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Change in Tax Credit Policy Drives 24% Drop in Residential Solar Price

| Written by John Farrell | No Comments | Updated on Dec 16, 2010 The content that follows was originally published on the Institute for Local Self-Reliance website at

Update: It’s important to note that this refers to the net installed cost.  In other words, the installed cost dropped because residential solar customers were now getting an uncapped federal tax credit.

We wrote in this 2009 report about the perverse problems created by the $2,000 cap on the federal residential solar tax credit.  The uncapping of the credit in the 2009 stimulus package had a significant impact:

An obscure provision in the stimulus act has led to a dramatic decline in the cost of small-scale solar power installations, according to researchers at Lawrence Berkeley National Laboratory.

According to the report (warning: HUGE PDF), a key factor pushing down solar costs was the removal of a $2,000 cap on federal investment tax credits for installations. The provision, part of the American Recovery and Reinvestment Act, led to a 24% decline in the average net installed cost for residential solar systems.

Not only did the price fall sharply, but:  The price fell as residential installations now enjoyed tax credit parity with commercial ones.  But there was one interesting additional tidbit:

Residential systems were cheaper to install than similarly sized commercial systems.


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About John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power. More

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