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Incentivizing Di

Solar: Best Prac

Lori Bird and Andy Re

NRELWebinar April 18, 201

NREL/PR‐6A20‐58566
Background

Method:

•Reviewed existing PV incentive programs, with flarger programs outside of SREC markets

•Interview utilities, administrators, regulators, an

Objective: Explore best practices in the desig

administration of distributed solar incentive 
Key Challenges• Highly variable solar costs,

difficult to predict

o Modifying incentive levels in response to in

cost changes

• Program longevity, predictability and s

aid solar market growth

• New business models (leasing, PPA)

• Cost‐effective incentive disbursement
What Defines Program Success?

• Solar market stimulation through cost 

• Increase long‐term viability of solar

o Market longevity and stabilityo Predictability for sustainable market growt

• Cost‐effective management of ratepay• Consumer protection• Providing price transparency to the so
Overview: Design Consideratio1. Form of incentives

o Rebates vs. PBIs (term, level)

2. Setting Incentive Levels

3. Encouraging multiple market s

4. Modifying Incentive levels

o Step‐down schedules, solicitations, or auc

5. Consumer Protection6. Administration
Common Solar Incentive Types• Up‐front rebate

o ($/watt capacity)

• Performance‐based Incentive (PBI)

o ($/kWh production)

Utility Rebate 

Austin Energy $2.00/wa

LIPA $1.75/waGulf Power Co. $2.00/wa

LADWP $1.62/waPG&E (CSI) $0.20/wa

Snohomish PUD $0.50/wa

Utility PBI 

Xcel Energy (CO) $.150/kWh 

Green Mountain $.060/kWh 

Madison G&E $.250/kWh 

Orlando Utilities $.050/kWh 

PG&E (CSI) $.025/kWh 

SMUD $.100/kWh 

*DSIRE – Accessed 7/10/2012
Common Incentive Program Comp

Rebate Incentive

Strengths

• Directly addresses up‐front installed

cost of solar

• Primarily short‐term administrative

burden

Weaknesses

• Incentivizes capacity, not production;

may not ensure system performance

• Requires payment in year one; can

create short‐term cash constraints

Performance Ba

Streng

• Incentivizes product

performance

• Limited near‐term b

demands

• Effective with third‐

Weakne

• Does not address up

in solar

• Long‐term administ

incentive payments
Stimulating Multiple Market Segm

• Diversity of system sizes, customer classes ma

objective

o residential, commercial, industrial, third‐party ow

• Differences in barriers and cost structures acr

o Residential owned systems – up‐front costo Larger commercial, 3rd party owned systems – ac

• Competitive procurement often used with lar

o Costs can differ by size substantiallyo Accurately pricing incentives important; large pay

• System cut‐off level can affect utilization of in

o System sizes – small 0‐30kW?, medium 30‐100kW
Ratepayer

Interests

Setting the Incentive Level

Solar Market

Stimulation

• Model effective levels; obtain component and 

cost data; radiation; electricity rates

o SAM and PV watts; data on installed costs

• Benchmark against other programs

• Establish a targeted ROI/payback period for cu

o 10‐15 year payback; incentive to cover up to 50% 
Adjusting the Incentive Level• Responding to changing market con

and solar costs

• Two primary methods used:

o Pre‐established schedules for declinin

– Planned incentive decreases along with m

circumstances

o Auction mechanism to set market pric

– Competitive bidding process for selecting 

solar installations
Declining Incentives ‐ Capacity Tar

0200400600800100012001400160018002000

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50

1 2 3 4 5 6 7 8 9 10

(MW)

Incentive  ($/watt)

Incentive Step

California Solar Initiative

Rebate Program

Installed Capacity (MW)EPBB Residential and Commercial ($/watt)EPBB Government and Non‐Profit ($/watt)

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00

1 2 3 4 5 

Incentive  ($/watt)

Incenti

LADWP Re

Solar Rebat

Installed Capacity (MW

Data Source: http://www.csi‐trigger.com Data Source: https://www.ladwp.com/ladwp/faces/la

progstusincetlvl?_adf.ctrl‐state=nswihfbn6_4&_afrLo
Declining Incentives – Budgetary T

Initial 2012 Incentive Rate ($/watt) 

Reduct

Amou

If 75% of funds used by 4/21/2012 incentive reduced by $0.2

If 75% of funds used by 5/21/2012 incentive reduced by $0.1

If 90% of funds used by 11/1/2012 and incentive is

greater than or equal to $0.35 the incentive reduced to: $0.2

If 90% of funds used by 11/1/2012 and incentive is less

than $0.35 then incentive reduced to: $0.1

Arizona Public Service – Solar Incentive Decline S
Declines: Capacity vs. Budgetary T

Capacity Targets

Strengths

• Can ensure multi‐year program

commitment

• Communicates the amount of installed

capacity by program end

Weaknesses

• Risks associated with unknown rate of

uptake (budget/year unknown)

• Not all customers understand concept

of “installed capacity”

Budgetary 

Streng

• Ensures intra‐year p

commitment

• Communicates with 

terms ($ not MW) t

Weakne

• Uncertainty for sola

program is adjusted 

• Timing can be confu

unpredictable at the 
Reverse Auction for Adjusting LevArizona Public Service Example

1. A maximum incentive level is establis

APS and communicated to prospectiv

2. Bidders enter system specs into the A

ranking calculator.

3. Incentive calculator determines the m

available incentive for the system and score to the bid.

4. Scores are ranked and incentives disb

starting with the lowest score, until t

for RFP has been exhausted.
Consumer Protection Measures• Encourage optimal system performa

o Orientation, tilt, azimuth, shading, etc.o Most common in rebate programs; som

• Installer certifications and system w

o Protect customers from fly‐by‐night co

• System components CEC‐listed/UL C
Consumer Protection (cont.)• Encourage energy efficiency

o Cost‐effectiveo Buy‐down solar capacity needso Ex: Gulf Power, SMUD,

Austin Energy

• Protecting customers from price gaugi

o CSI informs customers when a system pric

than one standard deviation above the av

• REC ownership determined equitably

o Utility often granted the RECs in return fo

incentive
Administrative Issues• Make aggregated installed cost data p

available to assert downward price pre

o CA Solar Statistics allows customers to vie

system cost data by zip code, size, installe

• Administering PBI payments

o On‐bill crediting preferred; frequency of c

needs to balance customer interests and a

• Inspections for performance

o Reduce inspection frequency after installe

installations meet program requirements
Application ProcessEquitable access to available incentive

o Random lottery vs. first‐come‐first‐serv

queuing systems

Streamline process – online applicatio

o Don’t require all system specifics initial

Establish administration cost caps?

o CSI limited administrative costs to 10% 

expenditures, but challenging to meet
Summary: Key ConsiderationsProgram specifics vary for different m

o Solar installed costs, electricity prices, a

financing, expected program uptake, so

irradiance, regulatory process, etc.

Balance competing stakeholder intere

o Buy‐down solar costs and increase insto Program longevity and predictability to 

costs

o Cost‐effective program administration
Lori.bird@nrel.gov

Andy.reger@nrel.gov

Distributed Solar Incentive Programsand Best Practices for Design and Im

http://www.nrel.gov/docs/fy13osti/