The Build Back Better Act would be huge for the solar industry. Here’s what’s in it. 

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BBB highlights:

• Extension of commercial ITC (Sec. 48)
  • 30% full value if projects meet prevailing wage and apprenticeship requirements, 6% base credit if not
  • Phases out when annual greenhouse gas emissions from electricity production in the United States is less than or equal to 25% of 2021 emissions levels, or in 2031, whichever comes later
• Addition of stand-alone non-residential storage ITC (Sec. 48)
  • 30% full value if projects meet prevailing wage and apprenticeship requirements, 6% base credit if not
  • Phases out when annual greenhouse gas emissions from electricity production in the United States is less than or equal to 25% of 2021 emissions levels, or in 2031, whichever comes later
• Addition of commercial PTC option
  • $25/MWh full value if projects meet prevailing wage and apprenticeship requirements, $5/MWh base credit if not
  • Phases out when annual greenhouse gas emissions from electricity production in the United States is less than or equal to 25% of 2021 emissions levels, or in 2031, whichever comes later
• Extension and refundability of residential solar ITC (Sec. 25D)
  • 30% through the end of 2031; 26% in 2032; 22% in 2033
  • Refundable after 2023
• Addition of stand-alone residential storage ITC (Sec. 25D)
  • 30% through the end of 2031; 26% in 2032; 22% in 2033
  • Refundable after 2023
• Domestic solar manufacturing tax credits
  • Specific credits for different components, including:
    • PANELS: thin-film and silicon PV cells (4¢/WDC), wafers ($12/m2), solar-grade polysilicon ($3/kg) and fully assembled thin-film and silicon modules (7¢/WDC)
    • INVERTERS: central inverters (>1 MW capacity): 2.5¢/WAC, utility inverters (>170 kW, ≤1 MW capacity): 1.5¢/WAC, commercial inverters (≥20 kW, ≤170 kW capacity): 2¢/WAC, residential inverters (≤ 20 kW capacity): 6.5¢/WAC and microinverters (≤ 650 W capacity): 11¢/WAC
    • TRACKERS: torque tubes: 87¢/kg, longitudinal purlins: 87¢/kg and structural fasteners: $2.28/kg
  • Credits increased by 10% if the final assembly of components is at a facility operating under a union-negotiated collective bargaining agreement
  • Credits will begin to phase out to 75% in 2027, 50% in 2028, 25% in 2029 and disappear completely after 2029

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The most comprehensive piece of federal legislation to help grow the solar energy industry is working its way through the Senate.

The Build Back Better Act (BBB) would benefit nearly every sector of solar. Small residential systems would become more affordable to more people via extended tax incentives and refundability options, developers would have new incentive options for larger projects and the entire industry could soon source more non-tariffed solar components from the United States thanks to new domestic solar energy manufacturing tax credits.

The BBB requires the support of every Democrat in the Senate to pass. Although Sen. Joe Manchin (D-WV) said on Dec. 19 that he cannot vote to move forward on the current version of the act, SEIA president and CEO Abigail Ross Hopper said in a member update that the organization still believes strongly that members of Congress will continue to press ahead.

“While the exact timing of action is unclear, we anticipate that the Senate will return in January with a renewed sense of urgency,” Hopper said.

Climate and solar provisions are among the least controversial parts of the bill, according to SEIA’s VP of public affairs, Dan Whitten. The act’s potential impact on the solar industry can’t be overstated. Erin Duncan, SEIA’s VP of congressional affairs, said it would create long-term business certainty for the solar industry.

“We’re an industry that is poised to provide the foundation for the future of what the energy mix looks like in this country,” Duncan said. “This bill creates a level for us to do that and create a container of certainty for our companies to make the types of investments that we have long wanted.”

A December 2021 “U.S. Solar Market Insight” report found the BBB would bring cumulative solar capacity in the United States to over 300 GW — triple the amount of solar deployed today.

Here’s what’s in it.

Large-scale solar + storage provisions

BBB would bring the commercial ITC (Sec. 48) back to 30% from the phased-down 26%, but with some stipulations — developers must meet prevailing wage requirements (the hourly wage and benefits paid to the majority of workers within a particular area, which is usually the union wage) and apprenticeship requirements to receive the full tax credit. If those prerequisites aren’t reached, only a 20% ITC can be collected.

For the first time in years, commercial solar projects could also qualify for a 10-year Production Tax Credit (PTC) worth $25/MWh. Prevailing wage and apprenticeship requirements must still be met to claim the full amount.

SEIA believes the prevailing wage requirements won’t be an issue since installers already make at or above that minimum requirement in most states.

“I’m sure it will require adjustment in some communities — that’s always inevitable — but in lots of markets, we’re already there now,” Duncan said.

The apprenticeship requirement is a bit more complicated. Developers would be required to host a defined number of apprentices per job who are part of apprenticeship programs that are registered with the U.S. Department of Labor. As it stands, most such programs are union-affiliated.

“I think that is the place where we probably have the deepest learning curve, because we just never had a requirement like that and it’s not as straightforward as looking at a giant index and making sure you’re keeping your record keeping on pace correctly,” Duncan said.

SEIA is working to determine which existing solar apprenticeship programs could meet those requirements, for example, through industry training organizations like Solar Energy International (SEI) and NABCEP. SEIA is also working with the legislature to ensure that if there aren’t enough apprentices in a region, there’s clarity to move forward without penalty.

“This is going to be an area of just massive work and growth. I think it’s also really exciting because the end result’s going to be we have a lot of brand-new solar workers, if we do it the right way,” she said.

After meeting those stipulations, developers can choose whether to collect the PTC or ITC for projects – but not both. Duncan said these additional options would make the industry more competitive.

“This is going to be an energy still led by private industry. We’re going to transition the economy and we’re going to be led by competitive businesses striving to bring the American public the best possible value,” Duncan said.

Commercial solar tax credits in BBB are set to phase out when annual greenhouse gas emissions from electricity production in the United States is less than or equal to 25% of 2021 emissions levels, or in 2031, whichever comes later. This structure makes it clear the priority is lowering emissions — if the 25% level is reached in a year after 2031, the credit would not begin to phase out until then.

In addition to the PTC and ITC, bonus credits would be available for meeting other criteria. A bonus 10% credit is applied if domestic content requirements are met, and another 10% if the project is located in an “energy community,” meaning a census tract or adjoining census tract where a coal mine has closed after Dec 31, 1999. According to a 2013 report by the NAACP, people who lived within three miles of a coal power plant have an average per capita income of $18,400, which is lower than the U.S. average of $21,587. These communities stand to benefit greatly from zero-emission solar power.

“The focus on opportunity broadly, between provisions for LMI communities, the overall focus and centering of communities…I think that is really smart and just very bold,” Duncan said.

Finally, the BBB would also allow large-scale solar developers for the first time to claim a stand-alone storage ITC — something SEIA has been pushing for years.

Before this bill, storage had to be paired with solar to receive an ITC, and a battery could only take advantage of the solar ITC if it was at least 75% charged directly from the PV asset it was paired with for five years. That meant the paired batteries couldn’t perform many of the additional demand arbitrage functions they were capable of, lest they forfeit the ITC.

The act’s standalone storage ITC would allow batteries to receive credit for their full potential at the same rate as solar systems, as long as prevailing wage requirements are also met.

Residential solar benefits

Big projects wouldn’t be the only kind boosted by BBB. The residential ITC (Sec. 25D) would also be expanded and extended to 30% for 10 years. After 2031, it would phase down by 4% yearly until 2034. Residential batteries would also be included in the tax credit, as stand-alone products.

According to SEIA, the credit would be claimed when an installation is placed in service — when power is flowing. Installations placed in service after the bill’s passage would be eligible for the 30% credit.

A new and impactful addition BBB would bring to residential solar credits is refundability. Environmental justice organizations have pushed for this aspect of the ITC, citing the challenges lower-income earners with limited or no tax liability face in benefitting from existing federal incentives. Refundability allows low-income families to receive the benefit even if they don’t owe enough to pay taxes — they can opt to receive a check rather than a tax write off for their installation the following year.

“By including 25D [tax credit] refundability in the Build Back Better Act, Washington now has an opportunity to ensure that middle- and low-income families — no matter where they live or how much they earn — can power their homes with clean, affordable energy sources,” said Residential Renewables for All, a coalition that lobbied for refundability, in a statement.

The residential ITC would be refundable after 2023 if the BBB passes — the time before then presumably used to set up the logistics to execute it.

Domestic manufacturing incentives

After years of reactive tariff battles with China, the United States has decided to be proactive and incentivize domestic solar component manufacturing in the BBB. Most provisions from Sen. Jon Ossoff’s (D-GA) Solar Energy Manufacturing for America Act made it into the final version of BBB, including specific credits for thin-film and silicon PV cells (4¢/WDC), wafers ($12/m2), solar-grade polysilicon ($3/kg) and fully assembled thin-film and silicon modules (7¢/WDC). The Senate Finance Committee also added inverters and trackers to that list in its version of the BBB.

The credits are increased by 10% if the final assembly of components is at a facility operating under a union-negotiated collective bargaining agreement.

The manufacturing credits will begin to phase out to 75% in 2027, 50% in 2028, 25% in 2029 and disappear completely after 2029.

SEIA is confident BBB’s manufacturing incentives would bring the U.S. solar supply chain back to the states.

“We have so much to offer our country as an industry,” Duncan said. “It’s such an exciting time, and we are an industry that’s going to grow in an unprecedented way over the coming years. This bill will help us reach that growth faster and with more tools at our disposal, particularly around domestic manufacturing.”