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How well did subsidies for solar panels on US homes work?

18 Jan 2018
Net PV benefit by county
Net PV benefit by county

Have subsidies for domestic solar panels installed in the US been worthwhile? To find out, researchers analyzed data for 540,000 systems with a total installed capacity of 6 GW.

“We hope that the study will give policymakers, utilities and solar businesses the ability to fine-tune their offers so that the costs of PV [photovoltaics] more closely match its benefits,” Parth Vaishnav and colleagues Nathaniel Horner and Inês Azevedo of Carnegie Mellon University told environmentalresearchweb. “We’d also like to highlight the geographical variation that exists in the costs of systems and the benefits they produce.”

It’s estimated that 2.5 GW of distributed PV installations were added across the US in 2015, followed by another 3.4 GW in 2016. Driving this capacity growth is a reduction in system prices, plus a range of federal, state and local subsidies as well as net metering programmes offered by some utility providers.

Looking at the financial benefits, data from 2014 point to a much wider range of the population receiving incentives for adopting rooftop solar than back in 2006. But the study concludes that PV subsidies still flow disproportionately to areas with higher incomes.

Other observations include the importance of generous net metering policies for the financial viability of rooftop systems. In US states where customers can sell excess power to the grid at retail prices, the private benefits of solar PV typically exceed private costs. However, if marginal pricing is applied, then customers need to be in locations with abundant sunshine such as California, Nevada or Texas to make the numbers add up. But that’s not the only factor, as the calculation is also sensitive to the financing terms of purchasing a rooftop system – even in sunny states.

While the study estimates that the total upfront subsidy per kilowatt of installed capacity has fallen from, on average, $5200 in 2006 to $1400 in 2014, the absolute magnitude has soared as the number of rooftop systems in operation has rocketed. This public investment has helped to grow jobs – the number of installers in the dataset rose from 514 in 2006 to 2900 in 2015 – as well as stimulate a regulatory environment for firms to operate in.

The scientists touch on other plus points too, adding that the increase in installed capacity also contributes to understanding how best to integrate distributed PV into the electric grid.

However, when considering the public benefit in terms of pollution cuts, such as avoided carbon dioxide emissions and improvements in air quality, the group recognizes the difficulty in determining appropriate monetary values. As a result, the researchers caution against defining public benefits too narrowly.

Renewable energy sources such as solar and wind have a crucial role to play in reaching climate goals, and success will be felt on a global scale. It follows that the benefits of technologies such as rooftop solar PV need to be priced accordingly.

The team reported their work in Environmental Research Letters (ERL).

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