Extending investment tax credits (ITC) and production tax credits (PTC) through 2050 for renewable electricity generation increases annual U.S. solar generation by 10 percent, according to the EIA’s alternative policy analysis, Annual Energy Outlook 2022: Extended and Sunset Tax Credit Cases.
Long-term availability of federal tax credits provides an incentive for more small-scale distributed generation in homes and commercial buildings as well as utility-scale electricity generation from renewable sources, especially solar photovoltaic (PV).
Federal ITCs and PTCs offset utilities’ renewable technology installation costs and installation costs for distributed generation technologies in commercial and residential buildings. These credits gradually phase down or end entirely, also called sunsetting, depending on the sector and technology.
In the Sunset Credit case, sunsetting tax credits by 2023 — which is just a few years earlier than in the Reference case — reduc- es projected annual solar generation by four percent in 2050. Solar generation accounts for 21 percent of total electricity generation in 2050, a nearly one trillion kilowatt-hour increase over the projection period.
