The comparative effectiveness of residential solar incentives

Abstract

We use temporal and spatial variation to evaluate the effectiveness of nearly all (over 400) state and utility incentives that promote the installation of residential solar photovoltaic (PV) panels. Using a unique data set that values a wide array of solar incentives including cash incentives, tax credits, and solar renewable energy credits, we evaluate and compare the impact of incentives using a standardized net present value of each incentive. We pair these data the amount of new residential solar installations within each state and year to examine the relationship between incentive type and new residential PV installations. We find that each additional dollar of incentives has led to on average, an additional 500 W of additional installed capacity per thousand residential electric customers. This effect is enabled by the presence of net metering and financing availability. Direct cash incentives, when coupled with financing initiatives and net metering, drive much of the impact on installations. Results are consistent with research that shows that incentive salience may drive variation in effectiveness. Results suggest that approximately 67% of state and utility incentives, up to $1.9 billion over 11 years, were likely spent on incentives that did not increase residential solar PV installations.