Rep. Jeremy Peterson has introduced legislation, HB 23, to phase out the solar portion of Utah’s Renewable Energy Tax Credit for homeowners. The tax credit helps Utah families and businesses install solar, geothermal and wind energy systems, helping homeowners and businesses become more energy self-reliant, while creating new jobs, and cutting pollution.
Representative Peterson’s bill specifically targets solar energy systems installed on residential buildings (single family homes, apartments, and condos). Utah Clean Energy opposed the initial version of HB 23, which proposed a rapid phase out of the tax credit by creating a declining annual cap on the funding available for the credit. However, Utah Clean Energy, the solar industry, and others reached a compromise with legislators that provides for a more gradual phase out of the tax credit. Moreover, the bill clarifies that the phase out applies only to residential PV systems, not solar thermal or passive solar systems.
HB 23: The Details
Currently, the solar tax credit pays up to $2,000 or 25% (whichever is less) of the cost to install a solar energy system on a home. This compromise struck on HB 23 would phase down the amount of the tax credit as follows:
- 2017 > $2,000
- 2018 > $1,600
- 2019 > $1,200
- 2020 > $800
- 2021 > $400
- 2022: $0
HB 23 also:
- Removes the annual cap on the total amount of funding available for the tax credit originally proposed in HB 23.
- Includes language that clarifies that the phase out does not apply to non-PV solar systems, such as solar thermal or passive solar systems.
What’s the Issue?
Utah’s solar tax credit has helped the solar market grow, resulting in a significant increase in the number of homes using the tax credit to help install solar. The state estimates that there will be $20 million in tax credits issued in 2016. The credit has come under scrutiny from lawmakers as solar PV has grown in Utah because of its potential impact on the state’s Education Fund.
However, the tax credit has been a major source of economic gain for Utah in recent years. The results of an economic analysis conducted by Utah Clean Energy show that for an incentive of $20 million in 2016, Utah will leverage a total economic impact of $313 million. In other words, the economic benefits of the current tax credit are 15 times the amount the state invests!
It’s clear that Utah’s current solar tax credit creates significant economic development benefits for Utah that far outweigh the costs to the state.
The solar tax credit has been good for Utah, and we want to see it continue to spur long-term growth for Utah’s solar market. We must consider the best path forward to ensure business-friendly market stability for the solar industry, and we should seize opportunities to bolster the resiliency benefits of solar energy by encouraging investment in storage technologies. We will keep you posted as this issue unfolds during the 2017 Legislative Session!
Utah’s Solar Tax Credit: A History
Utah Clean Energy helped establish the Utah state renewable energy tax credit over 10 years ago, and we have successfully supported its continuation and expansion over the years. It’s a proven and effective tool to increase the affordability of rooftop solar for Utah families and businesses, contributing to significant growth in the amount of rooftop solar installed every year since 2002. Thanks to this tax credit, Utah’s economy continues to benefit from our growing solar industry, which now directly employs over 4,000 workers throughout the state.