Guaranteed and tradable tax benefits will make the solar industry too big to fail – pv magazine USA

May 28, 2024 Michael Puttre

Robert Gibbons, strategic development manager at Trina Solar US, entered the world of solar about three years ago, coming from a background in the oil and gas industry. Fossil fuel projects were becoming less common and a new universe for renewable energy seemed to be opening with the passage of the Inflation Reduction Act (IRA). Despite its rather misleading name, the IRA is a huge federal support mechanism for renewable energy.

“One of the biggest benefits of the Inflation Reduction Act is to increase the visibility of tax policy for future solar projects,” Gibbons said pv USA magazine. “When was the last time you had a 10-year time frame where you felt pretty good that these tax breaks were going to happen, right?”

The 2010 federal solar tax credit, along with low-cost solar panels from China, boosted the U.S. solar industry. When this tax credit expired, Congress increased it from 26% to 30% and extended it through 2032.

Gibbons added that the IRA has emerged at a time when simply interconnecting projects has become much more difficult due to a combination of rising interest rates and what he calls the structural constraints of longer interconnection lines. He said his 30 years in financing, mainly infrastructure projects, many of which were in the oil and gas industry, gave him a good understanding of what it takes to get projects done, especially in difficult economic times.

While critics point out that money put aside in IRAs itself causes inflation, Gibbons is more optimistic about the positive effects of the bill, which he believes helps successfully and profitable solar projects get the green light. He emphasized that an important element of the IRA is the provision regarding the possibility of transferring tax deductions.

At the proposal stage, solar projects can seem like a house of cards. For a project to be successful, you need a developer to oversee design, engineering, land acquisition, legal issues and financing. In particular, financiers want to know that there will be guaranteed recipients of the electricity generated. Additionally, there must be a reliable supply chain to equipment manufacturers and possibly resellers. Currently, the availability of tax breaks can determine the viability of a proposed solar project.

“We do not advise clients on how to manage a project to obtain various tax credit additions,” Gibbons said, emphasizing that is not Trina’s role. “However, with the ability to transfer tax credits within an IRA, we and our partners can purchase them and provide clients with confidence in the economics of the project.”

The latest guidance from the Internal Revenue Service determines the degree of domestic content credit a clean energy project can receive for using equipment manufactured in the United States. Due to increased interest in U.S.-made photovoltaic modules, Trina Solar US is building a 5 GW photovoltaic module factory in Wilmer, Texas. Gibbons said Trina quickly took advantage of the opportunity to expand the plant, which will produce solar components and also assemble modules from components produced in China.

“On behalf of our clients, we were very interested in using modules from this facility,” Gibbons said. “Not only because of the benefits of domestic content, but also because of the desire to support the development of solar energy production in the U.S.”

While Gibbons appreciates the tangible benefits of IRA and IRS regulations to the U.S. solar industry, he also recognizes that policy cannot be relied upon indefinitely to support solar and other renewable energy projects. He believes that the latest regulations and rules are crucial, but at some point the industry will have to fend for itself. However, at the same time, it may be too big to fail.

“The IRA is starting to phase out and will be gone by 2032,” Gibbons said. “At this point we should have a large, sustainable solar power generation and generation industry, right? And if she needs further help after that, what politician will be willing to stand up and put an end to it?”