A complete list of incentives can be found at the Database of State Incentives for Renewable Energy (DSIRE). A lot of solar power systems are grid-connected and use net metering laws to allow the use of electricity in the evening that was generated during the daytime. New Jersey is the state with the least restrictive net metering law while California is the one that has the most number of homes that have solar panels installed.
Many were installed because of the million solar roofs initiative, which entails a vision introduced back in 2007 where solar PV panels are to be installed on an additional million rooftops of home or businesses in the state of California by 2018.
In some states, like Florida, solar power is subject to legal restrictions that discourage its use.
Federal Tax Credit
The federal tax credit for solar was extended for eight years as part of the financial bailout bill, H.R. 1424, until the end of 2016. It was predicted that this will create about 440,000 jobs and 28 GW of solar power. Additionally, it was also predicted that this will lead to a $300 billion market for solar panels. This prediction did not take into account the removal of the $2,000 cap on residential tax credits at the end of 2008.
Moreover, a 30% tax credit is available for residential and commercial installations. For 2009 through 2011, this was a 30% grant instead of a tax credit, and at the time, it was known as the 1603 grant program.
The federal Residential Energy Efficient Property Credit, an income tax credit on IRS Form 5695, for residential PV and solar thermal was extended in December 2015 to remain at 30% of system cost (parts and installations) for systems that are put into service by the end of 2019, then 26% until the end of 2020, and then 22% until the end of 2021. This applies to a taxpayer’s principal and/or second residences, but this can’t be applied to a property that is rented out. There is no maximum cap on the credit, and the credit can be applied toward the Alternative Minimum Tax. Any excess credit (greater than that year’s tax liability) can be rolled into the following year.
The solar industry and utilities clashed extensively on renewal, but the solar industry won. The renewal is expected to add $38 billion of investment for 20 GW of solar.
Section 1603 Grants
President Barack Obama’s stimulus bill in 2009 created a program known as Section 1603 grants. This program was designed so as to give federal grants to solar companies for 30% of investments into solar energy. Since 2009, the federal government has given solar companies $25 billion in grant money through this program. However, the Section 1603 grant program expired in 2011.
The United States Treasury Department has been investigating solar companies for potential fraud since 2013. The department promised a report by June 2015, but the report had not been released as of 2016.
Solar America Initiative
The United States Department of Energy (DOE) announced on September 29, 2008, that it will invest $17.6 million, subject to annual appropriations, in six company-led, early-stage PV projects under the Solar America Initiative’s “PV Incubator” funding opportunity. The PV Incubator project is designed to fund prototype PV components and systems with the goal of moving them through the commercialization process by 2010. The 2008 award is the second funding opportunity released under the PV Incubator project. With the cost-share from the industry, which is at least 20%, up to $35.4 million would be invested in these projects. These projects would run for 18 months and are subcontracted through DOE’s National Renewable Energy Laboratory.
Most of the projects were to receive up to $3 million in funding, except Solasta and Spire Semiconductor which would receive up to $2.6 million and $2.97 million, respectively. Some of the projects under this initiative include:
- Massachusetts-based 1366 Technologies developing a new cell architecture for low-cost, multi-crystalline silicon cells, which will enhance cell performance through improved light-trapping texturing and grooves for self-aligned metallization fingers
- California’s Innovalight using ink-jet printing to transfer their “silicon ink” onto thin-crystalline silicon wafers so as to produce high-efficiency and low-cost solar cells and modules
- Skyline Solar, also in California, developing an integrated, lightweight, and single-axis tracked system that reflects and concentrates sunlight over 10 times onto silicon cells
- Solasta, in Massachusetts, working on a novel cell design that increases currents and lowers materials cost
- Solexel, another California-based company, commercializing a disruptive, 3D high-efficiency monocrystalline silicon cell technology that dramatically reduces manufacturing cost per watt
- Spire Semiconductor in New Hampshire developing three-junction tandem solar cells that better optimize the optical properties of their device layers. This company is targeting cell efficiencies over 42% using a low-cost manufacturing method.
The PV Incubator project is part of the Solar America Initiative (SAI), which plans to make solar energy cost-competitive with conventional forms of electricity by 2015 (grid parity).
The U.S. Department of Energy Solar Energy Technology Program (SETP) will achieve the goals of the SAI through partnerships and strategic alliances by focusing mainly on four areas. These are:
- Market Transformation: activities that address marketplace barriers and offer the chance for market expansion
- Device and Process Proof of Concept: R&D activities addressing novel devices or processes with a potentially significant performance or cost advantages
- Component Prototype and Pilot-Scale Production: R&D activities emphasizing the development of prototype PV components or systems that are produced at pilot-scale with demonstrated cost, reliability, or performance advantages
- System Development and Manufacturing: collaborative R&D activities among industry and university partners to develop and improve solar energy technologies
Another thing that is a part of the Solar America Initiative is the Solar America Showcase. For this activity, preference is given to large-scale, highly visible, and highly replicable installations that involve cutting-edge solar technologies or novel applications of solar.
Announced by the Department of Energy in 2011, the SunShot Initiative aims to reduce the cost of solar power by 75% from 2010 to 2020. In great detail, this initiative’s goals are as follows:
- Residential system prices reduced from $6/W to $1.50/W
- Commercial system prices reduced from $5/W to $1.25/W
- Utility-scale system prices reduced from $4/W to $1/W (CSP, CPV, and PV)
Additionally, the Department of Energy announced a $29 million investment in four projects that would help advance affordable and reliable clean energy for American families and businesses. The $29 million would be separated into two investments:
- $21 million investment over five years to design plug-and-play PV systems that can be purchased, installed, and operational in one day
- $8 million investment in two projects to help utilities and grid operators better forecast when, where, and how much solar power will be produced at U.S. solar energy plants
Other projects under the SunShot Initiative are the following:
- Fraunhofer USA’s Center for Sustainable Energy Systems in Cambridge, Massachusetts developing PV technologies that allow homeowners to easily select the right solar system for their house and install, wire and connect to the grid
- North Carolina State University leading a project to create standard PV components and system designs that can adapt simply to any residential roof and can be installed and connected to the grid quickly and efficiently
- IBM Thomas J. Watson Research Center in Armonk, New York leading a new project based on the Watson computer system that uses big data processing and self-adjusting algorithms to integrate different prediction models and learning technologies
All these projects are working with the Department of Energy and the National Oceanic and Atmospheric Association to improve the accuracy of solar forecasts and share the results of this work with industry and academia.
State and Local
There have been numerous instances throughout the years that showcase the efforts that state and local government officials have undergone to make solar possible. The following are the most well-known of these instances:
- Governor Jerry Brown has signed legislation requiring California’s utilities to get 50% of their electricity from renewable energy sources by the end of 2030.
- The San Francisco Board of Supervisors passed solar incentives of up to $6,000 for homeowners and up to $10,000 for businesses. Applications for the program started on July 1, 2008. In April 2016, they passed a law that requires all new buildings below 10 stories to have rooftop solar panels. This made San Francisco the first major U.S. city to do so.
- In 2008, Berkeley initiated a revolutionary pilot program where homeowners are able to add the cost of solar panels to their property tax assessment and pay for them out of their electricity cost savings. In 2009, over a dozen states passed legislation allowing property tax financing. All in all, 27 states offer loans for solar projects.
- The California Solar Initiative has set a goal to create 3,000 MW of new, solar-produced electricity by 2016.
- New Hampshire has a $3,750 residential rebate program for up to 50% of system cost for systems less than 5 kWp ($6,000 from July 1, 2008, until 2010).
- Louisiana has a 50% tax credit up to $12,500 for the installation of a wind or solar system.
- New Jersey law provides new solar power installations with exemptions from the 7% state sales tax and from any increase in property assessment (local property tax increases), subject to certain registration requirements.
According to experience, a feed-in tariff is both the least expensive and the most effective means of developing solar power. This is because investors need certainty, and a feed-in tariff definitely gives them that.
California enacted a feed-in tariff that began on February 14, 2008, while Washington has a feed-in tariff of 15¢/kWh which increases to 54¢/kWh if components are manufactured in the state. Hawaii, Michigan, and Vermont also have feed-in tariffs.
In 2010, the Federal Energy Regulatory (FERC) ruled that states were able to implement above-market feed-in tariffs for specific technologies.
Solar Renewable Energy Certificates
In recent years, states that have passed the Renewable Portfolio Standard (RPS) or the Renewable Electricity Standard (RES) laws have relied on the use of solar renewable energy certificates (SRECs) to meet state requirements. They have achieved this by adding a specific solar carve-out to the state RPS. The first SREC program was implemented in 2005 by New Jersey. Soon enough, this program has expanded to several other states, including Maryland, Delaware, Ohio, Massachusetts, North Carolina, and Pennsylvania.
SREC offers many advantages, but one of its major problems is the lack of certainty for investors. A feed-in tariff provides a known return on investment, but an SREC program provides only a possible return of investment.
Power Purchase Agreement
In 2006, investors started offering free solar panel installation in return for a 25-year contract. They also began offering a Power Purchase Agreement (PPA), which is a contract between two parties — one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer).
By 2009, over 90% of commercial PV installed in the United States were installed using a PPA. About 90% of the PV installed in the United States is in states that specifically address PPAs.
New Construction Mandates
In March 2013, Lancaster California became the first U.S. city to mandate the inclusion of solar panels on new homes, requiring that every new housing development must average 1 kW per house.
The Property Assessed Clean Energy (PACE) Financing is a means of financing energy efficiency upgrades, disaster resiliency improvements, water conservation measures, or renewable energy installations of residential, commercial, and industrial property owners. This innovative financing arrangement lends money to a homeowner for a solar system, to be repaid via an additional tax assessment on the property for 20 years. This kind of financing arrangement allows the installation of the solar system at “relatively little up-front cost to the property owner.”
The principal feature of this program is that the balance of the loan is transferred to the new owners in the event the property is sold, and the loan is paid for entirely through electric bill savings. Unlike a mortgage loan, no funds are transferred when the property is sold — only the repayment obligation is transferred.
PACE programs are currently operating in eight states, California, Colorado, Florida, Maine, Michigan, Missouri, New York, and Wisconsin. Additionally, they are on hold in many other states.