PCCA Journal|2
nd
Quarter 2015
22
parity” yet, the researchers forecast a brighter future. Manu-
facturing costs for solar panels and installation costs have
plummeted as the technology has matured in recent years.
Projecting continued cost reductions to the end of 2016, the
researchers found that solar is poised to make significant
gains in cost-competitiveness across the entire sample.
But those projections look different if the ITC were to drop
to 10 percent. “Our prediction is that it doesn’t matter which
state you take or which segment you look at; solar would be
pretty much uncompetitive by early 2017 in virtually all of
the applications,” Reichelstein said.
Avoiding the Cliff
A preferable strategy to dropping the solar tax credit from
30 percent to 10 percent and leaving it there in perpetuity,
the researchers argue, would be to institute a more gradual
phase-down starting in 2017. Comello and Reichelstein sug-
gest that the government could drop the credit in smaller
increments, first in 2017, a second time in 2021, and then
eliminate it after 2025. Under their phase-down proposal,
investors would be eligible for targeted tax credits, calculated
either as lump-sum amounts or percentage-based tax credits
that would be phased down from 30 percent to zero.
“That 10 percent ITC is still a considerable incentive that
should not be minimized in terms of impact,” Reichelstein
said. “Under the current tax rules, the industry would take
a significant hit in 2016, but then keep significant subsidies.
Our thinking was, why do the sharp step down and then sup-
port the industry forever if it doesn’t need it forever?”
Instead of falling off a cliff, the industry would instead
have to weather a series of smaller shocks as it works
through a critical developmental phase. The researchers’
findings suggest that the industry should be able sustain its
momentum through those smaller shocks, leaving it poised to
achieve true cost competitiveness by 2025.
“By that time, if history is any guide, solar should be fully
competitive with natural gas or other energy sources at least
in favorable locations,” Reichelstein said.
And the quid pro quo aspect could make the proposal an
easier pill to swallow politically. Under the alternative pro-
posal, taxpayers would be spending more in the immediate
on solar, but they would no longer be supporting the industry
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Avoiding the Solar Cliff
Continued from page 21