Recommendations For Supporting Continued Growth of Distributed Generation in North America

California’s renewable energy goals will require a mix of utility-scale and distributed generation capacity. Achieving a high level of distributed generation will contribute significantly to meeting Renewable Portfolio Standard (RPS) goals and reduce the need for utility-scale development. At a recent conference hosted by Greentech Media for the solar industry, panelists and speaker representing all aspects of the solar value chain spoke about the several key challenges for achieving growth in the residential photovoltaic (PV) market, the primary market for distributed generation.

The following are recommendations for federal, state, and local governments, elected officials, and environmental organizations to address these challenges.

1. Streamline and Improve Incentive Programs
2. Support the Expansion and Extension of Incentive Programs
3. Educate the Public about Energy Management

1. Streamline and Improve Incentive Programs

Federal, state, and local governments must streamline and improve incentive programs in order to reduce administration costs. Residential solar installations in many cities throughout the country achieve grid parity with market electricity rates but the time and expenses associated with processing incentive payments and securing financing is a significant barrier to both customers and installers. Although material and labor costs are coming down as a trained workforce develops, the cost of paperwork can account for about 40 percent of a business owner’s installation costs. As a representative from Akina Solar noted, the downward stepping incentive payment structure of the California Solar Initiative may be a problem for solar installers because the buy down rate drops as total mega-watts installed increases. Installers will have a difficult time lowering installed costs to keep pace with the buy down rate once it reaches 35 cents per watt installed because of the high transaction costs of processing paperwork. This will leave homeowners with higher out-of-pocket costs and will lead to lower demand in the residential market.¹ In addition, PACE programs received some pushback from many industry representatives for the same reasons- they are too time consuming and complicated to scale statewide or nationwide. PACE programs have room for improvement and will likely see competition among alternative forms of financing from non-municipal sources. back

2. Support the Expansion and Extension of Incentive Programs

Environmental organizations and elected officials should support expansion and extension of incentive programs such as utility rebates and tax-based incentives since they have the lowest administration costs to property owners and installers. Because the industry is subject to “stroke of pen” risks associated with expiring incentives, the best way to insure continued growth of the residential industry is to support policy continuity which prevents boom-bust cycles in residential customer’s willingness to install solar. With certainty regarding federal and state level tax incentives, financing programs of all kinds will have an opportunity to mature and offer proven options in a growing market. back

3. Educate the Public about Energy Management

A major challenge for distributed generation is behavioral preferences. Most utility customers are not consciously aware of the fact that every time they turn on a light or plug in an appliance, they are making a purchase. In addition, there is an even greater knowledge gap about how much utilities pay for electricity, which depends on time of day and overall demand, since residential customers pay a flat rate rather than the minute-by-minute wholesale prices paid by the utility. The simplicity of our current system is a significant barrier to behavioral change that can only be overcome with improved energy data visibility and management at the residential level. Advances in information technology are creating automated and affordable systems that provide homeowners with information that is both timely and actionable.

Environmental organizations should conduct community outreach to educate the public about new technologies for energy management and promote their adoption. This will contribute to making energy management signals ubiquitous and speed behavioral changes necessary for improving energy efficiency and adoption of renewable energy. The information generated by household-level energy management systems will not only help reduce overall energy consumption but will allow homeowners to more easily assess the costs and benefits of installing a PV system. back

1 Greentech Media Solar Summit. “The View from the Top.” Conference panel presentation. March 31, 2010.