Solar highlights in the Senate’s $3.5 trillion budget proposal

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The United States Senate released its Fiscal Year 2022 Budget Resolution Toplines. The document was voted on, and released, by the Senate’s controlling Democratic Party.

The document will help guide the coming Budget Reconciliation process, which needs only a simple majority to pass the House and Senate.

The bill aims to fight climate change with investments in clean electricity and home electrification, to be funded by higher taxes on corporations. Several items directly influence the solar, electric vehicle, and energy industries:

  • Creates a new Clean Electricity Payment Program (CEPP)
  • Provides clean energy, manufacturing, and transportation tax incentives and grants
  • Offers historic level of investments in public housing, green and sustainable housing, housing production and affordability
  • Electrifies the federal vehicle fleet and building stock.

While official language has yet to be written, the blueprint offers indications for where discussions are likely to go.

ITC and direct pay

Many clean energy industry groups, as well as House and Senate members, have proposed that the tax credits for residential and business owned solar be raised from their current 26% to 30%, and extended through the end of 2029.

Additionally, the Biden Administration, the Solar Energy Industries Association (SEIA), and others have advocated for shifting the tax credits to a “direct day” format. Under that arrangement, a direct pay credit first would be applied against a tax filer’s tax liability. Unlike the current tax credit, however, any leftover credit would be refunded to the filer via a cash payment.

The current pure tax credit can be rolled over into the following year’s tax liability, but eventually is discarded entirely if the taxpayer’s tax liability is insufficient.

Clean Electricity Payment Program

While the CEPP won’t incentivize solar power directly, it would provide financial motivation for utilities that choose to make use of it. An explanation of this program was put together by the Clean Air Task Force. An in-depth description can be found on co-author Jesse Jenkins’ twitter account.

A key sentence from the Clean Air Task Force write up describes the CEPP as follows:

“Electricity suppliers that increase their share of clean electricity beyond a designated annual threshold receive federal performance payments for each additional MWh of clean electricity delivered….It is not a regulatory mechanism and does not create a binding mandate.”

Manufacturing credit

The manufacturing tax credits might include those submitted by Senator Jon Ossoff (D-GA). These tax credit include:

  • In the case of an integrated module…11 cents multiplied by…direct current watt basis
  • In the case of a photovoltaic cell…4 cents multiplied by…direct current watt basis
  • In the case of a photovoltaic wafer…$12 per square meter
  • In the case of solar grade polysilicon…$3 per kilogram
  • In the case of a solar module which is not an integrated module…7 cents multiplied by…direct current watt basis.

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