As the sun set on 2015, the IRS quietly and quickly moved to update a program giving massive tax credits to solar companies like Elon Musk’s SolarCity for rechargeable lithium batteries.
The 30 percent Investment Tax Credit (ITC) allows residential customers and solar energy companies the ability to get taxpayer cash for buying energy batteries for their solar arrays.
The ITC was scheduled to expire Dec. 31, but Congress extended it at the last moment to lengthen tax credit, potentially giving solar companies such as SolarCity and solar mega-company SunEdison billions of dollars worth of tax credits. The IRS later extended the ITC to include rechargeable batteries.
“This new ruling from the IRS provides the clarity needed to unlock the solar + storage industry,” Jigar Shah, former SunEdison CEO, told reporters.
Solar companies have peppered the government over the years with questions about how much the tax credit applies to the new power storage projects — including projects such as Tesla Motors’ Powerwall, which stores electricity derived from solar power for domestic consumption and backup power.
Prior to the extension, solar companies and government officials haggled over whether the 30 percent ITC would cover electricity stored using solar panels and the electric grid.
“The federal government does not want to incentivize people to ‘arbitrage’ energy from the grid,” Mike Kleinberg, Senior Consultant at renewable energy consultant company, DNV-GL.
He added: “You cannot charge from the grid in the evening and then discharge during the day to supplement your PV — and also qualify for the ITC, because you’re not then really charging from renewable energy.”
“In essence, if during year one, the taxpayer is not careful and allows too much of the electricity stored in the battery to be drawn from the grid, no portion of the energy tax credit is available for the battery regardless of the battery’s mix of stored electricity in later years,” he cautioned.
Other tech companies specializing in storage facilities have shown interest in the ITC as well.
“Our customers are very interested in the 30 percent ITC,” Jim Deichert, Division Manager for Off-Peak Heating at Steffes, told reporters.
Off-Peak Heating has a similar energy storage model: smart ceramic space heaters designed to store surplus electricity as heat.
It was revealed in January that solar companies may not be able to survive without government support.
Nevada’s Public Utilities Commission (PUC), instructed by Nevada Gov. Brian Sandoval, changed the state’s solar-metering rules in the early part of 2016. The rule change means solar energy providers SolarCity and SunEdison will see a substantial dip in pay from their energy panels.
The PUC, in short, acknowledged solar-panel users would get paid for the energy their panels generate at lower, wholesale rates instead of at the higher, retail rates. The change means customers will pay nearly the whole retail cost of solar energy production.
With the rule change, the service charge for solar panels in Nevada will increase 40 percent from $12.75 to $17.90 per month.
As a result of the change, SolarCity decided to cut ties with Nevada because of its desire to cut solar companies off government support, which suggests the solar industry relies heavily on government tax credits for survival. SolarCity dropped 500 employees from its payroll as a result of the move out of the state.
“I contacted Governor Sandoval multiple times after the ruling because I am convinced that he and the PUC didn’t fully understand the consequences of this decision, not only on the thousands of local jobs distributed solar has created, but on the 17,000 Nevadans that installed solar with the state’s encouragement,” SolarCity CEO Lyndon Rive told a reporters.
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