Canada to issue 30% tax credits to solar, wind; U.S. solar installs slip on delivery woes

The solar news you need to know.

Canada to provide 30% tax credits to renewable energy

Canada will introduce investment tax credits (ITCs) of up to 30% for renewable energy technologies as it looks to close the competitive gap with U.S. companies, finance minister Chrystia Freeland announced in the government's Fall Economic Statement.

The move follows the passage of President Joe Biden's U.S. Inflation Reduction Act (IRA) that extends tax credits for solar and wind for the next 10 years and allows developers of stand-alone energy storage to access the credits for the first time. The bill also includes tax credits for manufacturing to boost domestic supply.

Canada's tax credits will also be available to energy storage, small-scale hydro and small modular nuclear reactor (SMR) technologies.

Companies will need to meet domestic labour requirements to gain the full 30% tax credit and others will be eligible for a 20% credit.

The credits will be available from 2023 and will be phased out from 2032.

Canada will also launch later this year a new growth fund, first outlined in April, to attract "billions of dollars" of private sector investments in low carbon solutions, Freeland said.

"We will make it more attractive for businesses to invest in Canada to produce the energy that will power a net-zero global economy," the minister said.

U.S. quarterly solar installations drop on delivery blockages

U.S. solar installations in the third quarter fell by 23% on a year ago to 1.9 GW as developers continued to face delivery delays due to supply chain challenges and slow import approvals by U.S. Customs and Border Protection, the American Clean Power (ACP) association said in its latest quarterly report.

Quarterly wind installs slumped by 78% to just 356 MW due to supply chain challenges and earlier uncertainties over tax incentives. Storage installations hiked by 227% to 1.2 GW as the battery market heats up.

                 U.S. renewable energy installations through Q3 2022

                                                               (Click image to enlarge)

Source: American Clean Power, November 2022

Solar, wind and storage installations are expected to soar in the coming years following sweeping tax incentives in President Biden's Inflation Reduction Act (IRA). The IRA extends tax credits for solar and wind for the next ten years and allows stand-alone energy storage projects to qualify for the first time. The bill also includes tax credits for manufacturing to boost domestic supply.

For now, solar developers will largely rely on components from Asia.

A U.S. ban on products from the Chinese province of Xinjiang under the Forced Labor Prevention Act (UFLPA) has caused a blockage in imports as inspectors assess products. A withhold-release order (WRO) against products containing silica from Hoshine Silicon Industry Co also continues to curb supply, ACP said.

Xinjiang produces 50% of the world's polysilicon and solar developers are awaiting clarification from U.S. Customs and Border Protection on which exporters are circumventing the UFLPA.

President Biden has wavered tariffs on solar panels from the four largest supplier countries in Southeast Asia for 24 months to spur deployment while U.S. manufacturing is scaled up. Solar builders want this period extended as far more U.S. factory announcements will be required to fulfil demand.

Some developers also continued to suffer delays due to slow grid approvals, ACP noted.

“While the IRA is set to catalyze clean energy growth, the industry continues to deal with policy and regulatory challenges hindering development and deployment of clean power,” said JC Sandberg, ACP's Interim CEO and Chief Advocacy Officer.

Europe's solar industry warns EU against further price intervention

Europe's solar industry has warned the European Union against imposing additional power market measures beyond the revenue limits for renewable energy generators agreed by EU energy ministers in September.

An EU-wide cap on gas prices for electricity generation and the transfer of new solar and wind assets from the liberalised markets onto regulated contracts for difference (CFDs) - measures considered in a recent "non-paper" policy document by the European Commission (EC) - would deter renewable energy investment and curb growth, industry association SolarPower Europe said in an open letter to EU officials.

The EU is seeking ways to curb the impact of soaring gas prices on gas and electricity consumers following Russia's invasion of Ukraine.

In September, EU energy ministers agreed to limit revenues from solar, wind and nuclear power generation to 180 euros/MWh ($180/MWh) from December until the end of June. The move caps revenues at less than half recent market prices but far above the running costs of most solar and wind assets. The ministers also agreed a mandatory demand reduction of 5% during peak hours in December-March.

                     European wholesale power prices by country

                                                          (Click image to enlarge)

Source: LevelTen Energy

Thus far, EU countries have disagreed on how to curb gas market volatility. Last month, the EC proposed to implement a temporary "maximum dynamic price" mechanism for gas trades at the benchmark Title Transfer Facility (TTF) Dutch hub as a last resort option to curb soaring energy prices this winter.

Spain has already capped gas prices for electricity generation and a similar mechanism was set out in the EC's policy document.

"Recent evidence has shown limited benefits of such solution, while resulting into an increase of gas demand," SolarPower Europe warned.

In addition, a proposal to move all new renewable energy assets onto CFDs "would constitute a complete U-turn from the years of progressively and successfully bringing renewables to market exposure and building the Internal Energy Market," the industry group said.

After years of falling costs, many renewable energy developers have opted for projects based on commercial contracts, but conditions differ between markets.

CFDs are long-term fixed price contracts where the generator pays the state if wholesale markets rise above the agreed price. UK wind growth has been underpinned by CFD contracts and France and Spain rolled out similar schemes in recent years.

Mandatory CFD arrangements across the renewable energy sector would require "central planning and auctions, potentially crowding out investors and stifling innovative business models," SolarPower Europe said.

Reuters Events