The Economic Outlook and Tax Incentives for Wind and Solar Power: An Accountant's Assistance
ARTICLE | May 14, 2025
Authored by Schlenner Wenner & Co
The economic outlook for wind and solar power is optimistic, largely due to ongoing federal tax incentives that incentivize investments in these renewable energy sources. The federal government offers two key tax credits: the Investment Tax Credit (ITC) and the Production Tax Credit (PTC). These credits directly bolster investment in wind and solar electric power, driving down the cost of renewable energy and stimulating growth in these sectors.
The Congressional Budget Office (CBO) anticipates that the ITC and PTC will increase projected deficits by approximately $300 billion from 2026 to 2035. Despite this, the CBO predicts that without these tax credits, investment in wind and solar electric power from 2024 to 2026 would be about one-third less than with the credits. The actual impact of these tax credits, however, is uncertain due to the unpredictable nature of investor behavior.
Under the Inflation Reduction Act of 2022, the ITC and PTC programs allow businesses to deduct a percentage of their renewable energy systems' cost from federal taxes. These credits are available to taxable businesses entities and certain tax-exempt entities eligible for direct payment of tax credits. The future of these credits is influenced by the 2022 reconciliation act (Public Law 117-169), which makes the ITC and PTC more generous for investments in projects fulfilling certain criteria. Linking these tax credits to other policy objectives may increase per-unit costs, but it also supports a broader range of objectives, including job creation and domestic manufacturing. As such, tax credits will continue to play a crucial role in promoting investment in wind and solar power in the foreseeable future.
From 2025, traditional PTC and ITC are set to be replaced with the Clean Energy Production Tax Credit and the Clean Electricity Investment Tax Credit respectively. They are functionally similar to their predecessors but are not technology-specific.
The landscape of renewable energy tax credits is complex and ever-evolving. Accountants play a crucial role in helping business owners navigate these changing tax incentives. Accountants identify opportunities for sustainable investments, keep abreast of changes in IRS tax laws and guidance and can help businesses make environmentally conscious decisions that also make financial sense. Their guidance enables businesses to leverage these tax credits and contribute to a cleaner, greener future.
Please let us know if you have any further questions regarding credits and tax law changes for renewable energy businesses. We're here to help.
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