Government incentives for rooftop solar often greater than system’s total cost, CEA report finds

A new report that analyzed U.S. solar incentives released on Thursday by the Consumer Energy Alliance (CEA) showed that a combination of federal, state and local incentives, mixed with the declining net cost of installing photovoltaic systems, has fueled greater usage of rooftop solar across the nation.

The report compared solar incentives in 25 states that reflected a variety of locations, state policies, retail tariff design and wholesale electricity prices. CEA said it commissioned ScottMadden Inc. to expand on its 2016 solar incentives report in order to inform policy discussions with data that quantified total incentives available to residential PV users as a percentage of the installed cost of a residential solar facility.

“We strongly support solar’s growth across the country and we want to ensure that our nation’s solar policies continue to keep pace with the dynamic changes taking place in today’s markets, so that its continued growth is assured,” said Brydon Ross, vice president of State Affairs for CEA.

In 2016, residential solar PV capacity grew 20 percent over the prior year, the report said. The average installed cost of residential solar, meanwhile, dropped 21 percent to $2.84 per watt-dc in the first quarter of 2017 versus first quarter 2015.

In eight of the states examined in the report, total incentives exceed the total costs of a rooftop solar PV system.

The report also highlighted the stark difference in incentives between residential and utility-scale solar operations.

Utility-scale solar installations are much less expensive to install than residential rooftop systems, when factoring in installed cost plus operation and maintenance expense. However, utility-scale solar only receives about 45 percent of total system costs in incentives, as opposed to residential solar PV systems that receive on average between 104 percent and 140 percent of costs in incentives.

That means the ratio of absolute incentives for utility-scale to rooftop solar is more than five to one.

In 2017, an average residential solar system cost an estimated $19,722, including the cost of equipment, installation, and operation and maintenance expense over 25 years. The report noted that cost is for a system that totals the median size of 6.1 kilowatts.

“Through the 30 percent federal tax credit, various state tax credits and state rebates ranging between 10 percent and 65 percent, and the additional tax deductions provided by the depreciation of the solar assets for third-party-owned systems, taxpayers as a whole are covering a significant portion of the cost of an individual’s residential solar PV system in the United States,” the report said.

Of the 25 states analyzed, all but five states – Florida, Arkansas, North Carolina, Georgia and Louisiana – saw at least 75 percent of total system costs given as incentives to residential PV as part of standard rate structures. Despite this, those incentives do vary widely state to state, and third-party-owned PV owners receive the largest incentives, gaining additional tax benefits that direct-owned solar operators do not.

Through utility programs, utility customers share the cost of residential solar PV systems, according to the report. Customers contribute directly in about half of the states analyzed and, in at least five states, customers pay approximately 30 percent of the costs of residential solar PV systems, the study found.

The report also touched on the issue of cost shifting related to net energy metering programs, currently offered by 44 states. Net metering programs pay full retail rates for residential rooftop solar customers’ excess electricity production.

“CEA is concerned this may shift fixed utility infrastructure costs onto non-solar and less affluent customers,” the group, which has more than 500,000 members, said in a statement.