Technical Report

NREL/TP-6A2-45039

March 2009

State Clean Energy Practices: 

Renewable Energy Rebates

Eric Lantz and Elizabeth Doris
National Renewable Energy Laboratory

1617 Cole Boulevard, Golden, Colorado 80401-3393

303-275-3000 • www.nrel.gov

NREL is a national laboratory of the U.S. Department of Energy

Office of Energy Efficiency and Renewable Energy

Operated by the Alliance for Sustainable Energy, LLC

Contract No. DE-AC36-08-GO28308

Technical Report

NREL/TP-6A2-45039

March 2009

State Clean Energy Practices: 

Renewable Energy Rebates

Eric Lantz and Elizabeth Doris

Prepared under Task No. IGST.8300
NOTICE

This report was prepared as an account of work sponsored by an agency of the United States government. 

Neither the United States government nor any agency thereof, nor any of their employees, makes any 

warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or 

usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not 

infringe privately owned rights. Reference herein to any specific commercial product, process, or service by 

trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, 

recommendation, or favoring by the United States government or any agency thereof. The views and 

opinions of authors expressed herein do not necessarily state or reflect those of the United States 

government or any agency thereof.

Available electronically at http://www.osti.gov/bridge

Available for a processing fee to U.S. Department of Energy

and its contractors, in paper, from:

U.S. Department of Energy

Office of Scientific and Technical Information

P.O. Box 62

Oak Ridge, TN 37831-0062

phone: 865.576.8401

fax: 865.576.5728

email: mailto:reports@adonis.osti.gov

Available for sale to the public, in paper, from:

U.S. Department of Commerce

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

phone: 800.553.6847

fax: 703.605.6900

email: orders@ntis.fedworld.gov

online ordering: http://www.ntis.gov/ordering.htm

Printed on paper containing at least 50% wastepaper, including 20% postconsumer waste
iii

Acknowledgments

The authors would like to thank Katrina Pielli and her colleagues from the Environmental 

Protection Agency’s Clean Energy Program for review of an early draft of this paper. In 

addition, we would like to thank NREL reviewers Ron Benioff and Toby Couture for 

their valuable feedback and comments. Finally, thanks go to Jennifer Josey with NREL’s 

Technical Communications Office for her editing assistance.
iv

List of Acronyms

AAGR Average annual growth rate

AWEA American Wind Energy Association

CEC California Energy Commission

CFL Compact fluorescent light bulb

CORE Customer on-site renewable energy

CSI California Solar Initiative

DOE Department of Energy

DSIRE Database of State Incentives for Renewable Energy

EPBI Expected performance-based incentive

ERP Emerging Renewables Program

ETO Energy Trust of Oregon

FIT Feed-in tariff

HECO Hawaiian Electric Company

ITC Investment Tax Credit

MW Megawatts

NREL National Renewable Energy Laboratory

PBI Production-based incentive

PV Photovoltaic

R&D Research and development

RE Renewable energy

REC Renewable energy credit

SCEPA State clean energy policies analysis

SREC Solar renewable energy credit
v

Executive Summary

Rebates are a classic marketing tool and have been widely used for various consumer 

goods. A successful renewable energy rebate program may reduce technology costs, 

demonstrate technological feasibility, reveal potential market barriers, and/or increase 

market penetration of renewable energy technologies. As such, rebate programs for 

renewable energy have achieved widespread popularity.

This report functions as a primer for renewable energy rebate programs. It highlights the 

impacts of specific renewable energy rebate programs on renewable energy markets 

around the country, as well as rebate program impacts on overarching energy policy 

drivers. It also discusses lessons learned, challenges, ideal applications, keys to success, 

and complementary and alternative policies.

Results indicate that rebate programs can have a strong deployment impact on emerging 

renewable energy markets. Furthermore, any production from new clean energy resources 

increases energy sector diversity and makes a direct contribution to broader 

environmental policy goals. New industries also generate jobs and economic output. 

However, because rebate programs typically target emerging industries that start with 

little or zero market share, they lack the scale necessary to make a large contribution to 

overarching clean energy goals. Nevertheless, the market initiating attributes of 

renewable energy rebates makes them a critical first step in the deployment and diffusion 

process.

Rebates function well when applied to market-ready technologies that are prepared to 

move a technology from the prototype stage to mass production. In addition, they 

function well when they are matched with a clear set of goals that apply their market 

initiating strengths. Rebate programs may function poorly when context-specific market 

factors are not considered or when the precise rebate amount is not tailored to existing 

market and policy conditions. 

Rebate programs may be most effective when designed and implemented as one 

component in a suite of policies. Rebates can be applied to jumpstart or rapidly expand a 

specific renewable energy technology market while additional complementary policy 

measures may be put in place to drive larger scale shifts in energy production.
vi
vii

Table of Contents

List of Figures.............................................................................................................................viii

List of Tables..............................................................................................................................viii

SCEPA Project Background........................................................................................................ 1

Introduction................................................................................................................................... 1

Rebate Program Prevalence......................................................................................................... 3

Overview of Renewable Energy Market Activity with Rebates............................................... 4

Solar Photovoltaic......................................................................................................................4

California ............................................................................................................................ 4

New Jersey.......................................................................................................................... 5

Colorado.............................................................................................................................. 6

Oregon................................................................................................................................. 7

PV Rebates Conclusions............................................................................................................8

Solar Water Heating............................................................................................................ 8

Small Wind Systems........................................................................................................... 9

Biomass Power Systems................................................................................................... 11

Rebate Programs and Market Activity: General Conclusions............................................... 12

Impacts on Renewable Energy Policy Drivers......................................................................... 13

Challenges Associated with Rebate Programs......................................................................... 18

Fiscal........................................................................................................................................18

Freeridership ............................................................................................................................18

System Performance ................................................................................................................19

Administrative Burden and Costs............................................................................................19

Non-cost Barriers.....................................................................................................................19

Policy Duration and Flexibility................................................................................................20

Ideal Conditions and Applications............................................................................................ 21

The Right Technology, the Right Market................................................................................21

Small Markets with Low or Zero Growth................................................................................21

Moving from Prototype to Mass Production ...........................................................................21

Under-utilized Workforce........................................................................................................22

High-value Markets with Supporting Technical Policy...........................................................22

Key Elements of a Successful Program..................................................................................... 23

Policy Complements and Alternatives...................................................................................... 24

Tax Credits...............................................................................................................................24

Feed-in Tariffs .........................................................................................................................24

Net-metering ............................................................................................................................24

Time-of-Use Rates...................................................................................................................24

REC Compliance Markets .......................................................................................................25

Public Infrastructure Investment..............................................................................................25

Conclusion ................................................................................................................................... 26

References.................................................................................................................................... 27
viii

List of Figures

Figure 1. Annual PV market and average rebate paid ($/kW) in the grid connected 

California market................................................................................................ 5

Figure 2. Annual PV installations supported by New Jersey’s CORE rebate program..... 6

Figure 3. Market impacts by annual PV system installations and rebate value................. 7

Figure 4. PV market impacts in the commercial and residential sector as a result of ETO 

rebates................................................................................................................. 8

Figure 5. Small wind turbine installations by year and average rebate ($/kW)............... 10

List of Tables

Table 1. State Level Biopower Program Results............................................................ 11

Table 2. Rebate Program Impacts on High-level Clean Energy Policy Drivers............ 14

Table 3. State Solar Rebate Program Installed Project Average Annual Growth Rate 

(AAGR)............................................................................................................ 15

Table 4. Short-term Energy Security Impact: Estimated Annual Energy Production from 

Capacity Installed under State Rebate Programs* ........................................... 16

Table 5. Short-term Economic Development: Modeled Solar Industry Economic 

Development Impacts from Capacity Installed under State Rebate Programs. 16

Table 6. Environmental Impacts: Estimated Emissions Reductions from Capacity 

Installed under State Rebate Programs............................................................. 17
1

SCEPA Project Background 

The State Clean Energy Policies Analysis (SCEPA) project is supported by the 

Weatherization and Intergovernmental Program within the Department of Energy’s 

(DOE) Office of Energy Efficiency and Renewable Energy. This project seeks to 

quantify the impacts of existing state policies, and to identify crucial policy attributes and 

their potential applicability to other states. The goal is to help states determine which 

clean energy policies or policy portfolios will best accomplish their environmental, 

economic, and security goals. Analysts from the National Renewable Energy Laboratory 

(NREL) are implementing this work, with state officials and policy experts providing 

input and review. This report focuses on renewable energy rebate programs. 

For more information on the SCEPA project, access NREL’s Applying Technologies 

Web site at http://www.nrel.gov/applying_technologies/scepa.html. 

Introduction

Rebates are classic marketing tools that have been widely used for various consumer 

goods and can be implemented by manufacturers, governments, utilities, or private firms. 

Mechanisms for administering and collecting rebates vary nearly as much as individual 

rebate programs; however, rebates generally provide a lower cost good via some direct 

cash mechanism.1

Renewable energy rebates, also known as buy-down programs, provide a refund or 

discount off the cost of new renewable energy installations. Programs are often 

administered through local utilities or state agencies, and rebates are generally acquired 

through an application process. Rebate payments vary and are often based on the installed 

capacity of a system with the rebate value set at a given rate (i.e., dollars per watt). 

Rebate payments may be limited by size or dollar value, and/or include a one-time 

payment for renewable energy credits (RECs). They may also be coupled with production

or expected production-based incentive (PBI) payments.

The rationale for implementing a rebate program varies but may 

include greater market penetration, cost reductions via economies of scale, consumer 

information acquisition, or better tracking of sales and use. 

2

A primary driver of renewable energy rebate programs is the desire to stimulate early 

market growth for emerging technologies. By stimulating early stage market growth, cost 

reductions may be achieved by economies of scale or the elimination of supply chain 

 1 The direct cash aspect of a rebate is generally more valuable than a similar functioning non-cash 

incentive. Non-cash incentives include tax credits which may lower the cost of specific good but require a 

tax appetite, and in some cases are only collected at the time of filing a tax return. As a result, a tax credit is 

not of the same value as a direct cash rebate or a simple discount off of the retail price.

2 Production-based payments provide an incentive for the renewable energy system to be installed and 

maintained with maximum energy production in mind (Barbose 2006). Another mechanism that attempts to 

incorporate the value of a PBI as well as the ability to provide an upfront cost reduction similar to a rebate 

program is an expected performance-based incentive (EPBI). An EPBI provides an upfront payment based 

on the modeled performance results of the system. EPBIs are generally less administratively burdensome 

for distributed generation technologies than conventional PBIs.
2

bottlenecks. Additional drivers may include reduced utility load growth,3

In relation to energy efficiency rebates, renewable energy rebates are a relatively recent 

phenomenon. California began using clean energy funds

internalization 

of environmental and energy security attributes of renewable technologies, or the desire 

to elicit technical and market barriers of renewable energy technologies. In this manner 

successful rebate programs may reduce technology costs, demonstrate technological 

feasibility, reveal potential market barriers, and/or increase market penetration. Further, 

well-designed, well-targeted rebate programs can contribute to a larger market initiation 

for clean energy projects that can potentially lead—in partnership with other policies—to 

market transformation.

4 in 1998 to provide grants and 

rebates to renewable energy installations in the state (Bolinger 2003). Many states 

mimicked California, and as of October of 2008, 25 states offered rebate programs5 for 

renewable electricity generating technologies and 38 states offered rebates for renewable 

energy systems (DSIRE 2008).

6

 3 Reduced utility load growth allows a utility and the respective ratepayer base to avoid or forestall the high 

cost of building new power plants and/or energy infrastructure.

4 Clean energy funds often rely on a small surcharge or price adder placed on consumers’ energy billsto 

fund renewable energy or energy efficiency programs. These programs may be administered at the utility or 

at a state-wide level. 5 The 25 rebate programs are utility or state programs; technology coverage varies depending on the utility 

service area.

6 Renewable energy systems include electric generating systems as well as solar hot water heaters and 

geothermal heat pumps. These latter technologies may sometimes be considered energy efficiency 

technologies; however, DSIRE classifies them as renewable energy technologies. 

The purpose of this paper is to provide a basic overview of how rebate programs impact 

renewable energy markets and to discuss rebate program trends as they relate to the 

market transformation process. More specifically, this paper summarizes the effects of 

renewable energy rebate programs on the basic renewable energy policy drivers,

discusses the current status and experience of rebate programs, and discusses the value of 

rebate programs as market initiators. It also considers ideal applications, design 

considerations, key elements of a successful program, policy complements, and policy 

alternatives. 
3

Rebate Program Prevalence

Rebate programs have played a significant role in the emergence of distributed generation 

renewable energy markets and are likely to continue to play a critical role in the 

deployment and diffusion of renewables.

As of October 2008, the Database of State Incentives for Renewable Energy (DSIRE) had 

documented 228 renewable energy rebate programs administered by the state or local 

utilities throughout the United States.7

• 18 offer a state-level rebate program of some form

Thirty-eight states have at least one rebate 

program for at least one renewable energy technology. Of these 38 states: 

8

• 7 have a rebate program that covers virtually all forms of renewable energy 

technologies

;

9

• 25 have at least one rebate program that supports photovoltaics (PV);

;

• 26 have at least one rebate program that supports solar hot water installations;

• 27 have at least one rebate program that supports geothermal heat pumps; and 

• 17 have at least one rebate that supports wind power.

As the popularity of rebate programs continues to increase, their impact on renewable 

energy markets and technologies will spread.

 7 Generally, state-level programs apply to the whole state while utility-administered programs typically 

offer rebates only to those customers within their service territory.

8 The definition of renewable energy technologies in this report includes PV, wind power, solar water 

heating, biomass for power generation and heat, and geothermal heat-pumps. 9 This does not suggest that rebates are available for all renewable technologies for all individuals. It merely 

states that in a given state, rebate programs are available for at least a portion of the state and enough 

programs are available that somewhere in the state all renewable technologies are eligible for a rebate of 

some form.
4

Overview of Renewable Energy Market Activity with Rebates

Given the popularity of rebate programs, an assessment of the market activity resulting 

from rebate program implementation is included here. 

It is important to note that individual rebate programs rarely reflect the same incentive 

level because they are designed and/or implemented differently.10 Furthermore, system 

installations under these programs may qualify for additional state or federal incentives 

that could also support market growth.11

Solar Photovoltaic

The most active and consistently successful renewable energy rebate programs often 

target photovoltaic (PV) technology. Historically, these programs have been a primary 

driver of market growth in this industry, resulting in thousands of solar power 

installations. 

This high-level market review has not evaluated 

the relative impact of rebates separately from other complementary or supplemental 

incentives. However, it is worth noting that declines in PV rebate payments in 2006 and 

2007 are offset to some extent by the implementation of the federal Investment Tax 

Credit (ITC). In spite of these caveats, because rebate programs have generally been the 

primary incentive in the markets reviewed here, this data is believed to be sufficient for 

providing a sense of the market activity that is possible from state rebate programs. 

California 

California is the largest solar market in the United States (Sherwood 2008). At the end of 

2007, the market consisted of 279.5 MW of grid-connected PV capacity (Lieberg 2007). 

California’s PV rebate program was first implemented in 1998 when the California 

Energy Commission (CEC) began offering rebates for up to $3.00/watt. Initially, the 

program increased grid-tied PV installations in California from one per month to 30 per 

month (Bolinger 2002). 

Despite plans to reduce rebate values, market and cost trends forced the CEC to increase 

the rebate from $3.00/watt to $4.50/watt in mid 2001. Around the same time, PV 

installations also jumped from about 30 per month to 300 a month. However, based on 

the timing of this dramatic rise, it is possible that the California energy crises in early 

 10 Even when the dollar value of rebates in two different states appears similar, they are not necessarily 

comparable. Additional policy or market barriers or incentives along with general retail electricity rates 

influence rebate values.

11 The broadest complementary policy for solar installations is the federal Investment Tax Credit (ITC). 

Implemented in 2006, it allowed a 30% tax credit up to $2,000 for residential installations and increased the 

commercial ITC from 10% up to 30% through 2008. However, state rebate programs are often $2,500/kW 

up to $4,500/kW with systems commonly ranging from 2.5 kW to 5 kW. Up to this point, state rebate 

programs have generally dwarfed the value of the federal ITC for residential installations. The single 

exception here is in Oregon where as of 2007 the state’s business and residential energy tax credits for PV 

are roughly comparable to the Energy Trust of Oregon rebate for residential systems, $3/watt up to $6,000 

and are up to 50% of the cost of commercial systems depending on the year of the installation.
5

 Grid Tied California PV System Installations

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

$3.00 $2.99 $2.98 $4.23 $4.37 $4.06 $3.69 $3.14 $2.89 $2.70 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Average Rebate ($/W) and Year of Project Completion

Projects Installed

2001 and the implementation of a state tax incentive program12 may have also been

significant drivers in this ten-fold growth (Bolinger 2002). 

The average annual growth of installed units from 1999-2007 has been 119%; the largest 

percentage increase in market growth was in 1999 and 2001. Figure 1 shows annual PV 

market activity by systems installed and allocated rebate values according to the state’s 

Emerging Renewables Program (ERP) Statistics. 

Figure 1. Annual PV market and average rebate paid ($/kW) in the grid connected 

California market

Source: ERP Statistics13

New Jersey

The second largest PV market in the United States is New Jersey, with a total installed 

PV capacity of more than 62 MW (Sherwood 2008). This growth has been driven by 

New Jersey’s Customer On-site Renewable Energy (CORE) rebate program which began 

dispersing funds in 2001. The full rebate value was originally more than $5.00/watt but it 

has been scaled down moderately over time.14

 12 California’s state tax incentive, in place from 2001 through 2005, provided a 15% state tax credit for 

wind and solar systems installed in 2001-2003 and a 7.5% tax credit for systems installed in 2004-2005. 13 The average rebate paid is representative of ERP funded projects. However, in 2007, new applications 

began to be processed under the California Solar Initiative (CSI). While the total systems installed is 

representative of both ERP and CSI projects for 2007, the average rebate paid in 2007 only reflects rebates 

paid for ERP projects. 14 Declining rebate payments in 2006 and 2007 are at least partially offset by the federal ITC.

Despite a slow initial start, the program 

rapidly expanded and annual installed capacity has increased every year. Overall from 

2001 to 2007, growth in annual installations has averaged 200% (see Figure 2). In fact, 

the program became so popular that receipt of new PV applications was suspended on 
6

New Jersey PV System Installations

0

200

400

600

800

1000

1200

$5.08 $3.48 $4.43 $5.09 $4.83 $4.47 $3.80

2001 2002 2003 2004 2005 2006 2007

Average Rebate ($/W) and Year of Project Completion

Projects Installed

April 1, 2008, due to limited funds (NJBPU 2008). New Jersey now relies on its solar 

renewable energy credit (SREC) markets as the primary incentive for new PV systems.

Figure 2. Annual PV installations supported by New Jersey’s CORE rebate program

Source: New Jersey CORE Program Activity

Colorado

Although Colorado has much smaller total PV capacity—estimated at 9.7 MW as of June 

2008—the state has observed rapid growth in installed solar capacity as a result of its 

solar rewards rebate program. Solar rebates allocated in Colorado are similar to those in 

New Jersey with a program average of $4.27/watt. Average annual growth in projects 

installed in Colorado has been 92%, and approved standard rate rebates has grown from 

33 per month in 2006 to 100 per month as of June 2008 (see Figure 3) (CDOR 2008). 
7

Colorado PV Installations

0

200

400

600

800

1000

1200

- $3.77 $4.46 

Pre Solar Rew ards 2006 2007

Average Rebate ($/W) and Year of Project Completion

Projects Installed

Figure 3. Market impacts by annual PV system installations and rebate value 

Source: Colorado Department of Regulatory Agencies.

Oregon

In Oregon’s market, rebates are available to customers of Portland General Electric and 

Pacific Power through Energy Trust of Oregon (ETO) rebate programs.15

 15 The ETO is responsible for investing system benefits charges collected by the state’s two largest investor 

owned utilities—Portland General Electric and Pacific Power—in energy efficiency measures and 

emerging renewable energy markets.

From 2003 

through 2007, solar system installations grew from 74 to 225 while capacity grew from 

197 kW installed per year to more than 1 MW installed in 2008. 

Whereas New Jersey and Colorado initially had very high levels of growth that has 

tempered, Oregon’s ETO program has seen an increase in the annual installation growth 

rate from 57% in 2004 to 73% in 2007, despite a decline in average rebate value (see 

Figure 4) (ETO Program Statistics). However, Oregon’s dramatically declining ETO 

rebate value is largely offset by the federal ITC and the state’s Residential Energy Tax 

Credit which currently provides a tax credit of up to $3/watt, not to exceed $6,000 or 

50% of the installed cost (DSIRE 2008).
8

Energy Trust Oregon PV Installations

0

50

100

150

200

250

 $4.09 $3.39 $2.55 $1.66 $1.62 

2003 2004 2005 2006 2007

Average Rebate ($/W) and Year of Project Completion

Projects Installed

Figure 4. PV market impacts in the commercial and residential sector as a result of ETO 

rebates

Source: ETO Program Statistics

PV Rebates Conclusions

The success of prominent state rebate programs in stimulating PV installations is clear; 

however, it is less clear if these programs have effectively driven down PV technology 

costs. Some evidence shows that California’s installation costs and the balance of plant 

costs have declined (Wiser 2006). However, PV technology ultimately remains a niche 

technology out of reach for most potential consumers in the absence of continued rebates 

or other incentives.

Solar Water Heating

Solar water heating rebate programs are generally less common than PV rebate programs. 

However, a handful of rebate programs for solar water heating technologies have been 

implemented and the Hawaiian Electric Company (HECO) and the ETO—two of the 

larger programs—are reviewed here. 

In 1996, HECO implemented a rebate program to supplement a 35% state tax credit.

HECO’s rebate program offered an additional $750 incentive to the state’s tax credit. 

Market growth expanded moderately for the first two years of the program but was flat 

during subsequent years. With the combined rebate and state tax incentive, the average 

annual growth rate from 1996 through 2005 was 4%, suggesting only a marginal impact 

from the incremental incentive increase (Richmond 2007).16

 16 On a side note, in June of 2008, the Hawaiian Government signed a bill into law that requires all new 

homes applying for building permits to include a solar hot water system. Exclusions are available for 

specific conditions. The law goes into effect in 2010.
9

The ETO currently offers a rebate that averages $819 per system for solar water heating 

installations. This incentive is in addition to the federal ITC and a state tax credit of up to 

$1,500 per system.17

Small Wind Systems

Another technology that has been the recipient of rebates is small wind systems. The 

success of small wind rebates has varied between states and programs.

Growth in Oregon under these conditions in 2007 was 25% (ETO 

Program Statistics). 

Given these programmatic results, rebate programs for solar hot water appear to have 

only a moderate impact on market activity. In addition, it seems unlikely that these rebate 

programs have reduced production costs for solar hot water technologies or moved the 

industry toward mass production.

According to this research, California has the most successful small wind rebate program. 

There, growth in the number of systems installed annually has averaged 41% since 1998,

with an average rebate value at approximately 45% of the installed system cost (see 

Figure 5).18

After the market collapsed, the rebate was reinstituted at a maximum of $2.50/watt for 

systems up to 7.5 kW in mid 2006.

Between 1998 and 2002, installations grew at 56% annually and the rebate 

value was approximately 48%. However, growth in California faltered from 2003 

through 2005 as the state attempted to scale back the rebate. 

19

 17 In this case the federal ITC provides a 30% tax credit (capped at $2,000/ system through 2008) to the net 

installed cost of the system.

18 This percentage is derived from actual system costs and rebate disbursements in California. 19 An additional $1.50/watt was available for capacities in excess of 7.5 kW and below 30 kW.

Since 2006, rebate levels have remained at that level 

and market activity has resurged with 2007 installations up 188% over 2006 (ERP 

Program Statistics). 

The California program is estimated by the American Wind Energy Association (AWEA) 

to be a major small wind market driver and as such has helped grow the production levels 

of small wind technologies (AWEA 2008).
10

California Emerging Renewables Wind Installations

0

10

20

30

40

50

60

70

80

90

$2.68 $2.17 $2.20 $2.68 $2.50 $2.22 $1.80 $2.07 $2.31

1999 2000 2001 2002 2003 2004 2005 2006 2007

Average Rebate Value and Year of Installation

Turbines Installed

Figure 5. Small wind turbine installations by year and average rebate ($/kW)20

Despite California’s success, two other small wind incentive programs in New Jersey and 

Oregon have failed to stimulate notable market growth. Through December 2008, New 

Jersey offered a rebate through its CORE program for wind systems. The average rebate 

paid for systems 20 kW and under during this time was $3.98/watt. Despite the relatively 

high rebate value, this program only resulted in five system installations 20kW and under 

through 2007 (NJ CORE Web site).

Source: ERP Program Statistics

21

Possible explanations for the variable success of small wind rebate programs include 

wind resource limitations, local zoning requirements, and the lack of a standard rebate 

provision. The mixed success also suggests small wind rebate programs could benefit 

from increased market and technical potential analysis prior to program implementation. 

From 2004 through November 2007, the ETO offered rebates to small wind systems on a 

case-by-case basis. The average program rebate during this time was $1.23/watt with a 

range from $0.50/watt up to $8.77/watt. This program resulted in five system installations 

over the four year period. In November 2007, a new incentive program went into effect 

that offered up to $4.50/watt, capped at $35,000 for residential systems with an additional 

$6,000 production-based state tax credit available for residential systems. Based on a 

dramatic rise in applications, demand for the new standardized rebate program has 

greatly increased; however, only two projects had been approved and completed as of 

September 2008 (ETO Wind Program Statistics). 

 20 As was the case for California’s solar PV market, these installations were also supported by a state tax 

incentive from 2001-2005. 21 The 20 kW and under designation is noted due to the fact that one single 2.6MW installation occurred in 

2007. The rebate amount for this specific installation was less than $1/watt. This single project brings the 

total CORE wind program average rebate estimate to $0.74/watt.
11

Biomass Power Systems

Biomass energy technologies have also received rebate incentives. This review considers 

two example biomass programs that have had moderate success. 

Through December 2008, New Jersey’s CORE rebate program offered rebates for 

facilities that generated up to 1 MW of electricity from sustainable biomass resources. 

Rebates were available at a rate of $0.15/watt up to $5.00/watt, depending on the size of 

the system and state evaluation criteria (NJ CORE Web site). Activity in this market was 

slightly less than one project per year (see Table 1).

The ETO administers a biopower program that has funded projects since 2005. Funds are 

dedicated to biomass power generation projects that may sell within Portland General 

Electric or Pacific Power service territories. However, the ETO program is not a 

traditional rebate program. Each applying project is evaluated on its specific merits and 

funds may be allocated up to 100% of the above-market costs of power production (ETO 

program Web site). 

Biopower rebate program results and market activity for Oregon and New Jersey are 

summarized in Table 1 (ETO Program Statistics).

Table 1. State Level Biopower Program Results

Projects 

Supported 

(annually)

Average Project 

Size (kW)

Average 

Funding per 

project ($/kW)

New Jersey 0.86 386 $1,462

Oregon 1.00 1583 $336

Average 0.93 862 $983

Source: ETO Program Statistics and New Jersey CORE Program Activity

Rebate programs for biopower projects often include the array of biomass powergenerating technologies and fuel sources, including anaerobic methane, agriculture waste, 

and landfill gas. While this strategy is thought to increase program popularity, it fails to 

reflect the specificity often necessary to jumpstart a specific technology market. 
12

Rebate Programs and Market Activity: General Conclusions

Assuming that rebate programs are primarily in place to initiate new market activity or 

jump-start emerging industries, their success has been mixed. State rebate programs have 

provided a major impetus for solar PV installations in all states reviewed here and for 

small wind installations in California. However, solar hot water rebates and biopower 

programs, along with certain small wind programs, have not had the same level of 

success. In addition, rebate programs frequently have the goal of achieving cost 

reductions at scale, and despite large public expenditures, many residential and 

commercial-scale technologies remain niche technologies. 

Variable success suggests a few conclusions about rebate programs: 

• When properly designed, market growth can be dramatic. Proper design requires 

being technology specific, establishing the most effective rebate amount, 

minimizing program costs, establishing a standard rebate allocation procedure, 

and developing a thorough and specific market potential analysis. 

• Programs that target technologies that may not be ready for the marketplace are 

not likely to advance market expansion. 

• In cases where well-designed incentives are ineffective at stimulating market 

growth, resources may be better targeted at non-cost related market barriers like 

interconnection standards, net-metering, or public awareness.

• At the current level of observed cost reductions from rebate programs, it is 

unlikely that rebate programs alone will achieve widespread renewable energy 

deployment. 

• Complementary policies that allow renewable energy technologies to internalize 

their full value may be necessary to ensure the long-term viability of renewable 

energy technologies.
13

Impacts on Renewable Energy Policy Drivers

Renewable energy rebates often target residential and commercial consumers and 

comparable distributed-scale energy technologies. In this specific market, rebates are a

primary driver of distributed power generation and deployment of renewable energy 

technologies. For example, solar power rebate programs in California have supported

installation growth from approximately one system per month to the point where 111 

MW of grid-tied solar power was added in the first nine months of 2008 alone (CSI 

2008). However, because rebate programs are often applied to smaller scale emerging 

technologies with limited or zero market share, the short-term market impacts of 

successful rebate programs on some high-level renewable energy policy drivers—

including economic development, environmental benefits, and energy security—may be

limited when compared to the scale of electricity and energy markets at the state or 

national level.22

 22 Table 4 shows that when compared with state electricity retail sales, rebate programs rarely constitute 

more than 1% of a state’s electricity supply.

This portion of the analysis profiles the qualitative and quantitative impacts of renewable 

energy rebates on high-level energy policy drivers. Table 2 summarizes the qualitative 

impacts of well-designed and successful rebate programs on the breadth of high-level

policy drivers. Table 3 highlights the deployment impacts of rebate programs as a 

function of market growth rates under solar rebate programs in four different states. 

Tables 4-6 highlight the quantitative short-term impacts of existing rebate programs on

total electricity sales, economic development, and environmental quality.
14

Table 2. Rebate Program Impacts on High-level Clean Energy Policy Drivers

Overarching 

Renewable 

Energy 

Drivers

Potential Policy Goals

Shortterm 

Policy 

Impacts

Notes

Environment

Clean air benefits (SOx, NOx, mercury, 

and particulates)

Limited

Rebate programs can provide a direct source 

of clean energy resources to consumers. 

However, because of limited market 

penetration in the short-term, rebate 

programs are not expected to contribute 

greatly to broad environmental policy goals. 

Rebate programs should be viewed as 

market initiators which, when partnered with 

complementary policy, can support 

environmental goals over the long-term.

Greenhouse gas emissions reductions

Reduce water consumption

Reduce water pollution (heat and mercury)

Reduced fuel extraction impacts

Preserve sensitive areas

Protect wildlife/endangered species

Minimize human impacts

Waste stream management (farm, forestry, 

municipal wastes)

Economic 

Development

Job creation

Limited

Rebate programs are typically targeted at 

small emerging markets. This limited scale 

often means that the economic benefits from 

RE rebates are a small fraction of state’s 

gross domestic product. However, smaller 

RE projects may present prime opportunities 

for community owned energy resources. 

Rebates may also attract investment by 

manufacturers when they are indicative of a 

supportive policy environment.

State economic development

Reduce electricity costs

Provide electricity price stability

Revitalize rural areas

Attract new investment Moderate

Develop local or community-owned assets High

Energy 

Security

Ensure an abundant energy supply

Limited

In the short-term, rebate programs generally 

do not create new large sources of energy 

production. However, solar power can 

function as a peak demand reducer and 

distributed generation—often the target of 

rebate programs—may have a positive 

impact on system resiliency. Rebate 

programs targeted at transportation 

technologies are likely to have the greatest 

long-term impact on energy security.

Ensure an affordable energy supply

Reduce transfer of wealth outside the U.S.

Become a net exporter of energy

Diversify energy resources

Provide peak demand reductions Moderate

Increase grid resiliency

Encourage distributed energy generation High

Renewable 

Energy (RE) 

Deployment

Reduce fossil fuel consumption

Limited

The short-term value of rebate programs is 

concentrated in market development and 

achieving cost reductions at scale.

Immediate large-scale impacts on other 

policy goals are limited. However, without 

early stage market development, 

technological learning, and cost reductions,

the long-term success of renewable energy is 

likely to be reduced.

Stimulate innovation

Reduce baseload needs 

Reduce technical and policy barriers Moderate

Stimulate rapid RE market 

expansion/development

High

Support basic technological advancement

Provide cost reductions at scale

Facilitate learning by doing

Meet renewable portfolio standards/quota 

targets

Stimulate early adoption
15

Table 2 indicates that the highest impact area of rebate programs is in renewable energy 

deployment and California’s experience noted above clearly supports this characteristic.

Furthermore, Table 3 shows the dramatic growth in markets where solar PV rebate 

programs have been implemented and provides a sense of the magnitude of growth that is 

possible in rebate markets.23

Table 3. State Solar Rebate Program Installed Project Average Annual Growth Rate 

(AAGR)

As such, well-designed programs can be a critical 

component of renewable energy deployment by driving rapid market expansion.

Years of 

Data

Program 

Life AAGR

Average 

Rebate $/kW

Estimated Rebate value 

(percent of total cost) 

New Jersey 7 200% $4,457 50%

Colorado 2.5 92% $4,271 47%

Oregon 5 38% $2,660 30%

California 10 119% $3,204 36%

State Program 

Averages 124% $3,494 39%

Source: State Program Data—additional information is available in the list of references

However, Table 2 also suggests that rebate program impacts on the environment, energy 

security, and economic development policy goals are limited in the short term. These 

limitations exist primarily because rebate programs have not significantly altered the 

energy sector at the state or national scale. This characteristic is somewhat inherent in the 

rebate mechanism because it typically targets smaller distributed scale technologies, but 

also because rebate programs are frequently applied to emerging technologies which 

generally start with little or zero market share.

Table 4, which is designed to quantify the short-term energy security impact of state 

rebate programs, shows the limited scale and market share of state rebate programs. It 

also shows that, in general, state rebate programs have not added significantly to the 

diversity of electricity generating resources in the states reviewed here. As a result, rebate 

program impacts on energy security are generally limited. Furthermore, as state rebate 

programs typically target electricity generating technologies, they are unlikely even in the 

most successful cases to have more than a moderate impact on fossil fuel imports.

24

 23 The term “magnitude of growth” is used in this context because growth in these programs, though 

predominantly driven by the state rebates, has at times been supported by complementary state and federal 

policies. 

24 Because renewable electricity offsets natural gas power generation and natural gas imports, moderate 

impacts are derived.

To 

have a higher impact on energy security in the long term, rebates ideally should be 

targeted at transportation technologies and fuels that reduce petroleum consumption.
16

Table 4. Short-term Energy Security Impact: Estimated Annual Energy Production from 

Capacity Installed under State Rebate Programs*

Solar 

Photovoltaic 

(kWh)

Small 

Wind 

(kWh)

Biomass 

Power 

(kWh)

Solar Hot 

Water 

(kWh)

Percentage of 

Total State 

Electricity Retail 

Sales**

California 203,018,168 2,737,062 0.08%

New Jersey*** 70,738,489 3,503,124 16,237,536 0.11%

Colorado 14,533,103 0.03%

Oregon 3,772,144 118,917 44,367,648 3,164,347 0.11%

Hawaii 162,579,985 1.54%

Wisconsin 1,512,372 0.00%

* Energy production is based on average industry capacity factors and the installed capacity from 

state specific rebate programs. Capacity data include the total capacity installed by rebate program 

participants. 

** Total State Retail Sales are 2006 data from the Energy Information Administration (www.eia.doe.gov).

*** 2,625 kW of wind capacity is from one project in 2007.

The small market share that rebate programs have established for distributed renewable 

energy technologies also suggests that rebate programs alone are not likely to singlehandedly drive the emergence of a new clean energy economic sector. Nevertheless, 

rebate programs do support a small number of jobs and can contribute hundreds of 

millions of dollars in economic output in the short term (see Table 5). In addition, when 

rebate programs are structured to provide long-term market support and stability, they

may encourage investment in local businesses and create a competitive advantage in

attracting new renewable energy manufacturing facilities. Attracting a large-scale 

investment such as a new manufacturing facility can dramatically increase the economic 

development benefits of renewable energy technologies. Thus, a rebate program can aid 

in the creation of a vibrant local industry over the long term.

Table 5. Short-term Economic Development: Modeled Solar Industry Economic 

Development Impacts from Capacity Installed under State Rebate Programs

Solar Industry 

Installation and 

Production Jobs 

(Short-term)

Solar Industry 

Maintenance 

Jobs (Longterm)

Solar Industry

Economic 

Output

California 1,636 136 $378,580,079

New Jersey 570 48 $131,910,277

Colorado 117 10 $27,100,743

Oregon 30 3 $7,034,141

Note: Total economic development impacts typically include direct (industry specific), indirect (supporting 

industries), and induced (benefits from increased economic activity generally) impacts. The above values 

represent only the direct economic development impacts captured primarily by the solar industry. Short-term 

jobs include construction and manufacturing jobs and are defined as full-time jobs for one year. Long-term 

jobs continue for as long as the installations continue producing electricity. Modeled values are derived from 

Grover (2006) and vetted against a pre-release version of NREL’s JEDI Solar PV Model 

(www.nrel.gov/analysis/jedi/) as well as previous analysis by Navigant Consulting (2008). Values are based 

on the installed capacity of state specific rebate program participants.
17

In contrast to economic development impacts which tend to result indirectly from 

renewable energy development and manufacturing investment, renewable energy rebate 

programs contribute directly to environmental policy goals. The estimated direct 

environmental impacts from PV programs in California, New Jersey, Colorado, and 

Oregon are quantified in Table 6. However, because the market share of renewable 

technologies installed under these programs is still very small relative to the broader 

energy sector, renewable energy rebate programs are not likely to fundamentally alter the 

energy sector’s overhaul emissions profile.

Table 6. Environmental Impacts: Estimated Emissions Reductions from Capacity Installed 

under State Rebate Programs

California New Jersey Colorado Oregon

Carbon Dioxide (tons) 159,246 55,487 11,400 2,959

Nitrogen Oxides (tons) 225 78 16 4

Sulfur Dioxide (tons) 623 217 45 12

Mercury (lbs) 4.93 1.72 0.35 0.09

Methane (lbs) 3,631 1,265 260 67

Nitrous Oxide (lbs) 2,027 706 145 38

Note: Environmental impacts are estimated based on the energy production estimates outlined in Table 4. 

Capacity values are derived from state program data and include the total capacity installed by rebate 

program participants. Rebate program installations are assumed to offset non-baseload power generation as

defined in eGRID 2007 1.0 (http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html). 

Ultimately, successful rebate programs are used as policy mechanisms that increase 

market penetration, drive technologies to production at scale, and provide opportunities 

for learning by doing. By initiating renewable technology markets and facilitating 

deployment of new technologies, in partnership with complementary policies, rebate 

programs can be a critical first step toward a secure, clean, and prosperous energy future.
18

Challenges Associated with Rebate Programs

Rebate programs have proven to be successful at initiating rapid market expansion in 

specific contexts. However, rebate programs should be designed to fit at a specific point 

in the technology development and deployment cycle. If initiated late in the deployment 

cycle, they can become very expensive if required to support a large and rapidly growing 

industry. Similarly, if initiated too early, they may be underutilized or ineffective at 

reducing technology costs. As such, there are some specific challenges associated with 

rebate programs.

Fiscal

The primary fiscal challenge is assessing the proper rebate amount. Such a task may 

appear relatively straightforward. However, a variety of context-specific policy and 

market conditions can affect the market landscape for a given renewable energy 

technology. A well-designed rebate program will provide a rebate sufficient to encourage 

market growth, but not so large that the program cannot meet demand.

Electricity price and additional state, local, and federal incentives should be reviewed 

carefully when considering the correct rebate amount as these variables can greatly affect

how economic a specific renewable energy system is within a given market. In addition,

the rate of market growth being sought, as well as the size of the market to support,

should be considered. Furthermore, reaching specific economic price levels can trigger

exponential growth and care must be taken so the market does not grow so fast that 

program funding is exhausted prematurely (Paidipati 2008).

25

Freeridership

Establishing a viable rebate amount also requires considering the expected technology

cost reductions over time, how to proceed if those cost reductions are not realized, and 

how often rebate values should be reevaluated. These considerations are critical to 

ensuring market stability which in turn encourages reliable project financing and

investment in renewable energy infrastructure and manufacturing facilities.

Freeridership is defined as the allocation of rebates to individuals who are likely to 

purchase a renewable energy technology without a rebate. In any case where market 

activity is moderate or high prior to rebate program implementation, freeridership can 

dramatically increase the cost of new rebate programs and reduce their market impacts. In 

addition, a rebate program that is only funded at a level that meets or marginally exceeds 

 25 New Jersey’s CORE solar PV rebate program suspended receipt of new applications in 2008 due to 

insufficient funds. Exponential market growth often occurs when moving from low penetration (<10%) to 

very high levels of penetration (>50%). Over this range of market penetration, the technology diffusion 

curve becomes very sensitive to small changes in market economics (Paidipati 2008). This suggests that 

technological viability is likely to be threshold sensitive, and rebate program administrators must be 

sensitive to these market conditions.
19

market demand in the absence of the incentive is likely to result in the provision of 

rebates primarily to freeriders.

26

System Performance

Many rebate programs are capacity- or cost-based (i.e., there is a specific up-front rebate 

per watt or per dollar spent to develop the facility). However, these rebates may not 

provide any incentives for a system owner to ensure maximum production from their 

system. As a result, some rebate programs have shifted to performance-based or expected 

performance-based incentives. The former provides incentive payments over time for 

energy generation rather than as an up-front capacity incentive. Unfortunately,

performance-based incentives for distributed generation may result in increased 

administrative and technical costs, and do not directly address the high up-front costs of 

renewable energy systems. As a result, expected performance-based incentives are 

designed to capture the value of both up-front rebates and performance-based payments. 

Expected performance-based incentives adjust the full up-front incentive payment in 

accordance with expected performance.

Even where funds for rebates greatly exceed existing market demand, freeriders can have 

a significant and detrimental impact on state rebate programs. Ultimately, high growth 

markets are not viable candidates for rebate programs due to freeridership. In markets 

that are undergoing moderate growth in the absence of rebate programs, market analysis 

becomes increasingly important to evaluate the tradeoff between market growth and the 

cost of funding freeriders.

Administrative Burden and Costs

Challenges for rebate programs also include minimizing overhead and administrative 

costs. Very small rebate programs, like biomass programs where only one or a few 

rebates are provided, may be prone to high overhead costs. In addition, non-standard 

rebate programs where funds are provided based on individual project finances and 

expected profitability can potentially result in high administrative costs.27

Non-cost Barriers

Administrative 

cost reductions may result from a streamlined application and permitting process as well 

as increasing the standardization of rebate allocations.

In addition to economic and cost conditions, there are non-cost related market barriers 

that can affect the outcome of a rebate program. Two primary examples that must be 

considered when evaluating the potential outcome of a rebate program are net-metering 

and interconnection rules or standards. In addition, local zoning requirements, program 

publicity, public desire for clean energy, public concern over energy independence or the 

 26 Indiana’s geothermal heat pump rebate program is a perfect case example. Rough market estimates place 

the Indiana market at approximately 1,000 systems per year (Albertson 2008). However, under the rebate 

program, only 300 rebates were provided (Cummings 2008). Though quantitative analysis has not been 

performed, this disproportion suggests that the bulk of the state rebates were simply consumed by 

individuals who were likely to purchase a geothermal heat pump without the rebates. 27 In Oregon, one large-scale biomass installation actually received no specific rebate funds but still 

resulted in high costs to the states clean energy fund due too high levels of assistance from ETO staff.
20

environment, general public awareness, and disposable income all affect the outcome of a 

given program and should not be underestimated when planning rebate programs.

Policy Duration and Flexibility

The final challenge for rebate programs is how to move forward when markets and 

technology costs do not follow the expected trajectories. Many policymakers and 

constituents view rebate programs as a temporary boost to emerging markets. Common 

thinking is that as the industry grows, economies of scale can be realized throughout the 

supply chain and manufacturing process and technology cost reductions will result. To 

fall within funding authorizations, programs are often designed so that rebate values can 

be gradually reduced over time to reflect the reduced costs that are expected to accrue as 

a given industry or technology moves toward the mainstream. 

However, up to this point, rebate program administrators and policymakers have had only 

limited success in forecasting the timing and extent of technology cost reductions. In 

California, history shows that rebate values have actually been increased to sustain 

market growth despite scheduled reductions. However, technology cost increases may 

result from factors beyond the control of program administrators or technology 

producers. Volatile commodity prices, market growth that results in supply chain 

bottlenecks, or inflationary pressures can generally all drive up prices even if production 

and installation is becoming more efficient. In these cases, evaluating program success 

and developing a plan for continued program implementation can be difficult.
21

Ideal Conditions and Applications 

The nature of rebate programs often means that the greatest short-term impacts are on 

renewable energy deployment. As such, they often serve a relatively narrow and specific 

purpose, so knowing when and where to apply them is critical. This section highlights the 

ideal conditions and applications for renewable energy rebate programs. 

The Right Technology, the Right Market

Many rebate programs apply broadly to an array of renewable energy technologies. 

However, this approach may not recognize the nuance of specific technology markets and 

the timing-sensitive nature of technology viability. Specific renewable energy 

technologies typically occupy different niches within energy markets. Ideally, rebate 

programs can target the optimal technology based on its specific merits, broader market 

characteristics, and the available resources.

28

Small Markets with Low or Zero Growth 

In addition, rebates should go to technologies that are ready for widespread application 

and are not expected to undergo major technological breakthroughs in the near term. 

Rebate programs are best applied to technologies that only foresee long-term marginal 

improvements from research and development (R&D) but have significant cost savings 

that might be achieved through mass production, learning by doing, and economies of 

scale. Ideally, specific technology cost reductions are identified and measurable.

Rebates are often best applied to technologies with small or non-existent markets and low 

or zero growth. This ensures low freeridership and optimizes government investment. For 

example, offering a rebate on compact fluorescent light bulbs (CFL) in a market where 

there is high penetration would result in an expensive program since rebates go to all 

purchasers and many consumers are willing to purchase CFLs without a rebate. Instead, 

rebates can be lower cost to governments when applied to technologies with large 

potential, but little current market share, such as residential PV.

29

Rebate programs are best applied to technologies that are ready to make the leap from a 

few prototypes to mass production. Markets that are capable of moderate growth in the 

absence of a rebate program, or markets that have already achieved production on a 

moderate scale, tend not to be good rebate program candidates due to freeridership, high 

program costs, and a more limited probability of achieving cost reductions from changes 

in production scale.

Moving from Prototype to Mass Production

 28 A good programmatic fit is California’s solar PV rebates. Relatively high electricity rates and an 

abundant solar resource have led to sustained growth in the solar PV market over the full 10 years of the 

program. New Jersey’s CORE rebate program for small wind technology is a poor fit as the program does 

not match a given energy market with the proper resource.

29 Given the recent extension and modifications to federal renewable energy incentives, this criterion 

suggests that states may benefit from evaluating the market impact of current federal incentives before 

implementing a new state rebate program as some renewable energy technologies may be able to achieve 

moderate levels of growth in specific markets with the federal incentives alone. At a minimum, the 

increased value of federal incentives may allow rebate programs reduce the necessary rebate to meet a 

specific level of growth.
22

Under-utilized Workforce

If a specific market has an under-utilized workforce that could easily engage in 

renewable energy industries, policymakers may consider implementing a rebate program 

to demonstrate a supportive policy environment. Evidence suggests that manufacturers 

may prefer localities that embrace renewable energy and existing policy as one means of 

communicating renewable energy acceptance and support. 

High-value Markets with Supporting Technical Policy

Ideal applications for renewable energy rebate programs include consumer markets with 

high priced retail energy alternatives, a populace that is both knowledgeable and engaged 

in energy and environmental issues, and a market where technical and non-cost barriers 

have already been removed. Consumers who are unaware or uninterested in renewable 

energy technologies are not likely to pursue any new energy technology. In addition, if 

technical or policy barriers prevent consumers from capturing the full value of renewable 

energy through net-metering, time of use rates, and renewable energy credit sales, public 

resources may be better spent eliminating these barriers before spending money on rebate 

programs. 
23

Key Elements of a Successful Program

While elements of a successful rebate program vary depending on one’s definition of 

success, the basic definition of success is taking an emerging technology from the 

prototype stage to mass production. There are few key pieces that must be present to 

ensure rebate program success, including:

• An appreciation of the market-initiating attributes and scale limitations of the 

rebate programs.

• The ability to address non-cost barriers including public awareness, net-metering, 

and interconnection standards. This may involve implementing a suite of policies 

in conjunction with a given rebate program. 

• Targeting the right technology at the right time. Technologies that make good 

candidates for rebate programs should be at the proper point in the technology 

development and diffusion cycle. This is likely to require careful technology and 

market analysis.

• A clear knowledge of and consideration for existing state, local, or federal 

incentives, as well as their impacts on current market activity and expected 

market activity under the new rebate program. 

• Targeting technologies with foreseeable concrete cost reductions at scale and a 

methodology for addressing unexpected changes in cost.

30

• Establishing the proper rebate amount based on existing market trends, the cost of 

alternatives, and the size of market that is desired.

31

• Providing a clear and specific mechanism for reevaluation and adjustment of 

rebate values based on changes in market dynamics during the life of the rebate 

program.

• A level of funding that is able to exceed existing market demand and sustain 

growth so that market volatility resulting from changes in rebate availability and 

funding are minimized. 

 30 In some markets, supply and demand pressures coupled with increasing commodity prices have actually 

pushed prices up rather than down. Without cost reductions, a rebate program may simply support an 

industry that is dependent on government support for viability. 

31 Rebate values that are too large may overheat markets and exhaust funding prematurely. Conversely, 

rebate values that are too low may not stimulate market demand. 
24

Policy Complements and Alternatives

Renewable energy rebate programs occupy a specific niche in the portfolio of policies 

that may advance renewable energy into the mainstream of the United States. As such, 

there are policy complements and policy alternatives to renewable energy rebate 

programs. 

Tax Credits

Tax credits are probably the most common alternative for moving technologies from the 

prototype stage to production at scale. The most comparable form of tax credit is the 

federal ITC. In principle, tax credits function similarly to rebate programs; however, 

there are a few critical differences. First, tax credits may not be collected until an 

individual files their tax returns in the year following the purchase. In addition, a tax 

credit requires a tax liability for the consumer to capitalize on the value of the incentive. 

Finally, a tax credit does not require an actual funding appropriation because the tax 

credit is merely a reduction in tax base. As a result, the fiscal impact is less direct for a 

tax credit than a rebate program.

Feed-in Tariffs

One policy that could function as either an alternative or complement to enhance 

renewable energy economics and expand renewable energy markets is feed-in tariffs 

(FIT) or production-based incentives (PBI). FITs have been very successful at driving 

renewable energy expansion in Germany but have only received limited application in the 

renewable energy sector of the United States. Typically, a FIT or PBI provides a specific 

payment amount to renewable energy generators based on the amount of energy produced 

from a given system. Payments may be at a fixed price or adjustable based on existing 

market rates. Unlike rebates, these programs do not reduce the up-front cost barrier but 

they may provide longer-term industry stability. As a production based incentive, FITs 

also provide incentives for maximum system production and may streamline 

administrative costs by providing a simple payment based on power generation.

Net-metering

Net-metering best functions as a policy complement. Net-metering allows users of 

distributed generation technologies to sell the excess power they generate back to the 

utility at the retail rate and allows them to draw power from the utility when their own 

generation is insufficient. Without net-metering, individuals may receive no benefit for 

excess power generation above real-time consumptions levels or they may be 

compensated with wholesale power rates. Net-metering can be an important economic 

benefit for high cost renewable energy systems and may encourage larger system 

installations.

Time-of-Use Rates

Time-of-use rates also function as policy complements. These rate structures allow 

certain technologies, like PV, to maximize economic value from renewable energy 

generation by providing market price signals for net-metered systems. Because maximum 

daily PV power generation often correlates well with peak electricity demand periods, 

time-of-use rates allow net-metered PV to benefit from peak retail electricity rates. 
25

Higher prices for excess power, during peak electricity demand periods, increases the 

benefit that accrues from net-metered PV systems.

REC Compliance Markets

Creating a compliance-based renewable energy credit (REC)

32

Public Infrastructure Investment

Public infrastructure investment involves the installation of renewable energy 

technologies on public buildings and property and off sets conventional power needs of 

public infrastructure. This approach ensures that no single segment of the population 

benefits at a greater level than another and allows for relatively low cost support for 

renewable energy technologies. However, this policy is not likely to have the market

expansion impacts that a well designed rebate program may have because it does not 

leverage any private funding. Public infrastructure investment targeted at renewable 

energy may be more efficiently targeted at earlier stage R&D or pilot projects. 

market is an alternative

policy mechanism that could be used to incentivize distributed generation renewable 

energy development. This approach, sometimes employed under a renewable portfolio 

standard, establishes a guaranteed market for RECs up to the specific capacity or 

generation level that is mandated by the legislature. Income from sales of RECs into this 

market is then used to offset the cost associated with renewable energy installations. 

These markets can be designed to be technology specific; targeting residential and small 

commercial distributed technologies is likely to require such a technology specific 

designation.

The solar REC compliance market approach is now New Jersey’s primary incentive for 

PV. The primary attribute of this approach is that it is a market-based mechanism that 

encourages renewable energy development. However, because RECs are tradable market 

goods, prices can vary, sometimes dramatically, with supply and demand and this 

mechanism may not provide the stability necessary to efficiently build renewable energy 

markets. In addition, this type of incentive may be more complex for home-owners and 

distributed generation technologies to participate in. As a result, a REC compliance 

market may be better suited for mature renewable energy.

 32 RECs represent the environmental attributes of the renewable power generation and can be sold 

separately from the physical electricity. For more information on RECs and green power markets, see 

http://apps3.eere.energy.gov/greenpower/index.shtml.
26

Conclusion

Renewable energy rebates are a policy mechanism designed to reduce cost barriers to 

renewable energy technologies and encourage consumer uptake. However, rebate 

programs are ideally established with the specific purpose of short-term market initiation

or rapidly expanding small markets that are undergoing low or zero annual growth. 

Rebates function best when applied to market-ready technologies that are prepared to 

move a technology from the prototype stage to mass production with the explicit purpose 

of reducing technology costs, demonstrating technological feasibility, revealing potential 

market barriers, and increasing market penetration. Rebate programs may function poorly

when context-specific market factors are not considered or when the precise rebate 

amount is not tailored to existing market and policy conditions. 

Rebate programs may be most effective when well designed and implemented as one 

component in a suite of policies. Under this scenario, rebates can be applied to jumpstart 

or rapidly expand a specific renewable energy technology while additional policy 

measures may be put in place to capture the full value of renewable energy resources and 

ensure that institutional barriers, technical barriers, and public awareness are also 

addressed. 
27

References

1. Albertson, P. September 2008. Personal Communication. Waterfurnace 

Incorporated. 

2. American Wind Energy Association (AWEA) (2008). AWEA Small Wind Turbine 

Global Market Study. AWEA. http://www.awea.org/smallwind/. Accessed 

October 24, 2008.

3. Barbose, G.; Wiser, R.; Bolinger, M. (2006). Designing PV Incentive Programs to 

Promote Performance: A Review of Current Practice. Berkeley, CA. 

http://eetd.lbl.gov/ea/ems/cases/. Accessed October 23, 2008.

4. Biopower Program Statistics. Energy Trust Oregon. Unpublished Data Obtained 

by Request from the Energy Trust of Oregon. http://www.energytrust.org/

5. Bolinger, M.; Wiser, R. (2003). Learning by Doing: The Evolution of State 

Support for Photovoltaics. LBNL-52398. Berkeley, CA. Lawrence Berkeley 

National Laboratory

6. Bolinger, M.; Wiser, R. (2002). The Use of Capital- and Performance- Based 

Buy-Down Programs for PV in California, Pennsylvania, and Massachusetts.

Berkeley, CA. Lawrence Berkeley National Laboratory

http://eetd.lbl.gov/ea/ems/cases/. Accessed October 23, 2008.

7. Colorado Department of Regulatory Agencies (CDOR). Public Utilities 

Commission. The Renewable Energy Standard Adjustment. Xcel Energy Solar 

Rewards Program. Archive of Monthly Reporting June 2006-July 2008. 

http://www.dora.state.co.us/puc/rulemaking/Amendment37/Amendment37.htm. 

Accessed October 24, 2008. 

8. Cummings, P. (2008). Indiana Residential Geothermal Heat Pump Rebate 

Program Review. Indiana Office of Energy and Defense Development. 

http://www.in.gov/oed/files/GHPProgramreport.pdf. Accessed October 24, 2008. 

9. Database of State Incentives for Renewable Energy (DSIRE).

http://www.dsireusa.org/ Accessed December 16, 2008.

10. Emerging Renewables Program Statistics. Obtained by Request from the 

California Energy Commission. 

http://www.energy.ca.gov/renewables/emerging_renewables/index.html. 

Accessed October 24, 2008.

11. Emissions and Generation Integrated Database (eGRID) 2007 Version 1.0. U.S. 

Environmental Protection Agency. http://www.epa.gov/cleanenergy/energyresources/egrid/index.html Accessed December 17, 2008.

12. Energy Information Administration (EIA) (2006). State Electricity Profiles.

http://www.eia.doe.gov/fuelelectric.html. Accessed December 16, 2008.

13. Energy Trust of Oregon. Program Web site. http://www.energytrust.org/. 

Accessed October 27, 2008.

14. Grover, S. (2007). Energy Economic and Environmental Benefits of the Solar 

America Initiative. Prepared by ECONorthwest Portland, OR for the National 

Renewable Energy Laboratory. Golden, CO 

http://www.nrel.gov/docs/fy07osti/41998.pdf Accessed December 16, 2008.
28

15. Jobs and Economic Development Impacts (JEDI) Model. Draft Solar 

Photovoltaic Model. National Renewable Energy Laboratory. 

www.nrel.gov/analysis/jedi/

16. Leiberg, T.; Lee, J. (2007). Grid Connected PV Capacity Installed in California 

(Data through 12/31.07).

http://www.gosolarcalifornia.ca.gov/news/statistics/index.html. Accessed October 

24, 2008.

17. Navigant Consulting (2008). Economic Impacts of Extending Federal Solar Tax 

Credits. Prepared for the Solar Energy Research and Education Foundation. 

http://www.seia.org/galleries/pdf/Navigant%20Consulting%20Report%209.15.08

.pdf. Accessed December 16, 2008.

18. New Jersey Board of Public Utilities (NJBPU) (2008). Docket No. EO07100773. 

19. Paidipati, J.; Frantzis, L.; Sawyer, H.; Kurrasch, A. (2008). Rooftop Photovoltaics 

Market Penetration Scenarios. Prepared by Navigant Consulting. National 

Renewable Energy Laboratory NREL/SR-581-42306. 

http://www.nrel.gov/docs/fy08osti/42306.pdf. Accessed October 27, 2008.

20. Richmond, R. (2007). Solar Water Heating Program Overview. Presentation 

Prepared by Hawaiian Electric Company. U.S. DOE Solar Hot Water Market 

Expansion Workshop. 

http://www1.eere.energy.gov/solar/ush2o/shw_market_expansion_workshop_010

7.html. Accessed October 24, 2008.

21. Sherwood, L. (2008) U.S. Solar Market Trends 2007. Interstate Renewable 

Energy Council. http://irecusa.org/. Accessed October 24, 2008.

22. Solar Electric Program Statistics. Energy Trust Oregon. Unpublished Data 

Obtained by Request from the Energy Trust of Oregon. 

http://www.energytrust.org/

23. Solar Hot Water Program Statistics. Energy Trust Oregon. Unpublished Data 

Obtained by Request from the Energy Trust of Oregon. 

http://www.energytrust.org/

24. State of New Jersey Clean Energy Web site. Renewable Energy CORE Activity. 

http://www.njcleanenergy.com/renewable-energy/program-updates/coreactivity/core-activity. Accessed October 27, 2008.

25. Wind Program Statistics. Energy Trust Oregon. Unpublished Data Obtained by 

Request from the Energy Trust of Oregon. http://www.energytrust.org/

26. Wiser, R.; Bolinger, M.; Cappers, P.; Margolis, R. Letting the Sun Shine on Solar 

Costs: An Empirical Investigation of Photovoltaic Cost Trends in California.

LBNL-59282. Lawrence Berkeley National Laboratory. Berkeley, CA. 

http://eetd.lbl.gov/ea/emp/reports/59282.pdf Accessed December 16, 2008. 
F1147-E(10/2008)

REPORT DOCUMENTATION PAGE Form Approved

OMB No. 0704-0188

The public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, 

gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this 

collection of information, including suggestions for reducing the burden, to Department of Defense, Executive Services and Communications Directorate (0704-0188). Respondents 

should be aware that notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply with a collection of information if it does not display a 

currently valid OMB control number.

PLEASE DO NOT RETURN YOUR FORM TO THE ABOVE ORGANIZATION.

1. REPORT DATE (DD-MM-YYYY)

March 2009

2. REPORT TYPE

Technical Report

3. DATES COVERED (From - To)

4. TITLE AND SUBTITLE

State Clean Energy Practices: Renewable Energy Rebates

5a. CONTRACT NUMBER

DE-AC36-08-GO28308

5b. GRANT NUMBER

5c. PROGRAM ELEMENT NUMBER

6. AUTHOR(S)

E. Lantz and E. Doris

5d. PROJECT NUMBER

NREL/TP-6A2-45039

5e. TASK NUMBER

IGST.8300

5f. WORK UNIT NUMBER

7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES)

National Renewable Energy Laboratory

1617 Cole Blvd.

Golden, CO 80401-3393

8. PERFORMING ORGANIZATION

REPORT NUMBER

NREL/TP-6A2-45039

9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR'S ACRONYM(S)

NREL

11. SPONSORING/MONITORING

AGENCY REPORT NUMBER

12. DISTRIBUTION AVAILABILITY STATEMENT

National Technical Information Service

U.S. Department of Commerce

5285 Port Royal Road

Springfield, VA 22161

13. SUPPLEMENTARY NOTES

14. ABSTRACT (Maximum 200 Words)

This report functions as a primer for renewable energy rebate programs. It highlights the impacts of specific 

renewable energy rebate programs on renewable energy markets around the country, as well as rebate program 

impacts on overarching energy policy drivers. It also discusses lessons learned, challenges, ideal applications, keys 

to success, and complementary and alternative policies. Results indicate that rebate programs can have a strong 

deployment impact on emerging renewable energy markets. This report focuses on renewable energy rebate 

programs, which are being analyzed as part of the State Clean Energy Policies Analysis (SCEPA) project. SCEPA is 

being used to quantify the impacts of existing state policies, and to identify crucial policy attributes and their potential 

applicability to other states.

15. SUBJECT TERMS

Renewable energy rebate programs; renewable energy markets; deployment impact; State Clean Energy Policies 

Analysis project; SCEPA; United States; NREL; Eric Lantz; Elizabeth Doris.

16. SECURITY CLASSIFICATION OF: 17. LIMITATION 

OF ABSTRACT

UL

18. NUMBER 

OF PAGES

19a. NAME OF RESPONSIBLE PERSON

a. REPORT

Unclassified

b. ABSTRACT

Unclassified

c. THIS PAGE

Unclassified 19b. TELEPHONE NUMBER (Include area code)

Standard Form 298 (Rev. 8/98)

Prescribed by ANSI Std. Z39.18