Financial incentives for photovoltaics

Financial incentives for photovoltaics are incentives offered to electricity consumers to install and operate solar-electric generating systems, also known as photovoltaics (PV). A government may offer incentives in order to encourage the PV industry to achieve the economies of scale needed to compete where the cost of PV-generated electricity is above the cost from the existing grid. Such policies are implemented to promote national or territorial energy independence, high tech job creation and reduction of carbon dioxide emissions which may cause global warming.

When, in a given country or territory, the cost of solar electricity falls to meet the rising cost of grid electricity, then 'grid parity' is reached, and in principle incentives are no longer needed. In some places, the price of electricity varies as a function of time and day (due to demand variations). In places where high demand (and high electricity prices) coincide with high sunshine (usually hot places with air conditioning) then grid parity is reached before the cost solar electricity meets the average price of grid electricity.

Mechanisms

Four incentive mechanisms are used (often in combination):

• Investment subsidies: the authorities refund part of the cost of installation of the system.
• Feed-in Tariffs/net metering: the electricity utility buys PV electricity from the producer under a multiyear contract at a guaranteed rate.
• Renewable Energy Certificates ("RECs")

With investment subsidies, the financial burden falls upon the taxpayer, while with feed-in tariffs the extra cost is distributed across the utilities' customer bases. While the investment subsidy may be simpler to administer, the main argument in favour of feed-in tariffs is the encouragement of quality. Investment subsidies are paid out as a function of the nameplate capacity of the installed system and are independent of its actual power yield over time, so reward overstatement of power, and tolerate poor durability and maintenance.

With feed-in tariffs, the initial financial burden falls upon the consumer. Feed-in tariffs reward the number of kilowatt-hours produced over a long period of time, but because the rate is set by the authorities may result in perceived overpayment of the owner of the PV installation. The price paid per kWh under a feed-in tariff exceeds the price of grid electricity. "Net metering" refers to the case where the price paid by the utility is the same as the price charged, often achieved by having the electricity meter spin backwards as electricity produced by the PV installation in excess of the amount being used by the owner of the installation is fed back into the grid.

Where price setting by supply and demand is preferred, RECs can be used. In this mechanism, a renewable energy production or consumption target is set, and the consumer or producer is obliged to purchase renewable energy from whoever provides it the most competitively. The producer is paid via an REC. In principle this system delivers the cheapest renewable energy, since the lowest bidder will win. However uncertainties about the future value of energy produced are a brake on investment in capacity, and the higher risk increases the cost of capital borrowed.

Smart meters allow the retail price to vary as a function of time ("time of use pricing")[4]. When demand is high the retail price is high and vice versa. With time-of-use pricing , when peak demand coincides with hot sunny days, the cost of solar electricity is closer to the price of grid electricity, and grid parity will be reached earlier than if one single price were used for grid electricity.

The Japanese government through its Ministry of International Trade and Industry ran a successful programme of subsidies from 1994 to 2003. By the end of 2004, Japan led the world in installed PV capacity with over 1.1 GW.[5]

In 2004, the German government introduced the first large-scale feed-in tariff system, under a law known as the 'EEG' (see below) which resulted in explosive growth of PV installations in Germany. At the outset the Feed-in Tariff (FIT) was over 3x the retail price or 8x the industrial price. The principle behind the German system is a 20 year flat rate contract. The value of new contracts is programmed to decrease each year, in order to encourage the industry to pass on lower costs to the end users.

In October 2008, Spain, Italy, Greece and France introduced feed-in tariffs. None have replicated the programmed decrease of FIT in new contracts though, making the German incentive less attractive compared to other countries. The French FIT offers a uniquely high premium for building integrated systems.

France - Tarif d’Achat Photovoltaïque (2009) Installation Type Feed-in-tariff Continental France Overseas Departments Remark Roof & ground-mounted 0.3 Euro / kWh 0.4 Euro / kWh 1. Duration: 20 years BIPV 0.55 Euro / kWh 0.55 Euro / kWh Focus on BIPV National Target: 160MW by 2010 / 450MW by 2015 Tax credit for income tax payer: 50% reimbursement on equipment cost

In 2006 California approved the 'California Solar Initiative', offering a choice of investment subsidies or FIT for small and medium systems and a FIT for large systems. The small-system FIT of $0.39 per kWh (far less than EU countries) expires in just 5 years, and the residential investment incentive is overwhelmed by a newly required time-of-use tariff, with a net cost increase to new systems. All California incentives are scheduled to decrease in the future depending as a function of the amount of PV capacity installed.

At the end of 2006, the Ontario Power Authority (Canada) began its Standard Offer Program (http://www.powerauthority.on.ca/sop/), the first in North America for small renewable projects (10MW or less). This guarantees a fixed price of $0.42 CDN per kWh for PV and $0.11 CDN per kWh for other sources (i.e., wind, biomass, hydro) over a period of twenty years. Unlike net metering, all the electricity produced is sold to the OPA at the SOP rate. The generator then purchases any needed electricity at the current prevailing rate (e.g., $0.055 per kWh). The difference should cover all the costs of installation and operation over the life of the contract.

The price per Kilowatt hour (kWh) or kWp of the FIT or investment subsidies is only one of three factors that stimulate the installation of PV. The other two factors are insolation (the more sunshine, the less capital is needed for a given power output) and administrative ease of obtaining permits and contracts (Southern European countries are reputedly complex). For example Greece, at the end of 2008, had 3GWp of permit requests unprocessed and halted new applications [6].

National incentives

The most significant incentives programs are listed here.

Australia

Main article: Feed-in tariffs in Australia

Australia is a federation of states and territories. Each state has different laws regarding feed-in tariffs. The states have a range of policies from no feed-in tariffs to feed-in tariffs at more than double the normal consumer price of electricity. Some states are considering feed-in tariffs but have not yet enacted relevant legislation, or the legislation has not yet come into effect. Only a small proportion are Gross Feed-in tariffs (proposed NSW and ACT), most are on a net basis. In the Northern Territory at present only the Alice Springs Solar City is eligible for feed-in tariffs for solar PV.

Bulgaria

Situation as of March 30, 2009

• <=5kWp 823 Leva/MWh (about Eur 0.421/kWh)
• >5kWp 755 Leva/MWh (about Eur 0.386/kWh)

Bulgarian regulator DKER

Remuneration for 25 year contract, with possible next year changes set as minimally 95% of the previous year (needs citation)

Canada

Overview of Federal and provincial incentives at CanSIA. Only Ontario offers significant incentive.

Ontario

Situation as of October 2009.

Ontario Power Authority (OPA) Standard Offer Program (SOP). For renewable generation capacity of 10 MW or less, connected at 50 kV or less.

Feed-in Tariffs:

• Solar Photovoltaic: $0.80/kWh CDN
• Wind, Hydro, Biomass: $0.11/kWh CDN

Contract duration 20 years, constant remuneration. All power produced is sold to the OPA. Generator then purchases back what is needed at prevailing rate (e.g., $0.055/kWh CDN). The difference should cover costs of installation and operation over the life of the contract (perhaps with some profit).

Czech Republic

As of 2010 feed-in tariffs are 12.25 CZK/kWh for <=30kWp and 12.15 for >30 kWp. Contract duration is 20 years with yearly increase linked to inflation (within range 2 - 4 %). New contract prices are changed for 5 % yearly, due to unexpected rise of number of installations in 2009 new bill is proposed allowing 25 % change.

China

Situation as of 2009

Backed by the Chinese government’s total stimulus package of RMB 4 trillion ($585bn), Chinese businesses are now among the top producers of electric vehicles, wind turbines, solar panels and energy efficient appliances, according to a report released last month by London-based The Climate Group. In March 2009, the China government introduced the "Solar Roofs Plan" for promoting the application of solar PV building. The Ministry of Finance in July re-introduced the "Golden Sun Project" with more specific details of the related policy. The policy provides that the grid-connected photovoltaic power generation project, the state will in principle by photovoltaic power generation system and its supporting transmission and distribution projects to give 50% of the total investment subsidies. The subsidy will rise to 70% for solar power systems in remote areas that are not currently connected to the grid. Projects with a minimum capacity of 500MW would be eligible for the related incentive. All such financial incentive schemes boosts most of the new development in China solar market, such as the new thin film solar plant of Anwell Technologies and Tianwei, as well as the contract signed by LDK solar to install up to 500 MW of capacity of PV stations over the next five years in Jiangsu Province of China.

However, there still is no clarity on Feed-in-Tariffs for domestic installations within China.

France

Situation as of 2010. [7]

Legal basis: Arrêté du 12 janvier 2010

Feed-in Tariffs:

• Building integrated on houses, hospitals, schools : EUR 0.58/kWh
• Building integrated on other buildings : EUR 0.50/kWh
• Semi-integrated (the PV panels are located on buildings but do not have any architectural function) : EUR 0.42/kWh
• Ground-mounted PV in DOM-TOM and Corsica : EUR 0.40/kWh
• Ground-mounted PV <250 kWp in mainland : EUR 0.314/kWh
• Ground-mounted PV >250 kWp in mainland : EUR 0.314 – 0.3768/kWh according to the administrative region

Contract duration 20 years, linked to inflation. Additional investment subsidies available as tax credits. Each year, starting from 2012, the new contracts will be 10% lower than the previous year. Only 1500 kWh/kWp per year are bought from any fixed installation in mainland (2200 for tracking). In DOM-TOM and Corsica, the caps for fixed and tracking installation are respectively 2200 and 2600.

Germany

As of 2009, the legal framework is the German Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz – EEG). The feed in tariff, in force since 1 August 2004, was modified in 2008. In view of the unexpectedly high growth rates, the depreciation was accelerated and a new category (>1000kWp) was created with a lower tariff. The facade premium was abolished.

Feed-in Tariffs for 2009 installed panels (EUR/kWh)

System size (kWp)	Ground mounted	On buildings and anti-noise walls
<30	0.3194	0.4301
30 to 100	0.3194	0.4091
100 to 1000	0.3194	0.3958
>1000	0.3194	0.3300

Contract duration 20 years, constant remuneration. New contracts will be lower in value in future years (decreasing by 8-11% per year). Degression will be accelerated or slowed down by one percentage point if the market grows faster or slower than about 15% per year.

Greece

Situation as of 2009. [8] New PV FIT law introduced 15 Jan 2009

Feed-in Tariffs (EUR/kWh)

System size (kWp)	Mainland	Island
≤ 100 kWp	0.45	0.50
>100 kWp	0.40	0.45

Contract duration 20 years, indexed to 25% of annual inflation. New contract prices to reduce 1% per month starting 2010

Special program with higher FIT but no tax rebates planned to drive 750MWp installations of BIPV.

Investment subsidies: Tax rebates and grants (40%) are available.

India

The Indian Renewable Energy Development Agency (IREDA) provides revolving fund to financing and leasing companies offering affordable credit for the purchase of PV systems in India.

State Utilities are mandated to buy green energy via a Power Purchase Agreement from Solar Farms

The Ministry of New and Renewable Energy has launched a new scheme (Jan 2008) for installation of Solar Power Plants. For the producer, a Generation-based subsidy is available up to Rs. 12/kWh (€ 0.21/kWh) from the Ministry of New and Renewable Energy, in addition to the price paid by the State Utility for 10 years.

The State Electricity Regulatory Commissions are setting up preferential tariffs for Solar Power Rajasthan - Rs. 15.6 (€ 0.27) per kWh (proposed) West Bengal - Rs. 12.5 (€ 0.22) per kWh (proposed) Punjab - Rs. 8.93 (€ 0.15) per kWh

80% accelerated depreciation Concessional duties on import of raw materials Excise duty exemption on certain devices

Italy

The Ministry for Industry issued a decree on 5 August 2005 that provides the legal framework for the system known as "Conto Energia". The following incentive tariffs are from the decree of 19 Feb 2007.

Feed-in tariffs in Euros per kWh

System size in kWp	Free-standing	Semi-integrated	Integrated
1 to 3	0.40	0.44	0.49
3 to 20	0.38	0.42	0.46
20 or more	0.36	0.40	0.44

Contract duration 20 years, constant remuneration. Tarifs for new contracts will be decreased by 2% each calendar year.

Japan

The former incentive programme run by the Ministry of Economy, Trade and Industry was stopped in 2005.

Macedonia

As of October 2009

• Systems <50 KWp: 0.46€/KWh
• Systems >50 KWp: 0.41€/KWh

Contract duration 20 years

South Korea

Situation as of Oct 11 2006.

Feed-in Tariffs:

• Systems >30 kWp: KRW677.38/kWh
• Systems <30 kWp: KRW711.25/kWh (ca $0.75, €0.60)

Additional subsidies available.

Contract duration 15 years, constant remuneration

Spain

Situation as of 2009

No change since September 2008: the legal framework is the Real Decreto (royal decree)1578/2008 replacing 436/2004 modified by Real Decreto 1634/2006.

Feed-in Tariff:

Building mounted

• <= 20 kWp: 0.34 EUR/kWh
• > 20 kWp: 0.32 EUR/kWh

Ground mounted

• 0.32 EUR/kWh

These feed in tariffs are capped at approximately 500MWp/y, of which 241MW ground mounted, 233MWp building mounted >20MWp, 26.7 MW <20MWp building mounted.

Taiwan

Situation as of 2009

The Bureau of Energy under Taiwan's Ministry of Economic Affairs (MOEA) has announced the proposed feed-in tariff rates for photovoltaic (PV) and other types of renewable energy in September. A tentative rates of NT$8.1243-9.3279 (US$0.250-0.287) per kilowatt-hour (kwh) has been set for PV generated power, however, the proposed rates have fallen considerably short of local solar players' expectations. Public hearing will be held on 24 Sept to collect opinions from all parties concerned.

Turkey

Situation as of 2009

Announcements in the press that Turkey will introduce a new feed in tariff for photovoltaic; €0.28/kWh for the first ten years and €0.22 for another ten years.

United Kingdom

Situation as of 2006.

A grant system for installation has been operated by the Energy Saving Trust.

Maximum of £2,000 per kW of installed capacity, subject to an overall maximum of £2,500 or 50% of the relevant eligible costs, whichever is the lower.[9]

Tariffs for electricity sale and purchase are determined by individual electricity companies in a free-market situation, where consumers may choose their electricity supplier. There is no current feed-in tariff.

Proposed UK Feed-in Tariffs 2010.

The UK Government is proposing to introduce a feed-in tariff for small scale (up to 5MW) renewables by April 2010 and is currently undertaking a consultation period on the proposals, which can be summarised as follows:

• From April 2010, the FIT will offer a fixed payment per kilowatt hour generated (see table) and a guaranteed minimum payment of 5p per kWh exported to the market. Tariffs will not be index-linked.

• Projects up to 5MW will be eligible, including off-grid installations.

• Technologies that will be eligible for the FIT from April 2010 are: wind, solar PV, hydro, anaerobic digestion, biomass, biomass CHP and non-renewable microchip (see table for tariffs).

• The FIT will be offered for a 20 year period, with the exception of solar PV projects for which the period will be 25 years.

• The FIT designed with the aim of delivering 2% of the UK’s energy from small scale projects by 2020.

• Where appropriate, support will degress in line with expected technology cost reductions.

• Support levels will be reviewed periodically and in response to sudden changes in technology costs. However, tariff levels will be grandfathered, so that projects continue to receive the levels of support offered at their registration.

• Projects below 50kW must be installed by MCS accredited installers. 50kW to 5MW projects will be subject to accreditation similar to the current RO process.

• Projects installed in the interim period between the announcement of the FIT (15 July 2009) and the start of the scheme (April 2010) will be eligible to receive the tariff with some conditions on the support period. However, any non-domestic projects that receive grant funding from central government will have to return the grant before they can receive FIT payments.

• Regardless of technology, projects installed prior to 15 July 2009 will be eligible to receive generation payments of 9p/kWh and export payments of 5p/kWh, provided they were previously receiving support under the RO scheme.

• Projects up to 50kW in size will no longer be able to claim the RO; existing installations will be automatically transferred to the FIT. New and interim period projects between 50kW and 5MW will be given a one-off choice between claiming support under the FIT or the RO. Existing projects between 50kW and 5MW in size will remain under the RO, with no opportunity to transfer to the FIT.

• Government is not proposing to offer financial support for the up-front capital costs of projects.

• Proposed tariffs by technology type and size are detailed in the consultation document: Renewable Electricity Financial Incentives Consultation [10]

United States

Federal

Federal tax credits of 30%, capped at $2000 for residential systems, no cap for businesses and expires December 31, 2008. Details of this and state incentives are summarized at DSIRE. Legislation currently under consideration in Congress: “Renewable Energy and Job Creation Act of 2008.” Full text at [11]. This multifaceted energy bill would extend investment tax credit. As of June 21, 2008 it had passed the House but has not overcome opposition from Senate Republicans who have filibustered it over tax provisions that would finance the program [12].

California

Starting 1 Jan 2007 [13]

Administrative basis: California Public Utilities Commission (PUC) decision of Aug. 24, 2006

Feed-in Tariffs and Investment subsidies :

• Systems >100 kWp: $0.39/kWh
• Systems <100 kWp can choose either $2.50/Wp or $0.39/kWh

Contract duration 5 years, constant remuneration

Net metering

• Up to 2.5% of peak demand, rolls over month to month, granted to utility at end of 12 month billing cycle

Approved equipment

• Since 1 July 2009, the CEC list of approved solar panels has been tightened to the SP1 / NSHP list to provide more protection to the end-users. [14]

Colorado

Colorado became the first U.S. state to create a Renewable Portfolio Standard (RPS) under Amendment 37 in November 2004. amended in March 2007

Investor-owned utilities serving 40,000 or more customers to generate or purchase 10% of their retail electric sales from renewable-energy resources as well as a rebate program for customers

Utilities must provide increasing proportions of renewable or recycled energy in their electricity sales in Colorado: 3% in 2007; 5% in 2008-2010; 10% in 2011-2014; 15% in 2015-2019; and 20% in 2020 and thereafter. At least 4% of the standard must be generated by solar-electric technologies, half of which must be generated at the customer. Cooperatives and municipal utilities must follow a lower scale culminating in 10% in 2020. The 2007 amendments directed the Colorado Public Utility Commission (PUC) to revise or clarify its existing RPS rules on or before October 1, 2007. The PUC's rules generally apply to investor-owned utilities.

According to Green Power Network in 2006, U.S. tradable renewable energy credits (RECs) traded between ¢0.5 and 9.0/kWh. Many were at ¢2/kWh ($5-90/MWh)

Net metering::

• Credited to customer's next bill; utility pays customer at end of calendar year for excess kWh credits at the average hourly incremental cost for that year, limit on system size 2 MW, no enrollment limit

Utility rebate programs

Many states have counties and utilities which offer rebates of from $500 to $4/watt installed, as well as feed-in tariffs of up to $1.50/kWh. See reference for list. 40 states have net metering. See reference.

See also

• Feed-in Tariff
• Green energy
• Renewable energy
• Renewable energy commercialization
• Category:Renewable energy by country

External links

• What Solar Power Needs Now
• A National Solar PV Incentive Needed