States Scrutinize Solar Incentives as PV Proliferates

(Photo: Residential rooftop PV in Colorado. Credit: National Renewable Energy Lab, Flickr Creative Commons)

Many states are re-examining the scope and methods surrounding their solar incentives programs, says a new analysis prepared for the Consumer Energy Alliance. The CEA commissioned energy consulting firm ScottMadden, Inc. to update its 2016 report “Incentivizing Solar Energy: An In-Depth Analysis of US Solar Incentives.”

ScottMadden analyzed the cost of a typical solar facility in 25 states and its update details the federal, state, and local incentives available for residential solar PV systems. The report says the states were chosen to capture diversity in location, state incentive policies, retail tariff designs, and wholesale electricity prices. Previously, the 2016 report compared 15 states.

Key findings:

• Existing incentives for residential PV are significant. In all but five states, direct owners receive at least 75% of total system costs in total incentives under standard rate structures.
• Utility-scale solar installations are less expensive to install and are incentivized at lower rates per watt than rooftop solar PV systems. Residential solar PV systems receive, on average, between 104% and 140% of total system costs in incentives. Utility-scale solar installations only receive about 45% of total system costs in incentives.
• Third-party-owned solar PV owners receive the most significant incentives. In contrast to direct-owned solar, third-party solar owners are able to generate additional tax benefits through accelerated depreciation.
• Solar PV installation may shift costs to other customers. Some net metering programs, which pay residential PV solar customers full retail rates for their excess electricity production, may shift fixed utility infrastructure costs onto non-solar customers.

In addition, the report notes that incentives for residential solar PV vary widely among the states. “The 2018 analysis found that in order to accelerate the installation of PV systems, local, state, and federal governments have provided several incentive programs for rooftop solar owners,” CEA says. “In many states, total incentives are much greater than a solar system’s total costs.”

State government leaders are now considering programs that rely more on a competitive marketplace to provide the economically optimal levels of rooftop solar adoption, according to ScottMadden and the CEA.

Energy consumer organization CEA seeks to help ensure stable prices and energy security for households across the United States and has more than 500,000 members. The updated 2018 report is available here.

“Because of the rapid transformations in both the economics of solar PV systems and the policy dialogue over solar incentives in the states, we hope that CEA’s updated analysis will help policymakers by quantifying current incentives provided for solar PV systems,” said Brydon Ross, vice president of state affairs for CEA.