Money Trumps Sunny When It Comes To Residential Solar

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Written by Nora Caley
on August 07, 2013 No Comments
Categories : E-Features

It's more important to have money than to have sunshine.

That is one of the key points from a recent report from the Environment America Research & Policy Center, ‘Lighting the Way: What We Can Learn from America's Top 12 Solar States.’ The report highlights the so-called ‘dazzling dozen,’ states that have the highest amount of solar installed per capita. While these 12 states account for 28% of the U.S. population, the report notes, they make up 85% of the nation's installed solar energy.

The top 12 states ranked by per capita solar are Arizona, Nevada, Hawaii, New Jersey, New Mexico, California, Delaware, Colorado, Vermont, Massachusetts, North Carolina and Maryland. These states had the most solar photovoltaic capacity installed in 2012 and also the most cumulative solar capacity.

Some of these states have abundant sunshine, but what makes these states solar leaders is that their state and local governments created effective public policies for the development of solar. Those policies included creative financing options – everything from net metering to third-party power purchase agreements (PPAs) to property assessed clean energy (PACE) financing.

‘The states that stood out also have state leaders that are committed to making solar happen,’ says Rob Sargent, energy program director for Environment America. ‘There is commitment at the top. They are looking at the obstacles and saying, 'How do we overcome them?'’
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Sargent says one of the biggest obstacles for distributed solar generation is the upfront cost of installing a PV project. Such costs have made net energy metering one of the most popular financing methods. Eleven of the 12 states have strong net metering policies, in which the utility customer can offset his or her electricity bills with on-site solar and receive compensation for the excess electricity they provide to the grid. The exception was North Carolina, which installed mostly utility-scale projects.

‘Net metering is the biggest thing,’ Sargent says of the various creative financing methods. ‘People know they want to install solar, but they have to pony up money up front. There are maintenance costs, but there are no fuel costs for the rest of the time you are using it. It's just a question of how much you save over time.’

The report notes that grants, rebates, tax incentives and loans are important because they help minimize the upfront costs of installing solar. For example, the California Solar Initiative offers rebates to customers of one of the state's three investor-owned utilities – Pacific Gas and Electric, Southern California Edison or San Diego Gas & Electric – that install rooftop or ground-mounted solar. The rebate amounts vary according to the size of the project, customer class, location and performance. The Vermont Small Scale Renewable Energy Incentive Program offers a rebate of $0.45 per watt for residential installations under 10 kW for solar electric, and there are other incentives for solar thermal and commercial installations.

Also helpful are third-party leasing arrangements. In solar leasing, a third party installs and owns the solar project, and the property owner leases the panels. The consumer benefits from net metering credits on the electricity bill, and the third party gets any tax credits. Third-party power purchase agreements are similar to leasing, but the third party owns the panels and sells the electricity to the property owner at a reduced price. With PACE financing, property owners pay back the installation costs over time on their property tax bills.

Sargent notes that leasing has been especially attractive to consumers because they do not have to handle financial paperwork and interconnection issues.

‘Some of the leasing companies are able to go to people and say, 'I am going to take the paperwork out of it, and you can have solar on your roof with no money down,'’ he says.

Some states offer most but not all of the financing methods. Delaware offers net metering and rebates but not PACE. Colorado offers third-party PPAs and PACE but not tax credits. Hawaii offers tax credits but not rebates. Sargent notes that states such as Massachusetts offer programs that are not mentioned in the report, such as Solarize, a group-buying program that saves participants money as more homeowners sign contracts for solar.

Other states might follow these leaders. According to ‘Addressing the Upfront Cost Barrier: States Invest in Finance Policy this Session,’ a recent white paper from the Center for the New Energy Economy at Colorado State University, more than 550 advanced energy financing and incentive bills have been introduced in state legislatures this year as of May 5. More than half – 297 of the bills – are for tax incentives. The next largest category, loans and grants, was the focus of 100 bills. Other policy types include rebates, financial incentives, PACE, third-party leasing and bond programs.

‘There are some really good different programs,’ Sargent says. ‘The real key is there is no one thing.’

To read the Environment America report, click here.

Nora Caley is a Denver-based freelance writer.

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