U.S. Solar Industry Braces for Boom and Bust After Inflation Reduction Act
The U.S. solar industry is bracing for significant changes due to federal legislation. The Inflation Reduction Act, passed in 2022, has led to early phase-outs of key tax credits, causing concern about the future of solar energy. Meanwhile, developers are rushing to meet deadlines, but permitting bottlenecks threaten to disrupt plans.
The 'OBBBA' legislation has accelerated the energy transition, but it also brings challenges. Solar and wind projects starting construction after July 4, 2024, must be placed in service by December 31, 2027, to qualify for credits. This has led to a predicted boom in installations, with U.S. clean-energy installations expected to increase in 2025-26. However, permitting bottlenecks could push completion dates outside eligibility windows, causing delays.
Following this predicted boom, installations could plunge 41% after 2027, according to a forecast from BloombergNEF (BNEF). The early loss of tax credits is expected to cause long-term damage to the solar industry, with Wood Mackenzie forecasting a 17% decrease in 10-year installations to around 375 GW. New Leaf Energy, a community and utility-scale project developer, has already laid off about one-fifth of its workforce due to these changes.
Despite these challenges, the solar industry has seen significant investments since the Inflation Reduction Act was passed. Companies such as Tesla, First Solar, and SunPower have announced investments exceeding $110 billion and more than 224 projects, creating over 83,000 jobs in Republican-led districts. However, the future of the solar industry remains uncertain, with the U.S. solar industry facing significant changes due to the removal of incentives for renewable energy transition.
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