Critical clean energy tax incentives extended

Today, Congress passed an omnibus budget bill that includes long-term extensions of key tax incentives for wind and solar. The Iowa upfront solar tax incentive is tied to the federal one, meaning the Iowa tax credit will continue as well. These tax incentives have been a significant driver for wind and solar development in Iowa to date, helping the state become a renewable energy leader. The extensions approved by Congress today will drive further growth, and better position Iowa to build on that leadership.

The Iowa Environmental Council and its allies have worked to advance these extensions, and applaud Congress on the passage of the clean energy legislation that will strengthen our economy, communities and environment.

The budget bill extends each incentive for several years and also includes phase-outs over several more years. Here’s a breakdown of both incentives:

Solar investment tax credit (ITC):

• Extends the 30% upfront credit for 2017, 2018 and 2019;
• Phases out the credit by reducing it to 26% in 2020 and 22% in 2021;
• In 2022, the business credit reduces to 10% while the residential credit expires.

Wind production tax credit (PTC):

• Extends the full wind PTC in 2015 and 2016;
• Phases out the wind PTC by reducing it by 20% in 2017, 40% in 2018, and 60% in 2019. The credit expires after 2019.

Tax incentives are key policies for renewable energy. Because renewable energy has no fuel cost and very little operating cost, nearly all of the costs of developing a solar or wind project are upfront. Tax incentives like the solar ITC help offset upfront costs, while the wind PTC provides a revenue stream over time for wind projects.

Iowa’s upfront solar tax incentive provides a match of the federal incentive. In 2015, that match was 60%. Starting in 2016, the match will be 50%. The combined Iowa and federal incentives offset nearly half the upfront cost of solar. These incentives are helping to drive a growing solar market, which is now ahead of many neighboring states.

The federal PTC has had a huge impact on Iowa’s wind leadership. Most or all of the approximately 6,000 megawatts (MW) of wind benefited from the federal PTC, and the extension should allow new wind projects to come on-line in the next few years.

We applaud these extensions and the stability they provide to help grow Iowa’s wind and solar markets in the coming years, and look forward to continuing to advocate and shape complimentary policies that support Iowa’s transition to clean energy.

1. clean energy
2. solar tax credits
3. wind tax credits