A new report from Bloomberg New Energy Finance (BNEF) predicts substantially more solar generating capacity will get built in the United States, and a major industry downturn will be avoided, if the federal solar investment tax credit (ITC) is extended at its current level.
Policy plays an important role in deploying solar energy by helping to create competitive markets for new and innovative energy technologies. Renewable energy standards, performance-based incentives, and the renewable (or reverse) auction mechansim are used in various parts of the United States to help stimulate demand for solar and other renewable energy technology.
Investments by the military and all levels of government are important to make America competitive in the world solar market. An unintended consequence of current federal acquisition law is the limited authority of the executive branch to enter into long-term clean energy contracts.
Federal appropriations for solar energy-related programs at the Department of Energy (DOE) have been critical to catalyzing technological innovation, lowering the cost of solar components and systems, and overcoming market barriers.
Performance-based incentives (PBI) include various incentives that are awarded based on the actual production of an operational renewable energy system. PBIs tend to encourage the use of high-efficiency solar technology, optimal system design, and ongoing performance monitoring. The feed-in tariff, first pioneered in Germany, is the most common type of solar PBI.
Renewable energy standards (RES) require a minimum percentage of generated energy be sourced from qualifying renewable energy sources over a defined time period. There are several variants of this policy, such as a clean energy standard (CES). In addition, some policies contain a solar-specific requirement, known as a solar carve-out.
Under a reverse auction mechanism (RAM), renewable energy project developers submit bids to build generation facilities. Bids are based on energy costs that are calculated using the projects’ levelized cost of electricity (LCOE), which compares the full cost of energy across all technologies.
While retail (or end-user) interconnection is regulated by states, the rules for interconnecting solar and other generation assets to the wholesale distribution grid are set by the Federal Energy Regulatory Commission (FERC). Changes to FERC rules could allow greater use of solar energy in the distribution grid, and reduce regulatory barriers to interconnecting wholesale distributed generation solar energy projects.
Renewable Energy Deployment Links
- State Clean Energy Toolkit, Clean Energy States Alliance (CESA) - a coalition of state clean energy funds and stakeholders that promote best practices in policy design for clean energy markets and technologies