Performance-based incentives (PBI) are incentives that are paid based on the actual energy production of the solar system. Typically these are paid based on an energy ($/kWh) basis over a period of time. This is different from the approach where a one-time rebate is provided on a $/kW basis at the time the system is installed. Feed-in tariffs (FIT) are a common type of PBI.
How do PBIs work?
A solar system that is paid through a PBI approach must have metering installed that measures the output of the system, and this information is provided to the program administrator. An example of a PBI approach is the California Solar Initiative, where incentives are paid monthly over a 5-year period of time (60 total payments) based on the actual energy (kWh) produced by your solar energy system. The incentive rate ($/kWh) should remain constant for the term of the contract.
Why are PBIs important to solar?
Using a PBI policy is extremely effective in motivating installers and system owners to focus on proper installation, maintenance, and performance of their systems – since the payment is based upon the actual energy produced. This provides policy makers and regulators some assurance that incentives provided are being effectively managed, and not squandered on a system with poor performance. However one of the detriments to this approach is that the system typically requires additional financing, as there is not a lump-sum, up-front payment.