New Federal Stimulus Bill Includes Key Energy Tax Credit Extension 


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The U.S. stimulus bill passed and signed into law at the end of December contains several essential additions and extensions to the available renewable energy tax credits.  

The existing Section 48 investment tax credit (ITC) was extended by two years. That means any solar project that begins construction in either 2020, 2021, or 2022 is eligible for a 26% ITC. Solar projects starting construction in 2023 are eligible for a 22% ITC, and those that begin construction after 2023 are eligible for a 10% ITC. Solar projects placed in service after 2025 are eligible for a much reduced 10% ITC. 

The extension comes as a relief to those who’d been rushing to qualify a project under the existing construction start dates. Existing contracts, negotiations, and deliveries can now be pushed into 2021 and beyond, which helps take the pressure off projects that, due to things like COVID-19 related supply chain delays, were struggling to meet deadlines.  

Not Just Solar Projects 

The ITC was extended two years for other technologies as well, including small wind energy, fuel cells, combined heat and power, and microturbine projects. Other key provisions include: 

  • Small wind energy and fuel cells remain subject to a phase-out (also extended by two years) with the ITC for these technologies dropping to zero percent if construction begins after 2023. 

  • Combined heat and power and microturbine projects receive an ITC of 10% if construction begins before 2024. Like small wind energy and fuel cells, the ITC drops to zero percent if construction starts after 2023. 

Section 48 Production Tax Credit (PTC) 

The PTC was extended for one year: 

  • Wind projects beginning construction in 2020 or 2021 are eligible for a 60% PTC. Those that start construction after 2021 are not eligible for any PTC. 

  • Biomass, landfill gas, geothermal, qualified hydropower, trash facilities, and other PTC-eligible technologies are also extended for one year, as is the election to take an ITC in place of a PTC. 

Standalone ITCs 

Offshore wind projects were awarded a long hoped for standalone ITC of 30% for any projects that begin construction before 2026. To qualify, facilities must be located in U.S. inland navigable or coastal waters. The bill does not include a separate ITC for standalone storage though IRS guidance remains in place that provides for an ITC for storage associated with eligible projects.  

The new bill is one of the largest in American history and represents an exciting advancement for renewable energy tax credits. It’s expected to generate significant investments in the coming years. Few details of the bill were known before it was made public, so these energy provisions inclusions came as a welcome surprise to the renewable energy sector.  

SFC sees these legislative changes as ones likely to spur tremendous growth and investment in the industry for years to come. To learn more, contact us today. 

Christopher Ramos