With oil prices plummeting and the viability of supply chains in question, many Americans are adding a potential energy crisis to their list of worries. It is understandable that while so much is unknown, and answers to many of our questions remain elusive, even the most level-headed of us cannot help but worry. Will there be a fuel shortage as a result of the decrease in production? Will my electric company raise its rates? Luckily, there is some light at the end of the tunnel. According to the International Energy Agency (IEA) solar is proving to be one of the most stable energy sources during the COVID-19 pandemic (Fanard, 2020).
While the global oil demand has fallen a staggering 5%, and coal demand has already dipped down even farther (8%), solar is looking like it will be one of the only energy sources that will see growth in 2020; currently projected at 1% (IEA, 2020). Seeing the global renewable energy demand already increase by 1.5% in Q1 of 2020 (relative to 2019) is an encouraging sign that while many other energy sources are falling short, solar is powering through (IEA, 2020). In fact, out of all available renewable energy sources, solar PV power capacity is expected to increase the most rapidly in 2020 (IEA, 2020). Though the projections for renewable energy growth have declined since the onset of the pandemic, global renewable energy generation overall is still expected to rise 5% in response to a projected 1% global rise in demand (IEA, 2020).
The lack of certainty surrounding how long the pandemic will last has caused widespread panic across the globe. It also poses a challenge to accurately forecast the long term economic impacts of the virus. The American public has made it abundantly clear that they are concerned with supply chain disruption becoming yet another fallout from COVID-19. Anyone who has been to a grocery store can attest to the fact that people are clearly buying enough toilet paper and canned goods to last them through 2030. Though we may not be able to control the toilet paper fanatics of the world, we can rest a little easier knowing that our renewable power sources are not in such imminent danger.
Luckily for the solar market, despite almost 70% of solar module production being based in China, production of PV modules has begun to increase again (IEA, 2020). Now that China seems to be through the worst of their share of the outbreak the solar industry is hopeful that this trend will continue (Hernandez, 2020). The International Energy Agency (IEA) has offered it’s predictions for both the ‘best and worst case scenario’. In the ‘best case’ scenario the IEA has predicted that the impact to renewable energy production should be minimal (IEA, 2020). While we all hope for the best, it is a wise practice to prepare for less than ideal outcomes. Should COVID-19 continue to cause a large disruption in the global economy it is still predicted that renewable energy sources will still increase, making them a much more stable energy source and option for consumers than fossil fuels (IEA, 2020).
The good news for your business is that many financial incentives are still available on both federal and state levels for new solar installations; including the ITC (SEIA). The Investment Tax Credit, or ITC, is a federally backed incentive program that offers new solar installations a 26% federal tax credit that is calculated based on the total cost of installing the solar PV system (SEIA).
While some businesses are not going to see large tax liabilities at the end of 2021 due to COVID-19, for those that go solar, the ITC has a 1-yr carryback and a 20-year carryforward provision for any unused credit. The ITC along with the 100% Bonus Depreciation (SEIA), means your business can see up to half of the total system cost returned in the first year. These tax incentives along with 100% financing options and other locally funded programs have made solar a viable option to boost business cash flow.
COVID-19 has almost certainly disrupted many parts of your daily life but adding solar as an energy source should not become yet another headache. The time to go solar is now due to the declining rate of the ITC. In 2021 the incentive is scheduled to be reduced to 22% (SEIA). The long lifecycle of a solar project (usually several months to completion) means that it is highly unlikely that COVID-19 will impact your ability to go solar.
So while we are sitting in our homes awaiting for this to pass, it is a good time to look to solar as a means to increased energy stability, a positive environmental impact, and an increase to your business’s bottom-line.
*Nothing in this article should be constituted as financial or tax advice. We suggest speaking to your trusted financial advisor or tax professional before making any financial decisions.