Time may be running out for large scale photovoltaic and other solar electric generating projects due to a looming statutory reduction in the federal investment tax for such projects (the ITC). The ITC is the primary federal tax subsidiary for solar electric generating projects. For solar electric generation projects that are “placed in service” before Jan. 1, 2017, the ITC is 30 percent of the eligible tax basis of the project. For solar electric generation projects placed in service on or after Jan. 1, 2017, the ITC drops to 10 percent of the eligible tax basis.
Many solar electric generating projects will be economically unviable at the reduced ITC rate. Large scale solar electric generating projects (20MW or greater) can easily take up to two years to design, permit and construct. Thus, a large scale solar project just going into development today will be hard pressed to make the Dec. 31, 2016 placed in service deadline. If there is any significant risk that the project could miss this deadline, the project developer may cancel the project entirely. Case in point is the recently cancelled 500 MW Palen Solar Project that was to be located in Riverside County, California. The developers of that project cited the potential inability to place the project in service by the Dec. 31, 2016 deadline as one of the reasons for the cancellation of the project.