Effective policies such as the Production Tax Credit (PTC) and Investment Tax Credit (ITC) have been instrumental in motivating capital and driving growth in the renewable energy sector. These policies helped the sector attract more than $350 billion in investments since 2004 while enabling the rapid scale up of the renewable energy industry which has led to substantially lower costs. Unlike other energy policies however, the PTC and ITC are temporary and require periodic reauthorization. The uncertainty surrounding the continuation of these policies adversely affects the markets and puts further growth at risk.
This report presents market data demonstrating the effects of this policy uncertainty. The report specifically notes that new wind installations are forecasted to fall 73%, to 2.3 GW in 2017, due to inaction on the Production Tax Credit (PTC). Additionally, the Investment Tax Credit (ITC) is scheduled to decrease from 30% to 10% in 2016 for commercial solar systems and will expire altogether for residential solar systems. The report finds that this ITC step down and expiration is forecast to cut solar installations by almost 50% and is already affecting the market. These steep drop offs – market cliffs, can be avoided by the extension of current tax policies; however, year-long extensions do not provide the optimal policy certainty needed to ensure continued investment in the sector.
This report makes the case for the continuation of these effective policies, along with the adoption of new policies, to provide market certainty and continue to motivate capital investment in the sector.