2.0 Making Solar Affordable for Residents and Businesses

An 8 kW solar PV installed in the Chestnut Hill area of Philadelphia is shown above. (Mercury Solar Systems/ PIX18067)

Although the cost of solar energy systems is expected to decrease significantly over the next decade, a solar system remains a large investment. Because Americans are used to paying for energy on a monthly basis as opposed to in a lump sum, financial incentives and financing mechanisms are required to make solar energy affordable for the majority of residents and businesses. Developing incentives and financing programs to bolster local market demand attracts solar businesses and will establish a community in a growing industry. Financial incentives such as rebates and tax credits can reduce the up-front cost of solar energy systems, and loans and other financing mechanisms enable customers to spread costs over time.

The private sector has developed innovative financing models to reduce the up-front cost of solar, such as power purchase agreements and leasing arrangements. In areas with high electricity prices, these models are already cost competitive, but in areas with lower electricity prices, state or local incentives are generally still required to make the economics work. Renewable portfolio standards, which are popular mechanisms for stimulating demand and are often associated with incentive program creation, are also described in this section.

State and local governments might have overlapping authority to implement some of the incentive programs and financing mechanisms outlined here; others can fall exclusively under local jurisdiction. Many state and local incentives are designed to complement the current 30% federal investment tax credit for solar energy systems.

The topic areas and associated examples in this section contain more information about incentive and financing options. Community leaders should consider this information as they work to determine the best course of action for their community.

Located along Interstate 35, near Austin, Texas, is a PV installation of 15 Mueller PV sunflowers. (Vipin Gupta/PIX17928)