Solar for oil: the ITC set to roll on

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The ever familiar boom-and-bust cycle common to many global solar markets may be averted in the U.S. after 2016. A deal appears to have been struck that will see the ITC extended at its current 30% rate through to 2020.

The deal struck by U.S. congressional leaders is widely considered a “done deal” and would see the ITC maintained at its current rate for PV power plant projects that commence construction before January 1 2020, before stepping down to 26% through to 2021 and 22% to 2022, before then stepping down to 10% after that date. The legislation will have to be passed by 12:01am on Thursday December 17, to avoid a government shutdown.

The amendment to the scheduled ITC stepdown to 10% in 2017 is reported to have been struck in exchange for a lifting of a ban on U.S. oil exports, according to the Wall Street Journal.

“Before this extension was approved the outlook was for very high [PV] demand 2016 globally, with 20% growth, and then a fall of 10% [globally] in 2017,” commented IHS Technology’s Ash Sharma. “That pull forward in demand won’t occur to the same extent with an extension of the ITC, so our predictions for 2017 demand have come down meaning there will be much flatter demand.”

Given the strong demand, IHS was expecting a supply-demand imbalance within the solar sector.

“There would have had to be a major correction in pricing [in 2017] because of the ‘cliff edge’ caused by the ITC stepdown, but the extension will in effect stabilitze the global industry,” Sharma elaborated.

“The proposal [before Congress] is much more a step down approach, removing the cliff edge, towards a much more gradual reduction [of the ITC]. It will result in a much more stable environment in which suppliers and developers can reduce pricing much more slowly and in stable fashion,” said Sharma.

The head of IHS’ solar research unit noted that it is unclear whether developers that have brought forward projects, to avoid the 2017 ITC stepdown, will continue on current construction schedules or will now push them back.

“The question remains how much of that will slow down,” said Sharma. “If PPAs have been signed then these projects may go ahead. The pipeline beyond 2017 will likely fill up as few projects where scheduled to go ahead under a 10% ITC. We expect more project proposals will be submitted for 2017 and beyond.”

The new ITC stepdown is contained on page 2,005 of the wide-ranging bill currently before Congress.