Solar ITC Tax Normalization: Limits Solar Growth and Favors Fossil Fuels
Eric Blank and D.R. Richardson
This paper finds that the tax normalization requirements associated with the solar energy investments of regulated for-profit utilities may be skewing utility decision making. This distortion may lead utilities to keep coal plants open longer than necessary and to replace them with new natural gas facilities instead of new solar plants — even in situations where the solar alternative offers superior economics. As debate ramps up over potentially extending the solar ITC as part of a broader stimulus package, this paper concludes that removing the tax normalization requirements associated with the solar ITC (but not more broadly) could materially benefit customers and utility shareholders, as well as the environment.