Solar Incentives: Going, Going, Gone
11-02-2011
Governments around the world are cutting incentives for solar energy. If you were counting on the price of solar panels for your home to drop and for the incentives to stay in place, then think again. Some of the latest states to reduce their incentives in the U.S. are Maryland and Arizona, and if you live in Great Britain or Germany, their incentives have also been reduced. And at the federal level in the US, the 1603 Cash Grant will expire at the end of 2011. If you want to take advantage of the incentives for solar energy, then the moral of the story is: get your solar panel systems on your homes today.
Maryland announced this weekend that it would cap clean energy grants at $1,000 by November 1st. Under the old structure, residential homes could receive as much as $10,000 for switching to solar. The short notice for the cut was to avoid an avalanche of applications for solar installations. The Maryland Energy Administration said the cut was necessary in order to keep the program from running out of money prematurely: without the change, the program would have run out of its 2012 funding by the middle of next year because of the immense demand for solar energy. Arizona is also easing incentives in order to curb demand by reducing the amount of funding residential Arizona Public Service offers to residential solar panel owners.
On top of this, commercial customers are facing the end of the 1603 Grant, which awards businesses installing solar energy systems 30% of the total installation cost in cash in lieu of a 30% tax credit. It was designed to end last year, but was extended to run through the end of 2011; a similar extension seems unlikely this year. Solar Energy Industries Association (SEIA) chief Rhone Reisch argues that killing the grant will amount to a tax increase resulting in job losses. In addition, an SEIA report said that extending the cash grant by one year would create 37,000 more solar jobs in 2012 and 2,000 MW of additional installed solar capacity. The end of the cash grant would mean another blow to the American solar industry, which has suffered because of recent high-profile bankruptcies that were a result of falling panel prices coinciding with a fall in demand for solar installations.
Incentive cuts are also occurring abroad. UK Climate Change and Energy Minister Greg Barker announced Monday that British feed-in tariffs (FITs) would be cut in half. This coincides with Germany's announcement that it will cut its own FIT by 15% to adjust to the market. A feed-in tariff is a set amount of money a utility company agrees to pay an individual or enterprise for a certain amount of energy from a solar installation produced over a specific time-period. British cuts in FITs are meant to avoid the boom-and-bust cycle seen a few years ago in Spain, where companies and individuals scramble to install solar panels before government subsidies run out. This is the same reason as to why Germany's FIT has been reduced. Germany's FIT is set up under an automatic reduction scheme, in which the tariff is reduced every year to match the falling market prices of solar installations. Next year, the FIT will be reduced by 15%.
Nonetheless, the United Kingdom's abrupt and significant cut in incentives could kill the solar industry, according to The Guardian. The government announced it would cut the tariff in half in the course of six months, which will reduce the return on investment to fourteen years in a dangerously short period of time. Some have called this move regressive and favoring of the super-wealthy, and there are fears that this will deal a considerable blow to the British solar industry. In response to these complaints, Parliament has decided to launch an inquiry into the proposed cuts later this week.
