In early 2021 we will have a new administration in Washington DC that has pledged to be more involved in advancing renewable energy systems around the country. The question that I often get is how will this play out here in Colorado?
While no one has a crystal ball, I believe it is very likely that in the first quarter of 2021 the Biden Administration will rescind the 25% tariffs on solar equipment manufactured overseas that are imported into the US. On average one can assume that half the gross cost of a new solar PHOTOVOLTAIC system is materials cost while the other half is labor, permits, design, profit and overhead. So if 75% of the materials are imported and tariffed at 25% today, once the tariffed products currently on the shelfs are sold off a solar system’s total costs will go down approximately 9.5%.
While Jan 1st 2021 will bring about a reduction in the Federal Investment Tax Credit (ITC) from 26%, of the gross purchase cost of the solar system, down to 22%. That’s a reduction of 4% not flowing back into your pocket, or in essence a 4% increase in your overall costs. However, if the total system purchase cost is 9.5% lower in 2021 you would still be 5.5% better off buying a solar system in 2021 rather than in 2020 (9.5%- 4%).
The advantages of buying a PV system in 2021 could get even sweeter depending on the makeup of the US Senate. The ITC is simply a law passed by the House of Reps, Senate, and President. In past years the ITC was as high as 30%, so it is within the realm of possibility that a pro environment and pro renewable energy government could again make a new tax law that greatly incentivize individuals to build solar PV systems and saving Americans millions of dollars.