Implications of the Scheduled Federal Investment Tax Credit Reversion for Renewable Portfolio Standard Solar Carve-Out Compliance

Solar carve-outs, which require a percentage of a state's renewable portfolio standard (RPS) to be met with solar resources, have price caps in eight states: Maryland, Massachusetts, New Hampshire, New Jersey, Delaware, Ohio, Pennsylvania, and Washington, D.C. These price caps--called solar alternative compliance payments (SACPs)--allow for RPS compliance without supporting solar deployment through the procurement of solar renewable energy certificates (SRECs). SRECs represent the environmental attributes of one megawatt-hour of solar generation. If solar projects cannot be developed with an SREC price that is lower than the SACP, new solar deployment may be postponed. We examine the potential impact of the scheduled reversion of the Section 48 investment tax credit (ITC) in 2017 from 30% to 10% of project costs for corporate entities on solar carve-out compliance. In all the states examined, state policies currently have a considerable impact on reducing solar project costs under both high and low cost scenarios. To date, most state policymakers have not focused explicitly on implementing policies to address the ITC reversion. Examples of such polices include: extension of state tax credits or rebates, or expansion of net metering program caps.