Will Solar Projects Need Tax Equity in the Future?

If you have a business and are contemplating installing solar panels on your business, then do it soon. Major tax abatement laws will be changing that will dampen your desires to invest in solar for future years. You may want to communicate your opinions to your Congressperson or Senator (Stephen Levy)

You may know that the investment tax credit (ITC) declines from 30 percent to 10 percent of eligible capital costs in 2017. In addition, at the end of 2012, the current 50 percent “bonus” depreciation expires, further alleviating the need for tax equity. While those circumstances lessen the need for tax equity, they likely don’t eliminate it.

So, how much tax equity will be needed after the tax benefits shift? The analysis in Table 1 attempts to answer that question by calculating the value of tax benefits under the current and future incentive structures for a $100 solar project. The value of the tax benefits is about $52 under the current incentive levels, or 52 percent of the initial project costs. In 2017, after the ITC and depreciation benefits revert to their former levels, the value of the tax benefits drop to $35, or 35 percent of the initial project costs.

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