How to Revise the Federal Solar Tax Credit

Electrek has a post up that ranks US cities by households with solar panels. Here’s the list:

The city that stuck out to me was Seattle. Seattle? The Pacific Northwest isn’t exactly known for its sun. And, they also have quite of bit of energy generated by hydro and nuclear, so are those panels displacing carbon-emitting energy sources?

The 2016 official fuel mix statistics by the state of Washington for Seattle City Light show approximately 88% hydroelectric, 5% nuclear, 4% wind, 1% coal, 1% natural gas, 1% biogas.

Seattle – like most cities on this list – is a wealthy town, so there are plenty of people who can afford to drop $10-$20k on panels. Especially when they can tap into a 30% federal tax credit.

But, what if we adjusted the federal tax credit by taking a couple factors into consideration? Here are two to consider:

1. How dirty is the current energy sourcing in a given state? Here’s a ranking of states by how much carbon is emitted by generating electricity:

2. How much sun hits each state? Obviously, this can vary tremendously throughout states, but if we just use a state-wide average of each state we can still improve upon a nationwide average. This chart ranks states by solar irradiance where California is the baseline each state’s number show’s their relative solar irradiance relative to California.

If we combine these values, we can prioritize solar incentives based where they’ll have the largest benefit: States with the dirtiest electricity and the most sun. Here’s what that looks like:

Under this formula, Upper Midwest states would see similar tax credits to what they see today. Minnesota and Wisconsin would drop from 30% to 29%. But, things get interesting at the extremes. Subsidies would be cut in half for states that have relatively clean energy sourcing today, like Pacific Northwest and some New England states. On the other extreme, states with relatively dirty electricity generation and lots of solar energy would receive far higher incentives. The most extreme being Wyoming, where solar incentives would increase 7X. Yes, that’s right. Instead of offering a 30% tax credit or solar in Wyoming, we should be offering a 216% credit.

Someone living in Wyoming that spends $20k on solar panels would have their entire project cost covered, plus a check for $23,200 from Uncle Sam. Now that’s an incentive. Wyoming and North Dakota are the two states where we should pay more than the cost of solar panels for every household. Both states have incredibly dirty electricity today.

The incentives should be revisited on a regular basis to take into account shifting electricity sourcing in each state. It wouldn’t be all that surprising if a significant number of people in Wyoming took action to claim such a lucrative tax credit, which would lead to lower tax credits for late adopters.

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