All energy is incentivized. Good incentive design can ramp your solar market up as you rein in spending.

 

 

 

DESCRIPTION
At the moment, solar electricity cannot compete effectively with fossil fuel generation, which is heavily subsidized with tax credits, depletion and depreciation allowances, liability shields and other measures.

Solar has the potential to compete against these sources today with the support of temporary incentives that will accelerate demand. These have been proven in several markets to in turn reduce costs over time (through volume component manufacturing and the education of a local labor force in more efficient installation practices.)

Different states have chosen different paths to stimulate their individual markets depending on local needs and interests. Some have chosen to rely exclusively on a renewable portfolio standard (RPS) to drive incentives for solar adoption. Others have chosen to provide direct incentives either through their state tax codes or through programs at regulated utilities. Still others have combined the two in creative ways that maximize the effectiveness of the effort while minimizing costs. All programs, however, should share these fundamental principles:

Build enough scale to drive investment. Moving a solar industry into a state requires major investments in jobs, facilities, and inventory – investments that drive down costs. To make a successful program, incentives should support these investments with at least 10 years of committed funding.

Phase out incentives over time. Solar costs come down every year – even as conventional energy prices go up. Incentives that phase out create strong competitive incentives for the industry while limiting the total price tag.

Encourage high-performing systems. Incentives should drive the industry to build the best systems it can. Incentive programs should require quality installations and reward performance. This may include transition to performance-based incentives (PBI) and/or performance-based standards where feasible.

Support a broad range of solar system types – from homes to commercial, industrial and government facilities. Small residential systems build participation and public support, while large systems drive large deployment numbers and low costs. A robust industry can only develop if there is a full range of system types supported – from small residential retrofits, new construction, and commercial rooftops, to large ground-mounted systems and building-integrated photovoltaics (BIPV).

Provide sufficient incentive levels to drive demand within each sector. Commercial customers frequently need payback times of five to seven years on any capital investment in order to fund a project, while homeowners often have longer time horizons. Incentives should be adjusted by ratepayer class to drive sufficient demand within each.

A competitive, open and transparent market is required to develop the solar market for the good of all consumers. There should be a level playing field for all companies to promote price competition. Additionally, long-term, low-cost financing, which is available for conventional electricity projects, should be available for solar generation.

Commitment to analytical rigor and technical analysis is critical to demonstrate the effectiveness of a solar program. Any program should provide for a means to analyze its own effectiveness and value to society. Appropriate reporting and analysis from the administering agency and participants are critical.

Make incentive programs simple, transparent, easy to understand and administer. All stakeholders should have access to a program's data and status on a regular basis. The program must have adequate oversight and standards to protect public investment.

Negotiation and coordination with organizations that have a stake in the deployment of PV systems and who actively support solar PV is critical. This includes solar advocacy groups, environmentalists, builders, utilities, companies, and all other interested organizations.

Prepare to build on success and replicate winning models. Program design, funding, reporting, etc., can all improve over time as states, utilities and stakeholders gain experience. There are a few different models of successful solar incentives; click below to learn more about the leading systems.