mainstreaming solar pv in the usa

Feature article

64 renewable energy focus September/October 200864 renewable energy focus September/October 2008

Mainstreaming Solar PV inthe USAUS STATES NEED A COHERENT ACTION PLAN IN ORDER TO DEVELOP

PV MARKETS FULLY, ESPECIALLY IF THEY ARE TO BE ABLE TO MATCH

THE GROWTH MARKETS IN EUROPE. THE CLEAN ENERGY GROUP

RECENTLY RELEASED A REPORT AIMED AT BRINGING SOLAR PV INTO THE

US MAINSTREAM. MARK SINCLAIR SUMMARISES THE MAIN FINDINGS,

TOGETHER WITH BEST PRACTICE FROM SOME LEADING STATES. Mark Sinclair

While solar photovoltaic electricity (PV) markets are growing in the

USA, they are still far from robust. The total capacity of PV power

generation in the US remains quite modest, though increasing numbers

of PV systems are being installed in various States. This under-capacity

is especially striking when compared to Japan and Germany, which

have established national programs and policies to support PV markets

aggressively.

However, there is good news: across the US the States are taking a

growing leadership role in the support of solar energy technologies,

(Left): Funded in part from the Massachusetts Renewable Energy Trust, this 100kW solar PV array was installed at the new WGBH public television offi ces in Boston (Photo courtesy of Solar Design Associates). (Right) SOLARA is the fi rst development to be delivered under the California Energy Commission’s Zero Energy New Homes program. This multi-family aff ordable housing complex is located in Poway, CA . The total 141kW PV system, which is located on the roof of each building and most of the carports, will function as 63 separate systems serving 56 families. Most of the cost of the PV system and energy effi ciency upgrades to the project were covered by state and federal programs available to aff ordable housing developers (Photo courtesy of Community HousingWorks, Owner/Developer).

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renewable energy focus September/October 2008 65

PV/US State Markets


recognising the technology’s environmental and economic benefi ts.

In fact, the 2007 US growth rate of 45% for PV installations was

among the highest in the world, due in large part to support from

State solar programmes.

For example, the California Solar Initiative has an ambitious goal

of installing 3,000 MW of new grid-connected PV in 10 years. New

Jersey’s goal is to install 2,300 MW of PV by 2021. And more than

11 States have adopted renewable portfolio standards (RPS) with

specific and ambitious targets for solar generation.

To examine these State-based solar efforts, the Clean Energy

Group recently developed a report, “Mainstreaming Solar Electricity:

Strategies for States to Build Local Markets.” The report provides a

blueprint for strategies that States can pursue to effectively main-

stream solar electricity, based on the real-time experience and

innovation of the major State solar programmes.

The challenge: addressing high fi rst costs

The major obstacles to market penetration of solar technology are on

the “buyer” side of the equation. That is, potential purchasers often

fi nd it diffi cult to justify the signifi cant fi rst costs of a PV system, and

are further hindered by restrictive codes and regulations. In view of

this cost barrier, States must ensure that they create solar support

programmes that seek to build vibrant local markets while removing

market barriers.

PV system costs include hardware costs (modules and inverters), but

also non-hardware costs including marketing, sales, local transporta-

tion, hiring and training, insurance, permits, installation, and inspection.

Hardware costs are generally set in the worldwide market, driven by

technological innovation, and heavily driven by factors out of the

control of State programmes. However, non-hardware costs, equal to

50% or more of the total price of a system, are subject to the infl uence

of State policies and programmes. So as State policy can have a major

impact on the overall system price, it is fortunate that most energy

policy is set at the State level.

It is critical that the States take action to remove the regulatory

hurdles that stand in the way of wide-scale deployment of solar

energy, and provide the incentives needed to spur demand and build

local markets.

Serious about solar

State action plan in brief:

Provide sustained fi nancial support for projects;Establish “PV-friendly” laws and regulations;Ensure sensible programme design;Stimulate long-term fi nancing;Promote “PV-friendly” building codes.

Supporting the development of PV systems:

Walk the talk;Support training;Promote education and marketing.

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PV/US State Markets

66 renewable energy focus September/October 2008

Best State practice

Create consistent, stable, long-term State fi nancial incentives

Sustained, long-term solar incentive programmes at the State level will

enable more signifi cant PV cost reductions. In fact, support for building

a mature PV market is the most direct way for States to reduce non-

module costs because such markets will attract and encourage suppliers

to create an effi cient delivery infrastructure. Experience in Japan

suggests that deeper cost reductions are possible with a more sustained

policy eff ort.

Seeking to replicate the Japanese success in the USA, the California Solar

Initiative (CSI) is a good example of a State programme designed to create

a mature market. The CSI is a 10-year, US$3.3 billion programme, with

rebate levels reduced each year by approximately 10%. This approach

allows the State to set the maximum programme cost, and, if the initial

subsidy is too high, expect payment levels to self-correct. A gradually

declining level of incentives not only suits an industry with high cost-

reduction potential and the potential for rapid growth but improves on

State rebate programmes. Such State programmes are often subject to

arbitrary cessation and annual budget fi ghts.

Moreover, whatever the amount of State funds made available for solar

incentives, it is critical for States to commit and release these resources in

a way that ensures long-term continuity of the incentive programme – for

periods of fi ve to 10 years. Long-term support allows a local solar tech-

nology infrastructure to develop and stabilise, without boom and bust

cycles.

Establish specifi c installed capacity goals for PV

State policy makers should consider publicly committing to an installed

MW solar capacity goal as the basis for future policy and programme

actions. This will create clear market expectations and strengthen investor

confi dence. It will also make it easier to predict future budgeting and help

ensure continuity of programme design and deployment.

To that end, through 2007, several States established specifi c PV goals

and resource commitments to drive the emergence of a local solar

industry and market:

California – 3000 MW by 2017; New Jersey – 2300 MW by 2021; and

Maryland – 1500 MW by 2022.

Create a solar set-aside in a Renewable Portfolio Standard (RPS)

The majority of States have established Renewable Portfolio Standards

(RPS) that require utilities to supply a specifi ed percentage of electricity

from renewable resources. An RPS represents an important tool to expand

State solar markets if designed with diff erential support for solar tech-

nologies. However, due to cost and solicitation barriers, a traditional RPS

– in which all eligible renewable resources compete – supports least-cost

projects such as wind and landfi ll gas, and is unlikely to provide adequate

support for smaller-scale solar distributed energy.

Therefore, in recent years, States increasingly provide differential

support for solar within an RPS program in recognition of the special

benefits of solar installations. At least 11 States have now established

a solar share or set-aside – a requirement that some portion of the RPS

Case study – The California model

Formal goal – 3000 MW of PV within the next 10 years

Vision for PV:

2 years – increased public awareness;5 years – more fi nancial options and lower govt. subsidies;

10 years – sustained growth without subsidies.

What they are doing today:

1. State funding – Performance-based incentives only.

2. Program guidelines – PV system warranties must be transferable to future owners.

3. Financing – Gov’t & non-profi ts only, cost eff ectiveness applicable.

4. Building codes / standards:

Requires building permit, electrical permit, building code compli-ance inspection, and utility inspection;No statewide PV standards;Local inspections focus on safety issues and electrical requirements;No state-sponsored best practices promotion or information sharing.

5. Statutes / regulations:

CA PUC has established simplifi ed interconnection standards for small systems, though they vary utility to utility; munis will soon be required to comply as well;Net metering is available for PV systems up to 1 MW;There is an RPS; no solar carve out;Time of use rates are in place to monetise special value of PV during peak periods; feed in tariff s available on a limited basis.

6. Tax treatment for PV:

Property tax exemption for “new constructed” systems only applies to original owner;No sales tax exemption.

7. Construction policies:

PV consideration mandated for state funded projects;PV is installed where economical in state funded projects;PV has been earmarked for schools but higher incentive funding has been used up.

8. Training and certifi cation:

One-day focused installer trainings and technical courses on PV off ered;Qualifi ed installers are listed;Training for code offi cials off ered;CEC cec will provide training for builders;Utilities train their own inspectors.

9. Marketing activities:

Include how-to literature, advertising campaigns, solar days, web-listings of installers, support to solar associations;Add’l relationships with fi nancial institutions, builders associa-tions (“new solar homes partnership”).

What they say they need

Improve fi nancing structures;Increase public awareness;Encourage comparison shopping to reduce prices.

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PV/US State Markets


come from solar resources. This mechanism strengthens solar markets

by allowing solar technologies to compete against less costly renew-

able technologies.

New Jersey has been most aggressive in its use of a solar set-aside,

with 2% of its RPS target required to be delivered from solar PV

systems, requiring 2300 MW AC of solar by 2021. New Jersey’s solar

development targets are the largest in the country on a per capita

basis and are now driving the State’s high growth in PV installations.

Adopt solar friendly interconnection and net metering rules

Interconnection and net metering are two key State-controlled poli-

cies that enable States to get serious about promoting solar distrib-

uted generation. Solar PV customers must be able to connect to the

utility grid without undue delay and expense. And net metering

ensures that consumers with PV systems can meet their energy needs

while crediting customers for all the solar energy they generate. There-

fore, well-crafted, simplified interconnection standards and net

metering promote the broader deployment of customer-sited solar

systems.

Once again, New Jersey is in the lead, often singled out as the best in the

country among States with net metering rules and interconnection stand-

ards. As a result, New Jersey reports the highest rate of net metering

enrolment in the USA.

Simplify State funding programme practices

State solar programmes should simplify programme requirements and

paperwork to make them easy to understand and use. States should

employ electronic applications and tracking systems wherever possible.

States should also strive for effi cient programme administration and rapid

funding decisions and notifi cations.

Foster long-term project fi nancing

A lack of long-term project financing options impedes the sale of PV

systems. While consumer loans, home equity loans, and home improve-

ment loans can be used to finance PV installations over time, the

paybacks on PV systems generally fall well outside of the practical loan

term for such instruments. This has led States to explore special solar

loan programmes that target homeowners, featuring low interest rates

and/or no hassle application requirements.

More and more States are developing long-term\loan programmes

targeted at renewable energy to reduce monthly payment levels. These

loans should have a low interest rate, below that on a 30-year mort-

gage for residential loans. Key components of these programmes are

low hassle and administrative fees. Application forms, paperwork, and

fees should be kept to a minimum, with a quick turn-around for loan

approval. These finance instruments should avoid debt service coverage

requirements or lien on property (other than the solar system itself

being financed).

Establish a renewable energy tax credit programme

Tax incentives have proven effective in encouraging private invest-

ment in solar energy, as evidenced by the effect of the Federal Invest-

ment Tax Credit (ITC). Residential and commercial decisions to invest

Case study – up and coming: New Jersey

Formal goal: ~2300 MW by 2020 (2.12% of retail sales).

Vision for PV:

2 years – 90 MW installed;5 years – 450 MW installed, market no longer needs rebates;10 years – 1000 MW installed, phase out of RECs being discussed.

What they are doing today:

1. State funding:

Capacity-based incentives; In-state manufactured equipment adder.

2. Program guidelines – warranties required to be transferable to future system owners.

3. Financing – long term commercial fi nancing for PV retrofi ts.

4. Building codes / standards:

Requires building and electrical permits, building code compli-ance and electrical code compliance inspections;Also separate utility inspection;State inspection for state-fi nanced installations;No uniform statewide PV codes, home rule State;Promoting best practices and training is planned.

5. Statutes/regulations:

Statewide PV interconnection standards;Streamlined small PV interconnection;Net metering up to 2 MW aggregate, not to exceed annual elec-tric meter reading;RPS has solar carve out (“market booming with 100%+ annual growth”);No time of use rates are in place.

6. Tax treatment for PV:

All PV exempt from property tax at local option;All PV exempt from sales tax.

7. Construction policies:

Special fi nancing available for PV in state-funded buildings;PV system installation is encouraged and supported in public schools and rebates higher for public sector.

8. Training and certifi cation:

One-day special trainings off ered, also formal technical courses;Installer certifi cation and listing;Code offi cial training be off ered with IREC, also builder and archi-tect training.

9. Marketing activities:

Print and web-based how-to literature, advertising campaigns, co-marketing with installers, web-based installer listing; Additional relationships with architectural societies, electrical contractor assns., environmental organisations, ratepayer advocates.

What they say they need:

Reduce rebates;Delist poor installers;Limit residential applications to 5 kW unless energy effi cient.

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PV/US State Markets


in solar PV can be directly influenced by consumer-focused investment

tax incentives, as these incentives reduce the effective up-front cost of

the systems and increase demand for the technology. Several States

have established investment tax incentives for customer-sited renew-

able energy applications, including Arizona, California, Massachusetts,

New York, Ohio, and Oregon. Oregon’s programme is particularly

comprehensive and effective as it includes both a residential and a

business energy tax credit.

Support use of 3rd party ownership models for PV project development

Third party ownership is a PV business model that is emerging as a

powerful approach, since the third party has access to low cost

financing, greater ability to take on and mitigate technical risks, and

can make use of all Government incentives and tax advantages. This

model also reduces hassle and complexity for the end-user and

provides better access to financing.

California and New Jersey, among other States, allow this ownership

structure and business model to participate in their solar incentive

programmes. Other States may want to explore how they can encourage

expansion of this business model and other innovative business models,

such as utility ownership of PV systems.

Ensure favourable tax treatment of solar

A State’s sales tax and property tax policies are both powerful and

highly flexible tools that can be used to encourage or discourage

solar technologies – either limiting a PV system’s first and lifecycle

costs or further escalating those costs. As solar energy systems are

capital intensive, sales taxes on equipment and property taxes can be

significant.

Many States have exempted all PV systems from State and local sales

taxes. If sales tax exemptions are not possible under State law, States can

restrict the tax basis for PV systems to the cost of equipment only. Many

States also exempt all PV systems from property taxes.

Minnesota provides an example of eff ective tax policy that supports solar

PV deployment. The State off ers both property and sales tax exemptions

for all PV systems.

Solar friendly construction policies and practices

States should seek to encourage high-value or niche applications for

which PV technology is particularly well-suited and more cost eff ective:

public buildings, schools, and new home construction. Such solar applica-

tions help to educate offi cials and the public about the benefi ts of the

technology, promote high visibility for the technology, and off er econo-

mies of scale, thus reducing solar costs due to the larger size of most

public buildings.

States are increasingly establishing policies that require that PV system

installation be considered and evaluated for all major public building

construction. States can demonstrate their confi dence in PV technology

and strengthen the PV market by adopting policies that mandate the

inclusion of PV systems as appropriate, given site conditions for all


PV/US State Markets


publicly-funding building projects that involve major renovations or

new construction using State funds. The additional expense for a PV

system installation will often be very small in the context of a project’s

total design and construction cost. Further, because these buildings are

likely to be occupied and used for a public purpose for the life of the

system, a life cycle analysis of costs and savings should justify the addi-

tional expense.

A good example is Oregon’s recent legislation, enacted in 2007, that

requires installation of solar energy systems on public buildings in most

circumstances. The law provides that all public building projects should

include solar technologies in an amount determined by the total building

cost. The solar technology investment must amount to at least 1.5% of

the total contract price. The policy also applies to major renovation

projects if the cost of the renovation exceeds 50% of the total value of the

building.

Many States also require and provide support for the installation of renew-

able energy systems and PV as part of major public school construction

projects. “Solar on Schools” provides high demonstration value and an

important teaching tool that off ers students the opportunity to see fi rst

hand how renewable energy works.

New York State has been a leader in targeting installation of PV systems

in public schools through the NY State Energy & Research Develop-

ment Authority’s School Power Naturally programme. Connecticut also

has a noteworthy High Performance Schools Programme that aims to

change the way in which Connecticut’s schools are designed and built.

It also seeks to encourage towns to include energy efficiency features

and clean distributed energy generation as standard components.

Support installer training

The growing demand for PV systems requires a specialised, qualifi ed work-

force. An ample supply of installers and installation companies creates

competition for customers that can help drive quality installation and serv-

ices up and prices down. Many States off er training to installers. Training

targets in most States also include local code offi cials and inspectors. Some

States also target builders and architects.

New York has been a leader in the integration of PV courses and certifi ca-

tions into school programs at the secondary school level and in its State

colleges. NYSERDA provides funding to New York technical schools, colleges,

and continuing education programmes to develop and implement nation-

ally accredited training programs and facilities to train PV installers. Funding

is being provided for accreditation at three levels: instructors, training

organisations or institutions, and continuing education providers. To date,

NYSERDA has helped to develop ten nationally accredited training centre

and continuing education programmes across the State.

Some fi nal thoughts

Long-term Government leadership and commitment to solar technology

deployment are needed the market is to grow, and to enable consumers,

businesses, and industry to get the benefi ts of greater use of PV and

other solar technologies. It is also important to recognise that no single

State policy or programme can create a self-suffi cient solar market in

isolation. Instead, States should consider employing a portfolio of policies

and strategies to drive solar markets, and embrace innovative approaches

and lessons learned from leading solar States like California, New Jersey,

NewYork, Colorado, and Massachusetts.

Energy Trust of Oregon provided funding support for this 5900 watt system on the Oregon Coast.


mainstreaming solar pv in the usa

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