Policy & Regulation

Solar’s ITC needs an update

Solar’s ITC needs an update
(The opportunity to encourage clean energy adoption via roof replacements is enormous, and the potential positive impact on the climate crisis is significant.)

The opportunity to encourage clean energy adoption via roof replacements is enormous, and the potential positive impact on the climate crisis is significant.

Congress created the solar investment tax credit (ITC) in 2006 to spur solar energy growth in America and drive economic gains through the creation of new, clean manufacturing and construction jobs. Fifteen years later, it’s clear that the policy has succeeded. The solar industry grew 10,000% and added hundreds of thousands of well-paying jobs to the U.S. economy. The solar ITC has also enabled millions of homeowners and businesses to install solar cost-effectively, save money on their utility bills, and reduce carbon emissions.

Parts of the ITC must be updated, however, to keep pace with innovations in the solar sector and drive further clean energy growth.

One of the most promising innovations in clean energy technology is the advancement of integrated solar roofing. With solar integrated roofs, instead of being mounted on top of the roof, the solar laminate is inseparable from the roofing materials. For example, the solar laminate can be applied to a shingle rather than a large, rigid panel that requires an external rack. Solar roofs deliver the same financial and carbon-free electrical benefits as non-integrated solar. However, solar integrated roofs are easier to install, more aesthetically pleasing, and more durable and reliable when it comes to waterproofing. Integrated solar roofs are a win-win for homeowners, addressing a need for a new roof while also satisfying a desire to positively impact the environment by generating clean energy.

The solar ITC enabled millions of homeowners and businesses to install solar cost-effectively. Parts of the ITC, however, must be updated.

To unlock greater solar deployment potential, Representative Mikie Sherill, Representative Bill Pascrell, and Senator Jon Ossoff introduced legislation in early August that proposes important clarifications to the way the ITC is assessed for rooftop solar.

First, it allows the entirety of the roofing materials used to qualify for the ITC. It’s similar to the way land improvements are treated for ground mount solar. Currently, only energy-generating materials are clearly qualified in the tax code for the investment tax credit. While this reflects the current understanding of home solar, it doesn’t address the technological advancement of solar integrated roofing products. In order for solar integrated roofing to work, a complete clean-energy-generating roofing system is installed in which solar and other roofing materials are inseparable. This gap in the tax code makes it hard for manufacturers to accurately price the installation of a solar integrated roof. It also forces integrated solar roofers and homeowners to delineate out what part of a highly integrated job would apply for the credit. The change could increase the current homeowner benefit of the ITC by 60-70%.

In addition to the potential of growth of solar roofs, deeming the roof an energy property opens up a whole population for solar that currently has no access. Currently, many homeowners cannot get solar installed, largely because their roofs are too old. Adding the roof into the eligible basis will allow a new roof to be financed and paid for by the avoided cost and the deemed rent associated with the solar system installation and operation, expanding the total addressable market across solar sectors at various scales (ie, residential and commercial).

The opportunity to encourage clean energy adoption via roof replacements is enormous, and the potential positive impact on the climate crisis is significant. More than five million roofs are replaced in the U.S. each year, and if we can convert just a fraction of those roof replacements to solar roof installations, the country could nearly double its rooftop solar capacity in two to three years, as well as drive a tax revenue increase of up to 9,000%. Increasing residential solar by this scale would create tens of thousands of new solar jobs. Installation and construction-related jobs are the largest engine for the solar workforce (accounting for up to 67%).

In addition to installation jobs, turbocharging solar roofing could reignite U.S. solar manufacturing jobs. Earlier this year, GAF Energy announced the build-out of a solar roof manufacturing facility in San Jose, CA, while Tesla produces its solar roof product in Buffalo, NY. If America is to be a global leader in the solar industry and the fight against climate change, then it must continue to implement forward-thinking policies that will spur the creation and deployment of the latest solar technology innovations.

The Biden administration and the 117th Congress have voiced a commitment to building a resilient economy that can both confront climate change and create thousands of good jobs. The time is now to make updating the ITC a legislative priority to maximize the positive climate and economic impacts of the next generation of solar energy technology. Passing the RAISE the Roof Act would be an important step to growing the residential solar market, creating tens of thousands of new jobs, spurring innovation in the sector, and opening the options of rooftop solar to millions of new Americans every year.

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