U.S. Government solar policy: Appropriate roles for nonfinancial incentives

Abstract

During 1975–1980, U.S. solar policy emphasized financial incentives to potential purchasers as the primary means of stimulating the introduction and spread of residential solar heating systems. This article examines the importance of nonfinancial factors in decisions to purchase residential solar heating systems during these early stages of market penetration and discusses the implications these factors have for policy design. Drawing upon research on the diffusion of innovations, on the effectiveness of income tax credits for solar heating systems, and on solar energy system purchasing decisions themselves, the argument is developed that nonfinancial factors such as system reliability, warranty protection, environmental concerns, adequate information about system costs and performance, and confidence in system suppliers and installers are at least as important as initial system cost to early purchasers. These considerations were not reflected in U.S. solar policy to the extent warranted. As a result, that policy failed to promote the balanced development of all elements essential to a viable residential solar heating industry and probably failed to alter the intentions of many prospective solar system purchasers. The reasons U.S. policymakers were relatively insensitive to nonfinancial factors are discussed and an alternative strategy for increasing the rate of market penetration of residential solar heating systems is offered.