Developing State Solar Photovoltaic Markets

Riding the Wave to Clean Energy Independence

Report outlines four key strategies for ensuring wide-scale deployment of established solar technologies, and how states can lead the charge.

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Solar photovoltaic energy is an established technology that has proven its ability to improve our national security and boost the economy. Photovoltaics produce energy that is both domestic and emission-free, making it key to weaning the United States of our dependence on polluting fossil fuels and helping to curb the effects of global warming. Solar PV also bolsters our economic security by creating more new jobs than any other energy technology.

The federal government has shown support for solar energy in recent years with the passage of the Energy Policy Act of 2005, which provides tax credits for investors in solar power systems. The Securing Energy Independence Act of 2007 (HR.550/S.590) would extend the tax credits through the end of 2016, a necessary step for a rapid transition to solar energy.

Yet federal action is not enough. Energy policy is largely determined at the state level through state and local laws and utility regulation. States must therefore take the lead to ensure that incentives are properly structured to keeps costs declining while regulatory processes become more easily navigable by businesses and consumers. Solar photovoltaics must rival power from the utility grid in both cost and accessibility in order to make solar power appealing to consumers.

Four policies are central to ensuring the wide-scale deployment of solar energy:

  • Financial incentives: Financial incentives for solar power, sustained over five to 10 years at a declining rate, ensure market stability and cost reductions, and will build a state-based industry by stimulating customer investment.
  • Interconnection standards: Solar PV customers must be able to connect to the utility grid without undue delay and expense. If the process is lengthy or difficult, it will dissuade many consumers.
  • Net metering: Net metering ensures that consumers are equipped with PV systems that meet their energy needs while crediting customers for all the energy they generate.
  • Rate design: Utilities should charge consumers fairly for the electricity they consume and make the same rate choices available to solar customers that are available to other customers.

This report highlights model policies and case studies of four states that have effectively developed thriving solar markets. These models provide guidance to states looking to boost their economies by developing a strong solar industry and show that stronger energy independence through solar power is achievable for every state. These successes will provide essential lessons in shaping a bold national solar policy.

Why Solar

Over 70 percent of our electricity in the United States is generated from fossil fuels, a finite resource that emits greenhouse gases and other pollution. We must transition to domestic, clean, renewable sources of energy in order to avoid a climate crisis and reduce our dependence on fossil fuels and foreign sources of energy.

Solar photovoltaics, which convert light from the sun into electricity, are a mature technology with the potential to play a large part of the solution. The benefits of PV are clear: it provides zero-emission electricity at peak times when energy grids are strained and is a proven, reliable technology with warranties for 20 years. It also improves national security and strengthens the utility grid by delivering energy to American rooftops every day, and it creates economic security by creating more jobs than any other energy technology.

Solar energy can play a central role in improving our energy independence and making the transition to a renewable energy economy. The sooner we begin, the sooner we can reap the benefits.

The Cost of Photovoltaics are Coming Down

The cost of solar PV has declined sharply over recent years as the technology has matured and manufacturing volumes in the solar industry have grown. Every time production has doubled, manufacturing costs have fallen by approximately 20 percent. Solar PV will be competitive with grid power (Figure 1); the only question is when.

States Can Lead the Way

The federal government has recently initiated programs to increase the use of solar energy across the country. The Energy Policy Act of 2005 created a 30 percent Investment Tax Credit for solar power systems that expires at the end of 2008. The Securing Energy Independence Act of 2007 would extend the credits through the end of 2016, but these measures alone are not sufficient. Most energy policy is set at the state level, so state action is necessary to clear the regulatory hurdles that stand in the way of wide-scale deployment of solar energy and provide incentives to spur development of solar markets.

The Time Is Now

The solar industry had global gross revenues of $19 billion in 2006 and is projected to grow to $70 billion in 2010.2 This growth means new jobs, a stronger economy, and increased energy independence for states that establish the right market conditions to ride this wave. Many states are already taking action to create conditions that will allow solar energy projects to flourish. The following case studies highlight effective state programs that implement the four key policies necessary for solar market development—financial incentives, interconnection, net metering, and rate design—and tell the story of the leader or organization that made it happen. These case studies illustrate how any state across the nation can build on past success to develop a strong solar industry and provide critical lessons for federal policy makers in promoting clean energy.

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