George W. Bush, Climate Hero: The ITC Story
The Inflation Reduction Act has passed the Senate. And with it comes what President Biden has touted as the “largest investment ever in combating the existential crisis of climate change.” Nearly $370 Billion is allocated by the bill toward climate and clean energy measures, much of it in the form of tax incentives. Since the bill was passed only two days ago it’s hard to say exactly how these climate measures will manifest and when. So while we wait for the dust to settle and our new climate-saving agenda to be explained, I thought we could reflect back on the fun we’ve had already this century.
We all saw the Great Gaffer blaze back on the scene with the mother of all gaffs – and no, not the Big D…The Big W – accidentally accusing himself of war crimes, and then agreeing with himself. Amazing, and it made me nostalgic for a simpler age. For those of you who missed it, those 8 years with George W. Bush were special times: it felt like turbulent politics (pretty mellow by current standards), with terrorism, 2 wars, cries of corruption and for many, a feeling that we were going to backslide on climate goals because the oil and gas industry had taken over the Whitehouse. Bush was a Texas oilman and many thought progress on our most pressing environmental challenges were doomed. And now looking back 20 years…20 years!!!…I think we can all agree that more progress certainly could have been made. But, in an ironic and heartwarming twist of fate, President Bush in 2005 signed into law one of the most profound environmental measures in our history: The Solar Investment Tax Credit.
This piece of tax legislation might not have an exciting name but let’s give credit where credit is due. This federal incentive in a way kick-started the solar energy boom in America that persists today. This is one of the single most powerful tools we’ve had in promoting the adoption of solar. We’re a far cry from our climate goals, but there’s an argument to be made that without the ITC we’d be packing it in and calling it a day. Since the passage of the ITC there’s been a 10,000% increase in the amount of solar in the United States. Solar power in 2000 was a fringe energy source and now there is enough solar power installed in the U.S. to power more than 23 million homes. Each year we set a new record for panels installed. And along with the environmental benefit we also have over 230,000 Americans employed in the solar energy space. The ITC was, IS, a game changer.
If you’re just now looking into solar – perhaps thinking about it for your home – and this is the first time you’re hearing about the ITC, here it is in a nutshell: the federal government wants us to go solar. So much so that they’re willing to give back 26% of the cost of a solar system in the form of a tax credit. To put that in real terms, let’s say that you buy a solar system for $25,000; you’ll then file with your taxes an additional form (Form 5695 to be exact) claiming, in this case a credit for $6,500 against your federal income tax. If you don’t owe that much, you take what you can and roll the remaining amount over to subsequent years. Your $25,000 solar system now costs you $18.5K. And this credit is good for more than just solar: battery storage, wind, geothermal, etc. It’s a rich incentive and a primary reason why nearly 800,000 American homes went solar last year.
There are a lot of good reasons why George W. wanted you to go solar. You cynics out there might be saying that the ITC was only passed to greenwash some broader oil and gas-friendly incentives. Perhaps. Oooor. Or…George W. Bush is the most unsung climate hero of the 21st century. Just saying. There’s a debate to be had over a Coors Banquet. Regardless of his intentions, the ITC has been a powerful impetus for the growth of the American solar industry.
And as we all know too well, all good things must come to an end. Or at least we thought so until a day ago when the Inflation Reduction Act passed the Senate. Up to this point the ITC’s days were numbered. It was scheduled to expire a few years back. By the skin of its teeth it was extended. What was 30% had dropped to today’s 26%, and was scheduled to drop to 22% next year, and 0% the year after. We were looking at a very near future without any ITC for residential solar systems.
For a number of reasons, not everyone is able to buy a solar system even if they want to. But those fortunate enough to have the right house were facing a cliff: with the end of the ITC, the effective price of solar systems would have gone up by 26%, and the effective energy savings would go down. We were looking at a future where the solar industry – panel manufacturers, financiers, installers – would have to figure out how to reduce their costs by 26% over the next year and a half or allow that extra cost to fall squarely to the customer and jeopardize the health of the entire industry. With the passage of the Inflation Reduction Act that fate has been reversed and we may even see the ITC increased back to 30% and extended a number of years. Again, we’ll wait to see the details but the prospects are exciting and the positive impact to our health, environment and economy will be profound.
Of course, the Democrats in the Senate are rightfully taking credit for the creation and passage of the Inflation Reduction Act. But if you’ll permit me, I’d like to end on a little Kumbaya. I think it’s important to call out here that George W. Bush actually installed solar panels on the White House (both electric and thermal), after, of course, Reagan removed the ones Jimmy Carter put up. And while we’re shaking up Red & Blue myths, Richard Milhouse Nixon signed the Clean Air Act into law, did the same for the Endangered Species Act, and created the Environmental Protection Agency. Just saying. Nothing is ever so straightforward as black and white, or, red and blue. Improving the health of our environment, and investing in the industries of the future serves us all well. Climate change won’t care what colors you wear, and neither does the IRS.
