The American Jobs Plan, unveiled recently by President Joe Biden and the White House, seeks to invest in the future of the United States of America, with the aim of rebuilding infrastructure and creating millions of jobs via public domestic investment on a huge scale. Notably, the American Jobs Plan also includes key provisions that will provide significant support for the U.S. solar industry.
What is the American Jobs Plan?
The $2 trillion American Jobs Plan is a new investment plan from President Biden and the White House, focusing on infrastructure, the core economy, climate, and job creation. While recent stimulus plans focused on short-term responses amidst the COVID-19 pandemic, the American Jobs Plan is geared towards long-term recovery and rebuilding, and a competitive U.S. economy. You can download the American Jobs Plan Fact Sheet here or read it in full on the official White House website.
Climate & The American Jobs Plan
If the proposal becomes law, it would become the most important climate legislation in U.S. history. Though not all investment amounts have been specified as yet, it appears that around half of the $2 trillion total would, broadly, fall under the umbrella of climate change, clean energy, and environmental justice. Research suggests that climate-friendly investments are economically beneficial, with every $1 invested in clean energy infrastructure returning significantly more $1 to the economy. What’s more, investment in clean energy creates 2-3 times more jobs than an equal investment in fossil fuels. It’s not just simple job growth either, climate stimulus has the potential to create well-paid jobs in safe, healthy, equitable workplaces.
What Does the American Jobs Plan Mean for Solar?
The most important provisions of the American Jobs Plan for the solar industry are:
An ten-year extension of the Investment Tax Credit (ITC).
An expanded ‘direct pay’ ITC for solar projects.
The above proposals show a significant level of solar industry support from President Biden and would be hugely beneficial in bolstering the industry’s recovery and growth following the COVID-19 pandemic. These supports would allow solar developers across the country to contribute massively to the deployment of new clean energy projects—which are necessary to meet climate targets such as those outlined in New York’s Climate Leadership & Community Protection Act.
Extension of the Investment Tax Credit (ITC)
The ITC, which currently offers a 26% tax credit for solar systems, was due to begin a phasing out process until Congress delayed this in 2020. Now, however, the American Jobs Plan proposes a ten-year extension for the ITC. Thus far, the ITC has contributed significantly to the growth of the U.S. solar industry since its inception in 2006. The Solar Energy Industries Association (SEIA) notes that the solar industry has grown by over 10,000% since 2006, with an average annual growth of more than 50% in the last decade.
Expanded Direct-Pay Investment Tax Credit (ITC)
Currently, the ITC allows for a reduction in the federal income taxes that the person/company involved would otherwise pay, with the business that installs, develops and/or finances the project claiming the credit. However, in many cases, the developer may not have sufficient tax liability to take full advantage of these tax credits. In this scenario, the developer partners with a third-party investor using tax equity financing. This can be an expensive process for commercial projects in particular.
A direct cash payment in lieu of the ITC would allow solar developers to benefit directly from the tax credit, enabling projects with little or no taxable income to quickly monetize the credits, completing construction at a lower cost and, as a result, creating jobs. Under this direct payment model, developers could take advantage of the tax credits on projects they own without having to pay third parties for tax equity. Although full details of the direct payment provision have yet to be revealed, it’s clear that this approach would open up new opportunities for developers.
Climate-Related Funding Proposals By Sector
In addition to the solar specific proposals we have discussed above, there are plans for significant investments in a wide range of climate-related projects across the United States. Below we have briefly summarized the proposals for each sector. You can read more about these proposals in the full text of the American Jobs Plan, available here.
$400 billion in direct payments to build renewable energy infrastructure.
$46 billion in clean energy investments through federal procurement.
$213 billion to build two million energy efficient affordable housing units.
$10 billion to reduce emissions from federal office buildings.
$174 billion to go toward electric vehicle adoption.
Research funding for climate solutions such as utility-scale grid storage and floating wind.
$16 billion to cap old abandoned oil wells and prevent the further leakage of methane.
$27 billion for a new Clean Energy and Sustainability Accelerator to develop climate solutions in those communities which have not historically seen the benefits of the clean energy industry.
Curious about going solar? Reach out to YSG Solar today. YSG will identify the ideal solar project for your needs—be it residential, commercial, community, or even a solar land lease—while ensuring the biggest savings and the best possible return on your investment. To get in touch, send us an email or call at 212.389.9215.
YSG Solar is a project development company responsible for commoditizing energy infrastructure projects. We work with long-term owners and operators to provide clean energy assets with stable, predictable cash flows. YSG's market focus is distributed generation and utility-scale projects located within North America.