Expiring Subsidies, Not Free Markets, Driving Minnesota Solar Growth

Renewable energy advocates often claim that business is booming for the solar industry in Minnesota, and this is true. However, in order to determine whether this is a good or bad thing for Minnesota residents, it is important to understand why this is the case.

A recent article suggests the recent demand in solar development is happening because people want to cash in on the federal solar subsidies before the tax credits taper off over the next five years. According to an article in the Rochester Post Bulletin:

“When Steve and Dawn Finnie opened Little Thistle Brewing Co., they had long-term plans to add solar panels to help power their brewery.

Long term became near term as a federal tax incentive for solar energy systems is set to begin phasing out at the end of this year.

Until 2020, solar energy installers can receive up to 30 percent tax credit. Large solar installation firms have some leeway that allows them to either start construction or spend 5 percent of a project’s total capital costs before the end of the year to claim the subsidy. However, independent businesses and residential solar customers have to have their projects complete by the end of the year in order to claim the credit.

Solar companies say that’s powering a surge in solar purchases. A Reuters article says Trina Solar estimates about 20 percent of current demand in the U.S. for solar panels is due to tax considerations.

Under the incentive put in place in 2015, the tax credit would drop to 26 percent in 2020 and ramp down annually until 2022, when it would remain at 10 percent for utility and commercial projects and be eliminated for residential solar systems.”