Renewable energy tax credits extended under pandemic stimulus package

Minnesota renewable energy developers are welcoming the latest federal pandemic stimulus package, which will extend critical tax credits.

Signed into law at December's end, the $900 billion stimulus bill — meant to stem the economic effects of the coronavirus — extends by two years the terms of solar energy investment tax credits available in 2020.

Now, new solar projects also will get a 26% investment tax credit in 2021 and 2022. That credit will decline to 23% and then 10% in the following two years.

The investment tax credit is "the most important" financial incentive for solar projects, said David Shaffer, executive director of the Minnesota Solar Energy Industries Association, a trade group. The extension "should be really beneficial."

Under the stimulus, the current federal wind production tax credit will be extended by one year.

Federal tax credits have long existed to spur wind and solar energy development.

Renewable power markets are now large enough now that even without tax subsidies, new large-scale renewable projects are often cheaper than gas-fired power plants, according to an October report on electricity generation costs from Lazard, an investment bank. (The report didn't cover new transmission costs, which can be significant).

Wind power tends to be cheapest in the Midwest — a major wind belt — whereas solar energy not surprisingly is cheapest in sunnier climes. Still, even in Minnesota, solar "prices are dropping so much we really don't need a lot of help in the future," Shaffer said.

Wind accounts for around 20% of Minnesota's electricity generation; solar, 1 to 2%.

But developers have been rapidly adding solar power to the state's grid in the last four years. Two relatively large new solar projects are slated to be built in 2021.

Minneapolis-based Xcel Energy, the state's largest electric utility, said it's still evaluating if the tax credit extension will have any "specific impact" on its planned renewable projects. But the company said the extension gives it more flexibility.

"Essentially, the changes allow Xcel Energy more time to complete wind and solar projects as well as potentially begin new projects," the company said.

Allen Gleckner, energy markets director for research and advocacy group Fresh Energy, said the tax credit extension gives developers some leeway.

"It takes some of the pressure off projects running up against deadlines," he said.

Scores of wind and solar projects are waiting for approval to get connected to the regional electric grid.

"We have a very robust pipeline of wind and solar projects in the Midwest," said Beth Soholt, executive director of Clean Grid Alliance, which represents wind and solar developers and renewable-energy advocates.

Mike Hughlett • 612-673-7003