Solar energy has become a significant player in the race to reduce greenhouse gas (GHG) emissions due to several factors. The cost of solar panels has plummeted in recent years, making them more accessible and affordable. Technological advancements have also made solar systems more efficient and reliable, enhancing their appeal as a sustainable energy solution.
Canada and the United States have committed to achieving net-zero emissions by 2050. President Biden has set an ambitious target of achieving 100% clean electricity in the U.S. by 2035. To attain this goal, the Biden administration has proposed various measures, including tax incentives, investments in renewable energy infrastructure, and the promotion of community solar projects.
Many companies have stepped up to take advantage of these incentives and to help businesses and organizations achieve net-zero emissions. One key advantage for these companies is the availability of financial incentives for solar and renewable energy projects. In the U.S., federal tax incentives exist for residential and commercial solar installations. The most significant incentive is the solar investment tax credit (ITC), which provides a credit of 30% of the installation cost for solar projects in residential and commercial properties. State-level tax credits are also available in many states. New York is particularly attractive for solar developers due to its state tax credit of up to $5,000 for commercial solar installations.
The shift toward net-zero also presents opportunities through community solar projects. These initiatives enable multiple households or businesses to benefit from a single solar project, allowing individuals with space or resource constraints to access solar energy. Community solar projects can also extend the benefits of solar power to low-income households and communities that may otherwise struggle to access renewable energy, leading to long-term cost savings.
Renewable energy credits (RECs) are another avenue for supporting the shift towards net-zero. RECs provide businesses and organizations with a means to support renewable energy projects without directly purchasing the generated electricity. Whenever a renewable energy project produces electricity, it generates RECs, which can be sold to entities seeking to offset their carbon emissions. This creates an additional revenue stream for renewable energy projects, facilitating their continued growth and expansion.
The political momentum toward achieving net-zero targets has profoundly impacted the solar energy market, positioning it as a central player in the transition to a low-carbon economy. Canada and the U.S., in particular, have demonstrated their commitment to these targets through various measures, including tax incentives, community solar projects, and the utilization of RECs. Notably, the responsibility for electricity falls under the jurisdiction of states and provinces in both countries. This means that the demand, supply, and formulation of electricity-related policies and regulations primarily originate at the state and provincial levels. While federal-level incentives, such as the ITC, exist in both countries, reducing federal income tax liabilities for solar system installations, there are also state and provincial incentives specific to each region.
New York sets an example
In the U.S., for example, the New York State Energy Research and Development Authority (NYSERDA) offers financial incentives for installing renewable energy systems in non-residential, large commercial, industrial, and single-family residential projects within the state. These incentives aim to promote the adoption of renewable energy technologies, including solar.
Similarly, Canada has introduced its own initiatives to support clean technology projects, including solar. Under the Inflation Reduction Act, the Canadian government has unveiled a 30% investment tax credit for investments in clean technology projects. This tax credit serves as an incentive to stimulate investments in solar and other clean energy projects.
From a policy perspective, solar projects are generally welcomed at the federal level and in select states and provinces. For example, a solar developer can access the NYSERDA grant in upstate New York once the project has obtained full permits and the grid interconnection fees have been paid.
While awaiting further details on the implementation of the IRA, solar companies can generally access funding opportunities at the federal and state levels. The availability of funding for renewable energy projects is relatively straightforward, providing a favorable environment for the growth and expansion of the solar industry.
As an avid traveler, I often engage in discussions about the visible impacts of global warming and the urgent need for action. Among the most frequently mentioned concerns are rising sea levels, intensified hurricanes, devastating floods, and the alarming retreat of glaciers. I had a profound encounter with the effects of climate change when I flew over Greenland in October 2022. Witnessing vast stretches of exposed rocky terrain that were once blanketed with ice and snow was a stark reminder that the ice continues to melt at an alarming rate. These firsthand experiences serve as undeniable evidence that climate change is a tangible reality.
Beyond my personal observations, there are numerous other examples of the visible effects of climate change that people can witness around the world. One prominent illustration is the increased frequency and intensity of wildfires. In regions such as California, Australia, and the Amazon rainforest, devastating wildfires have become more prevalent, destroying vast areas of land, displacing communities, and releasing significant amounts of carbon dioxide into the atmosphere, further exacerbating climate change.
Another visible consequence of climate change is the bleaching and deterioration of coral reefs. These vibrant and biodiverse ecosystems, found in tropical and subtropical waters, are subjected to warmer ocean temperatures and acidification due to higher atmospheric carbon dioxide levels. As a result, coral reefs are experiencing widespread bleaching, leading to their decline and the loss of critical habitats for marine life.
Furthermore, changing weather patterns, including more frequent and severe heatwaves, droughts, and extreme precipitation events, are evident in many parts of the world. These extreme weather phenomena disrupt ecosystems, harm agriculture, and food production, and pose significant risks to human health and well-being.
It is crucial to recognize that while the effects of climate change are already visible, there is still hope for meaningful action. By collectively embracing sustainable practices, transitioning to renewable energy sources, implementing effective policies, and promoting conservation efforts, we can mitigate the impacts of climate change and work towards a more sustainable and resilient future for our planet.
Dr. Richard Lu is president and CEO of SolarBank. He has over 25 years of global energy experience developing and implementing growth strategies for organizations in North America, Europe, and Asia.
