Why do some states outperform others so much when it comes to solar installations? In an effort funded by the US DOE’s SunShot Initiative, NREL researchers used statistical analysis and detailed case studies to better understand why solar market policies in certain states are more successful and lead to higher distributed solar PV installations.
The report can be accessed here: The Effect of State Policy Suites on the Development of Solar Markets. A shorter factsheet is available at this link.
One may think that the fast fall in PV prices in recent years plays the key role in increased acceptance of solar in any market, but this is not entirely true. Had economics been the lone driving factor for installation of PV systems, then all states would have seen a similar growth trend. As per the data available, this is definitely not the case!
Falling PV prices do affect solar installations in a state, but it is not a direct correlation and depends on a host of policy and contextual factors within the state. Findings of this study will help policymakers comprehend this relationship between policies and solar installations, and perhaps where to look for problems if things are not working.
NREL’s Integrated Applications Group evaluated the time-dependent relationships between policy implementation and the success of solar markets using historical data for installed capacity of solar PV systems across various states of the USA.
The crux of the report is that a combination of foundational policies and localized strategies can increase PV installations in any state. The report’s co-author, Elizabeth Doris, a technical manager for Policy and Technical Assistance at NREL, says that the states which have implemented a combination of three or four foundational and market-enabling policies have been mostly successful in creating robust solar markets.
To arrive at this conclusion, the authors have looked into both policy and non-policy factors that influenced state and local solar markets.
When it comes to policy, there are two fundamental blocks which are absolutely necessary to nurture solar markets in any state — interconnection and net metering. Interconnection policies define how a PV system should be connected to the grid, while net-metering policies decide the compensation users receive for supplying electricity from their panels to the grid. The presence of these two key enablers facilitates increased market penetration over time.
Together, both these policies empower the user and open up a two-way connection with the grid. As such, these policy instruments are less expensive to the government and represent a non-financial incentive to catalyse growth of the solar market.
There are also non-policy factors such as the cost of competing grid electricity, insolation potential of the place, and community awareness in energy efficiency/renewable energy.
The authors of the study report that there is “no one size fits all” and states which have tailored their policies while keeping in mind their own circumstances, have reaped the benefits. Besides, the time duration for which policy has been in effect and the number of solar policies adopted have been statistically shown to be as important indicators of market success.
A renewable portfolio standard (RPS) — also known as a renewable energy standard (RES) — is an additional option available to policymakers. RPS or “solar set asides” are especially valuable in states with less favorable demographic and economic backgrounds. The report also observes that third-party ownership models (TPO) like solar leasing are a distinguishing factor in some of the successful stories.
Success of TPO is linked to a favorable economic climate characterised by the presence of factors such as high grid electricity prices, high consumer interest in energy efficiency and renewable energy, and high solar insolation.
The report, however, cautions that TPO and RPS, though motivating, are no replacement for a strong policy foundation (interconnection and net metering).
To use an analogy, if a state was a student trying to get a “solar degree,” it would be required to take at least three courses. The two core courses would be interconnection and net metering, while a third elective could be chosen as per the student’s strengths. A bright student could possibly audit a few courses as well. 😀
The current study is a sequel to two others which together attempt to diagnose the relationship between demographics, economics, and policies in a state with the solar capacity deployed there.
The Effectiveness of State-Level Policies on Solar Market Development in Different State Contexts found that extreme values of non-policy factors like personal economic context, solar resource, competing electricity prices, and interest in sustainability do have a say in solar installation rates.
A second more interesting study, Strategic Sequencing for State Distributed PV Policies: A Quantitative Analysis of Policy Impacts and Interactions, found that non-financial incentive policies and population can explain 70% of PV capacity growth.
Only recently, NREL came out with another report which said that the downward slope of residential/community-scale solar systems will continue through 2016, before then stabilizing after perhaps rising a bit.
Photo Credit: h080 / IWoman / CC BY-SA
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