It now applies to a wide range of generation technologies, including but not limited to solar thermal electric, photovoltaics, wind, and geothermal electric (DSIRE). For solar systems, the credit is "equal to 30% of expenditures, with no maximum credit. Eligible solar energy property includes equipment that uses solar energy to generate electricity…" (DSIRE). For small wind turbines, the credit is "equal to 30% of expenditures, with no maximum credit" (DSIRE). Significantly, this also applies to investments supported by "subsidized energy financing" (DSIRE).
Alternatively, taxpayers could have chosen simply apply for and receive Renewable Energy Grants (REGs) under the 1603 program. These apply to a wide range of generation technologies, including but not limited to solar thermal electric, photovoltaics, wind, and geothermal electric (DSIRE). The grant is equal to "30% of property that is part of a qualified facility, qualified fuel cell property, solar property, or qualified small wind property; and 10% of all other property" (DSIRE). However, "only tax-paying entities are eligible" (DSIRE). Government agencies, non-profits, and coops are not eligible (DSIRE).
These incentives are not limited to the federal level. Roughly twenty states offer tax credits assist in compensating for the cost of buying and putting in solar energy equipment, in an array from 10% to 50% of expenses, with credit limits "ranging from $500 to $35,000 for residential systems and from $25,000 to $60 million for commercial systems" (DSIRE). This tax credit is not automatic, however. Some states require applications and pre-approval, and several states have minimum standards for system warranties, equipment quality, and installer credentials, and installation types (DSIRE).
Future of Solar Power Industry
Solar electricity is still not directly economically competitive with coal and gas power plants (Singh and Sood), and so only about 2% of total electricity generation comes from non-hydroelectric renewable power generation (Palmer and Burtraw). However, because a future need will exist, roughly 17 states have created funds to finance renewable energy programs (DSIRE; Singh and Sood). Singh and Sood refer to these funds as Renewable Energy Trust Funds (RETs), while DSIRE refers to them as public benefits funds (PBFs). These funds are normally financed by a small surcharge imposed on all state utility customers (DSIRE; Singh and Sood), though some are established as compensation for nuclear waste storage, voluntary customer contributions, or utility settlement proceedings (DSIRE). Other uses exist, including energy efficiency and low-income support (DSIRE). Some expire after a certain date, and others have been "raided" by states with low coffers (DSIRE).
Another side of incentivization is direct investment or financial subsidies for renewable energy generating capacity, like home solar systems (Singh and Sood). This is one way to redistribute externalities from fossil-fuel power stations (Singh and Sood). Direct cash incentives include rebates, buy downs, grants, and performance-based incentives (DSIRE). In 30 states, 150 utilities use PBFs/RETs, state funds, and federal funding from the American Recovery and Reinvestment Act of 2009 (ARRA) to fund photovoltaics (PV) and/or solar thermal systems (DSIRE). Another type of direct investment is the feed-in tariff, which requires generators "to buy electricity produced from renewable resources at a fixed price per kilowatt-hour, usually over a long-term, fixed time period," paying for "both electricity and the associated environmental attributes or renewable energy credits (RECs) (DSIRE; Singh and Sood). Currently five states, the Tennessee Valley Authority (TVA), and several municipalities use this type of incentivization (DSIRE).
Other incentivizations include tax deductions for renewable energy production, investments, or consumption, as well as reduced investment loan rates (Singh and Sood). The main federal policy tool in the U.S. is the Renewable Energy Production Credit (REPC) (Palmer and Burtraw). These are always political footballs, prone to being cut in budget battles (Kelly; Wang). In the meantime, REPCs are a relatively expensive method of inducing renewable power generation, giving "1.5cents/kWh [tax credit] for electricity produced from wind and dedicated closed-loop biomass generators" and later extended to include geothermal, solar, and landfill gas power generation (Palmer and Burtraw). In many cases, the "subsidies [are] worth almost as much as the entire $1.6 billion cost of the project[s]" (Lipton and Krauss). The REPCs "largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come" (Lipton and Krauss).
Permits required to implement Solar Projects
Other types of policies affect solar system installations. For example, most states permit "solar easements," which, in the manner of a traditional access easement, secures a solar system owner's right to continued access to sunlight from a neighboring property. Nearly half of all states have passed legislation about solar rights that prohibits private restrictions (e.g., homeowners associations or covenants) from impinging on the ability of the owner to install a solar power system. Of course, local governments may also deal with these issues, including building permits, required structural analyses, inspections, town plans, and so on (Musser).
In fact, to many people, local issues are paramount. Regulatory costs account for $0.50/watt of capacity, according to an industry study mentioned by the New York Times and quoted by the author (Musser). One of the largest solar panel system installation companies in the U.S., Verengo Solar Plus, dedicates more than 10% of his workforce "solely to researching and tailoring permit applications & #8230;[including] two 'permit runners'" whose only job is to hand-deliver permits (Zeller). Studies suggest that analysis "permit standardization could make solar power & #8230; competitive for roughly half of the nation's 128 million homes within just two years" (Zeller). Time investments also loom large, especially for smaller projects (Musser), possibly because of budget cuts in personnel (Zeller). For example, Santa Ana, California, takes "four to six weeks to process permit applications & #8230; [with only] & #8230;one electrical engineer & #8230; for & #8230; any building project" (Zeller). Local requirements vary widely, and are sometimes absurd to the point of nonexistence (Musser and Zeller). Training for building inspectors is non-existent, and could affect safety (Musser).
Government regulations and policies affect renewable power generation a great deal. The federal, state, and local governments encourage solar power generation developments and installation through a wide variety of mechanisms. As the price of solar power generation has come down through government incentivization, the regulatory costs have gone up. Some fine-tuning is needed in the permitting process for this new technology. The future of government financial incentivization is dependent on both the economy and the political situation.
DSIRE. Solar Set-Asides in Renewables Portfolio Standards. 2011. North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. 26 November 2011 .
Energy Policy Act of 2005. No. 119 STAT. 594. Pub. L. 109-58. 5 August 2005.
FERC. "Generator Interconnection." 6 August 2006. Federal Energy Regulatory Commission. 26 November 2011 .
Kelly, Erin. Future of federal solar programs in doubt. 28 June 2011. 2011 26 November .
Leone, Steve. Solar, Wind Projects Could Benefit From New Grid Regulations. 22 July 2011. 26 November 2011 .
Lipton, Eric and Clifford Krauss. "A Gold Rush of Subsidies in Clean Energy Search." The New York Times 12 November 2011: A1.
Musser, George. Are local solar regulations really as bad as people make them out to be? 7 February 2011. 26 November 2011 .
Palmer, Karen and Dallas Burtraw. Renewable Electricity Policies. Discussion Paper. Washington, DC: Resources for the Future, 2005.
Schmidt, Hugh F. "What Regulation May be Appropriate to Support Sustainable Energy Inputs for Electric Generation?" Proceedings of the 42nd Hawaii International Conference on System Sciences. Honolulu, Hawaii: University of Hawai'i at Manoa, 2009. 1-8.
Singh, Randhir and Y.R. Sood. "Policies for Promotion of Renewable Energy Sources for Restructured Power Sector." Third International Conference on Electric Utility Deregulation and Restructuring and Power Technologies (DRPT) . Nanjuing: IEEE, 2008. 1-5.