How Do State Policies Affect Solar Development?

Abstract

As a result of a variety of political, social and economic factors, photovoltaic installations are increasing rapidly throughout the United States. Renewable development has varied immensely across states; this research seeks to discern if state public policy is causing these discrepancies. Is state solar development primarily a result of factors outside policymakers’ control, such as solar irradiance, natural endowment, or political culture? Or, can specific policies trigger significant development and substantial changes in the local energy industry? This thesis uses fixed effects and ordinary least squares regression models to test state policies on resulting energy development. The study examines the effects of solar set-asides and credits within the renewable portfolio standard, tax rebates and personal tax credits, net metering policies, public benefits funds, and sales and property tax exemptions. According to the models, set-asides are the only policy with measurable, singular effects on photovoltaic development. While net metering policies and tax rebates likely encourage purchases, outside economic factors (such as electricity prices and political culture) may mitigate these effects. Finally, public benefits funds, property and sales tax exemptions have not singularly generated substantial solar development. As there is limited data available on state specific solar generation in 2011, this study recommends additional analysis in subsequent years as the solar energy market expands, and public sources better track photovoltaic installations. This research additionally recommends studying individual decision making patterns specifically relating to the use of solar tax incentives.