Covid-19 and tax credit withdrawals cause uncertain renewable future

JP Casey 29 April 2020 (Last Updated April 29th, 2020 12:13)

Covid-19 and tax credit withdrawals cause uncertain renewable future
A wind turbine and solar panels. Credit: DP Energy.

US analytics firm S&P Global has announced that the Covid-19 pandemic could have an adverse effect on US renewable power, with federal support for power sources such as wind and solar in the long-term no longer certain.

In a webinar held on Tuesday, the company’s Platts Analytics group reported that renewable energy in the US has not been included in any of the financial stimulus measures implemented in response to the pandemic, and this uncertainty has hampered renewable investments.

“Federal tax credits were extended for 2020, but permitting and other delays create uncertainty around eligibility to receive the Production Tax Credit (PTC) for wind,” said Platts Analytics. “State mandates along the US East Coast also provide support for offshore wind development, although some of those projects could be delayed due to pandemic-related restrictions.”

According to the Electricity Markets and Policy Group, an independent research group operated by the Berkley Lab, a subsidiary of the Department of Energy, the average spend on utility-scale power purchase agreements in the solar sector has fallen dramatically. The average price of a power purchase agreement in California has fallen from close to $240 per MWh in 2009 to less than $40 per MWh in the state ten years later. In the southwest, this price fell to as low as $20 per MWh in 2019. However, S&P’s figures buck this trend, with power purchase agreements reaching anything up to $35 per MWh, potentially reversing a trend over the last decade that has seen solar power become a more efficient and, critically, more accessible, source of power.

Uncertainty arising during the pandemic is unfortunate timing for US renewables in general, and solar in particular, with the Investment Tax Credit (ITC) that has propped up the solar industry set to be withdrawn over the coming years. The ITC saved individuals and companies 30% of the cost of installation of solar panels in 2016, but this figure is set to fall to 26% in 2020, 22% in 2021 and 10% in 2022; most worryingly, the credit will no longer be available for residential solar power from 2022 onwards.

Compounded with the expiry of the PTC, which has supported other renewable projects such as wind, in 2020, US renewables face an uncertain future. In 2019, Wood Mackenzie reported that the loss of the PTC could see 6.6GW of wind projects scheduled for competition in 2020 not begin operation until 2021, and that 1.5GW of wind projects would be cancelled outright.