A Survey of State and Local PV Program Response to Financial Innovation and Disparate Federal Tax Treatment in the Residential PV Sector
|The residential PV market in the United States is currently characterized by declining installed costs, dwindling state and local PV incentives, booming demand, a high share of third-party-owned (TPO) systems in the largest markets, a growing appreciation of the benefits that host-ownership can provide, and a recent proliferation of solar loan products designed to encourage host-ownership and capture those benefits. Within this context, Lawrence Berkeley National Laboratory (LBNL) is pleased to announce the release of a new report that explores how some state and local PV incentive programs have responded to this dynamic market environment by adapting their incentive offerings to help optimize their expenditures andmaintain their relevance.
Though by no means uniform, these responses have generally fallen into two camps: (1) differentiating incentive levels between TPO and host-owned systems in recognition of the greater federal tax benefits provided to TPO systems, and/or (2) encouraging the spread of consumer-friendly solar loan offerings as a way to expand the number of available financing options and, in turn, consumer demand for solar. Both courses of action potentially help to preserve increasingly scarce public funding for PV by using incentives more as a tool to fine-tune the market rather than to stimulate it outright, and/or by shifting away from cash disbursements in favor of financial support that can better sustain program fund balances and potentially even provide a return on capital. At the same time, these types of responses are not yet widespread, perhaps in part because they raise questions about the role of state and local PV programs within the solar market, as well as possible impacts on solar deployment--both of which deserve consideration.
This report begins by describing the evolution of residential PV finance in the United States since 2007, focusing initially on the first wave of innovation that brought the rise of TPO, followed by the second and current wave of innovation involving solar loans, and paying particular attention to market drivers in each case. It then surveys the varied responses of state and local PV programs to this financial innovation, with most responses falling into one or both of the two broad camps noted above: differentiating incentive levels by ownership type, and/or providing support for solar loans. Finally, it discusses the various tradeoffs, considerations, and implementation challenges that confront program managers when fine-tuning their incentive offerings in these ways.
The report, as a well as a summary slide deck, can be downloaded here. LBNL appreciates the funding support of the U.S. Department of Energy's SunShot Initiative.