Financial incentives for photovoltaics are incentives offered to electricity consumers to install and operate solar-electric generating systems, also known as photovoltaics (PV). A government may offer incentives in order to encourage the PV industry to achieve the economies of scale needed to compete where the cost of PV-generated electricity is above the cost from the existing grid. Such policies are implemented to promote national or territorial energy independence, high tech job creation and reduction of carbon dioxide emissions which cause climate change.
When, in a given country or territory, the cost of solar electricity falls to meet the rising cost of grid electricity, then 'grid parity' is reached, and in principle incentives are no longer needed. In some places, the price of electricity varies as a function of time and day (due to demand variations). In places where high demand (and high electricity prices) coincide with high sunshine (usually hot places with air conditioning) then grid parity is reached before the cost solar electricity meets the average price of grid electricity.
Maps, Directions, and Place Reviews
Mechanisms
Four incentive mechanisms are used (often in combination):
- Investment subsidies: the authorities refund part of the cost of installation of the system.
- Feed-in Tariffs/net metering: the electricity utility buys PV electricity from the producer under a multiyear contract at a guaranteed rate.
- Solar Renewable Energy Certificates ("SRECs")
Investment subsidies
With investment subsidies, the financial burden falls upon the taxpayer, while with feed-in tariffs the extra cost is distributed across the utilities' customer bases. While the investment subsidy may be simpler to administer, the main argument in favour of feed-in tariffs is the encouragement of quality. Investment subsidies are paid out as a function of the nameplate capacity of the installed system and are independent of its actual power yield over time, so reward overstatement of power, and tolerate poor durability and maintenance.
Feed-in Tariffs (FiT)
With feed-in tariffs, the initial financial burden falls upon the consumer. Feed-in tariffs reward the number of kilowatt-hours produced over a long period of time, but because the rate is set by the authorities may result in overpayment of the owner of the PV installation. The price paid per kWh under a feed-in tariff exceeds the price of grid electricity.
Net metering
"Net metering" refers to the case where the price paid by the utility is the same as the price charged, often achieved by having the electricity meter spin backwards as electricity produced by the PV installation in excess of the amount being used by the owner of the installation is fed back into the grid.
Solar Renewable Energy Credits (SRECs)
Alternatively, SRECs allow for a market mechanism to set the price of the solar generated electricity subsidy. In this mechanism, a renewable energy production or consumption target is set, and the utility (more technically the Load Serving Entity) is obliged to purchase renewable energy or face a fine (Alternative Compliance Payment or ACP). The producer is credited for an SREC for every 1,000 kWh of electricity produced. If the utility buys this SREC and retires it, they avoid paying the ACP. In principle this system delivers the cheapest renewable energy, since the all solar facilities are eligible and can be installed in the most economic locations. Uncertainties about the future value of SRECs has led to SREC contract markets long-term to give clarity to their prices and allow solar developers to pre-sell/hedge their SRECs.
Quick overview
Smart meters allow the retail price to vary as a function of time ("time of use pricing"). When demand is high the retail price is high and vice versa. With time-of-use pricing, when peak demand coincides with hot sunny days, the cost of solar electricity is closer to the price of grid electricity, and grid parity will be reached earlier than if one single price were used for grid electricity.
The Japanese government through its Ministry of International Trade and Industry ran a successful programme of subsidies from 1994 to 2003. By the end of 2004, Japan led the world in installed PV capacity with over 1.1 GW.
In 2004, the German government introduced the first large-scale feed-in tariff system, under a law known as the 'EEG' (see below) which resulted in explosive growth of PV installations in Germany. At the outset the Feed-in Tariff (FIT) was over 3x the retail price or 8x the industrial price. The principle behind the German system is a 20-year flat rate contract. The value of new contracts is programmed to decrease each year, in order to encourage the industry to pass on lower costs to the end users.
In October 2008, Spain, Italy, Greece and France introduced feed-in tariffs. None have replicated the programmed decrease of FIT in new contracts though, making the German incentive less attractive compared to other countries. The French FIT offers a uniquely high premium for building integrated systems.
In 2006 California approved the 'California Solar Initiative', offering a choice of investment subsidies or FIT for small and medium systems and a FIT for large systems. The small-system FIT of $0.39 per kWh (far less than EU countries) expires in just 5 years, and the residential investment incentive is overwhelmed by a newly required time-of-use tariff, with a net cost increase to new systems. All California incentives are scheduled to decrease in the future depending as a function of the amount of PV capacity installed.
At the end of 2006, the Ontario Power Authority (Canada) began its Standard Offer Program, the first in North America for small renewable projects (10MW or less). This guarantees a fixed price of $0.42 CDN per kWh for PV and $0.11 CDN per kWh for other sources (i.e., wind, biomass, hydro) over a period of twenty years. Unlike net metering, all the electricity produced is sold to the OPA at the SOP rate. The generator then purchases any needed electricity at the current prevailing rate (e.g., $0.055 per kWh). The difference should cover all the costs of installation and operation over the life of the contract.
The price per Kilowatt hour (kWh) or kWp of the FIT or investment subsidies is only one of three factors that stimulate the installation of PV. The other two factors are insolation (the more sunshine, the less capital is needed for a given power output) and administrative ease of obtaining permits and contracts (Southern European countries are reputedly complex). For example, Greece, at the end of 2008, had 3GWp of permit requests unprocessed and halted new applications.
National incentives
The most significant incentives programs are listed here.
Australia
Australia is a federation of states and territories. Each state has different laws regarding feed-in tariffs. The states have a range of policies from no feed-in tariffs to feed-in tariffs at more than double the normal consumer price of electricity. Some states are considering feed-in tariffs but have not yet enacted relevant legislation, or the legislation has not yet come into effect. Only a small proportion are Gross Feed-in tariffs (proposed NSW and ACT), most are on a net basis. In the Northern Territory at present only the Alice Springs Solar City is eligible for feed-in tariffs for solar PV.
Bulgaria
Situation as of April 1, 2010
- <=5 kWp 792.89 Leva/MWh (about EUR0.405/kWh)
- >5 kWp 728.29 Leva/MWh (about EUR0.372/kWh)
Bulgarian regulator DKER
Remuneration for 25-year contract, with possible next year changes set related to 2 components (electricity sales price previous year, RES component).
Canada
Overview of Federal and provincial incentives at Canadian Solar Industry Association (CanSIA).
Ontario
In 2006 the Ontario Power Authority introduced the Renewable Energy Standard Offer Program. This program was replaced with the 2009 Feed-In Tariff program for renewable energy (FIT). The FIT program is further divided into the MicroFIT program for projects less than 10 kW, designed to encourage individuals and households to generate renewable energy.
The program was launched in September 2009 and the tariffs were fixed then. The solar projects <=10 kW received $0.802, however, as of 13 August 2010 ground mounted systems will receive a lower tariff than rooftop mounted systems.
Feed-In tariff rates for the Ontario Power Authority (OPA) FIT and MicroFIT Programs, for renewable generation capacity of 10MW or less, connected at 50 kV:
- Solar Photovoltaic:
Rooftop <=10 kW $0.802/kWh CDN Ground Mounted <=10 kW $0.642/kWh CDN Rooftop > 10 <= 250 kW $0.713/kWh CDN Rooftop > 250 <= 500 kW $0.635/kWh CDN Rooftop > 500 kW $0.539/kWh CDN Ground Mounted2 > 10 kW $0.443/kWh CDN
- Wind, Hydro, Biomass: from $0.111 up to $0.195/kWh CDN
Tariffs vary based on fuel type and size of installation. The contract duration with the OPA is 20 years, with a constant remuneration for solar, though biomass, biogas, hydro, and wind receive a 20% of Consumer Price Index price adder. Additionally, biomass, biogas, hydro receive a 35% peak demand adder during peak demand periods of the day and -10% off peak. Finally, all but solar may also qualify for a community and aboriginal price adder. All power produced is sold to the OPA. Generator then purchases back what is needed at prevailing rate (e.g., $0.055/kWh CDN). The intent of the Feed-In Tariff program is to provide an 11% return on investment.
In June 2013, Ontario Canceled Feed-in Tariffs for Large Projects.
Croatia
As of March 2007
- Systems <10 kWp: 3.40 HRK (0.45 EUR/kWh)
- Systems from 10 KWp up to 30 kWp: 3.00 HRK (0.40 EUR/kWh)
- Systems >30 kWp: 2.10 HRK (0.28 EUR/kWh)
Contract duration 12 years
Price calculated in Croatian Kuna, exchange rate used for conversion of above rates 1 EUR = 7.48 HRK.
Czech Republic
As of 2010 feed-in tariffs are 12.25 CZK/kWh for <=30 kWp and 12.15 for >30 kWp. Contract duration is 20 years with yearly increase linked to inflation (within range 2 - 4%). New contract prices are changed for 5% yearly, due to unexpected rise of number of installations in 2009 new bill is proposed allowing 25% change.
China
As of August 2011 a national feed-in tariff for solar projects was issued, and is about US$0.15 per kWh.
Situation as of 2009
Backed by the Chinese government's total stimulus package of RMB 4 trillion ($585bn), Chinese businesses are now among the top producers of electric vehicles, wind turbines, solar panels and energy efficient appliances, according to a report released last month by London-based The Climate Group. In March 2009, the China government introduced the "Solar Roofs Plan" for promoting the application of solar PV building. The Ministry of Finance in July re-introduced the "Golden Sun Project" with more specific details of the related policy. The policy provides that the grid-connected photovoltaic power generation project, the state will in principle by photovoltaic power generation system and its supporting transmission and distribution projects to give 50% of the total investment subsidies. The subsidy will rise to 70% for solar power systems in remote areas that are not currently connected to the grid. Projects with a minimum capacity of 500MW would be eligible for the related incentive. All such financial incentive schemes boosts most of the new development in China solar market, such as the new thin film solar plant of Anwell Technologies and Tianwei, as well as the contract signed by LDK solar to install up to 500 MW of capacity of PV stations over the next five years in Jiangsu Province of China.
However, there still is no clarity on Feed-in-Tariffs for domestic installations within China.
France
For current situation, consult the modified 2011 Feed in Tariff Arrêté.
Conditions expected to change on 1 September 2016.
Germany
The Renewable Energy Sources Act (German: Erneuerbare-Energien-Gesetz or EEG) came into effect in 2000 and has been adapted by many countries around the world. It was amended several times and triggered an unprecedented boom in solar electricity production. This success is largely due to the creation of favourable political framework conditions.
Grid operators are legally obliged to pay producers of solar electricity a fixed remuneration (feed-in tariff or FIT) for solar generated electricity fed into the grid, depending on the size and type of the system, as well as the year of installation. The tariffs vary to account for the different costs of rooftop or ground-mounted systems in accordance with the size of the system and system cost reductions over time. Since the EEG guarantees the FIT payments for a duration of 20 years, it provides sustained planning security for investors in PV systems. Grid parity for large installation and small roof-top systems was already reached in 2011 and 2012, respectively.
As of July 2014, feed-in tariffs for photovoltaic systems range from 12.88 ¢/kWh for small roof-top system to 8.92 ¢/kWh for large utility scaled solar parks. Feed-in tariffs are restricted to a maximum system capacity of 10 MW. The feed-in tariff for solar PV is declining at a faster rate than for any other renewable technology.
On 1 August 2014, a revised Renewable Energy Sources Act entered into force. Specific deployment corridors now stipulate the extent to which renewable energy is to be expanded in the future and the funding rates (feed-in tariffs) will no longer be fixed by the government, but will be determined by auction.
Greece
Situation as of 2009. New PV FIT law introduced 15 January 2009.
Contract duration 20 years, indexed to 25% of annual inflation. New contract prices to reduce 1% per month starting 2010.
Special program with higher FIT but no tax rebates planned to drive 750 MWp installations of BIPV.
Investment subsidies: Tax rebates and grants (40%) are available.
India
The Indian Renewable Energy Development Agency (IREDA) provides revolving fund to financing and leasing companies offering affordable credit for the purchase of PV systems in India.
State Utilities are mandated to buy green energy via a Power Purchase Agreement from Solar Farms
The Ministry of New and Renewable Energy has launched a new scheme (Jan 2008) for installation of Solar Power Plants. For the producer, a Generation-based subsidy is available up to Rs. 12/kWh (EUR0.21/kWh) from the Ministry of New and Renewable Energy, in addition to the price paid by the State Utility for 10 years.
The State Electricity Regulatory Commissions are setting up preferential tariffs for Solar Power
Rajasthan - Rs. 15.6 (EUR0.27) per kWh (proposed) West Bengal - Rs. 12.5 (EUR0.22) per kWh (proposed) Punjab - Rs. 8.93 (EUR0.15) per kWh
80% accelerated depreciation Concessional duties on import of raw materials Excise duty exemption on certain devices
Ireland
Solar PV has been excluded from the last three REFIT feed-in tariff programs (which are solely targeted at large scale producers). No commercial scale solar installations have been built in Ireland.
Residential and Micro scale Solar receives no grant aid, no subsidy and no tax deductions are available. No Feed-In tariffs are available for these customers and net-metering is similarly unavailable. Co-operative and privately shared electricity between separate properties is illegal. A 9c/kWh Feed-In tariff was available from Electric Ireland until December 2014, when it was withdrawn without replacement. Income from this feed-in tariff was subject to income tax at up to 58%. No other Micro-scale Feed-In tariffs are available.
Homeowners with grid connected PV systems are charged a EUR9.45 per billing cycle "low-usage surcharge" for importing less than 2kWh per day or being a net exporter of energy in a billing period.
Italy
The Ministry for Industry issued a decree on 5 August 2005 that provides the legal framework for the system known as "Conto Energia". The following incentive tariffs are from the decree of 19 Feb 2007.
Contract duration 20 years, constant remuneration.
On March 8, 2011, a government decree has cancelled this regime: new installations from June 1, 2011, will receive lower tariffs. The exact amounts will be decided during the month of April 2011.
Japan
The former incentive programme run by the Ministry of Economy, Trade and Industry was stopped in 2005.
Republic of Macedonia
As of October 2009
- Systems <50 kWp: EUR0.46/kWh
- Systems >50 kWp: EUR0.41/kWh
As of July 2010
- Systems <50 kWp: 0.30 EUR/kWh
- Systems 51 to 1000 kWp: 0.26 EUR/kWh
As of 2013
- Systems <50 kWp: 0.16 EUR/kWh
- Systems 51 to 1000 kWp: 0.12 EUR/kWh
Contract duration 20 years
Serbia
As of January 2010
- All Systems: EUR0.23/kWh
As of January 2012
- Building integrated, up to 3 kW: EUR0.2066/kWh
- Building integrated, 3 kW to 500 kW: formula 20,941 - 9,383*R, where R is power
- Ground mounted, >500 kW: EUR0.1625/kWh
Contract duration 12 years
Slovakia
As of December 2010
- Systems <100 kWp: EUR0.43/kWh
- Systems >100 kWp: EUR0.425/kWh
Contract duration 15 years
2016: Only rooftop and below 30 kW. EUR0,088/kW (88,91 EUR/MWH). But all three DSO has "Stop stav" - they refuse connection.
There is only connection of PV without subsidy.
South Korea
Situation as of Oct 11 2006.
Feed-in Tariffs:
- Systems >30 kWp: KRW677.38/kWh
- Systems <30 kWp: KRW711.25/kWh (ca $0.75, EUR0.60)
Additional subsidies available.
Contract duration 15 years, constant remuneration
Spain
Situation as of 2009
No change since September 2008: the legal framework is the Real Decreto (royal decree) 1578/2008 replacing 436/2004 modified by Real Decreto 1634/2006.
Feed-in Tariff:
Building mounted
- <= 20 kWp: 0.34 EUR/kWh
- > 20 kWp: 0.32 EUR/kWh
Ground mounted
- 0.32 EUR/kWh
These feed in tariffs are capped at approximately 500 MWp/y, of which 241 MW ground mounted, 233 MWp building mounted >20 MWp, 26.7 MW <20 MWp building mounted.
Taiwan
Situation as of 2009
The Bureau of Energy under Taiwan's Ministry of Economic Affairs (MOEA) has announced the proposed feed-in tariff rates for photovoltaic (PV) and other types of renewable energy in September. A tentative rates of NT$8.1243-9.3279 (US$0.250-0.287) per kilowatt-hour (kwh) has been set for PV generated power, however, the proposed rates have fallen considerably short of local solar players' expectations. Public hearing will be held on 24 Sept to collect opinions from all parties concerned.
Turkey
"Amending the Law on Utilization of Renewable Energy Resources in Electricity Generation" (Law No: 6094) (enacted 29 December 2010, published in the Official Gazette dated 8 January 2011 and numbered 27809) (Amendment Law)
The Amendment Law introduces significant amendments to improve the incentive mechanism under the Renewable Energy Law and encourage renewable energy investment opportunities in Turkey - the following are the main amendments and incentives:
According to the Amendment Law, the applicable sale tariffs within the scope of the RES Support Mechanism are as follows (for solar): Solar power based production facility 13,3 dollar cent/kWh
United Kingdom
Situation as of November 2010. This mainly covers PV but other technologies can be found from DECC.gov.uk
UK Feed-in Tariffs The UK Government has introduced a feed-in tariff for small scale (up to 5MW) renewables from 1 April 2010, with a review in 2012 for changes on 1 April 2013. Though limits on max MWp installations will be announced in December to steer away from large solar utilities.
- From April 2010, the FIT will offer a fixed payment per kilowatt hour generated (see table) and a guaranteed minimum payment of 3p per kWh exported to the market (assumed 50% only) or you are entitled to opt out with your own Power Purchase Agreement (PPA). Tariffs will not be index-linked to the RPI.
- Projects up to 5 MW will be eligible, including off-grid installations.
- Technologies that will be eligible for the FIT from April 2010 are: wind, solar PV, hydro, anaerobic digestion, biomass, biomass CHP and non-renewable microchip (see table for tariffs).
- The FIT will be offered for a 20-year period, with the exception of solar PV projects for which the period will be 25 years.
- The FIT designed with the aim of delivering 2% of the UK's energy from small scale projects by 2020.
- Where appropriate, support will decrease in line with expected technology cost reductions.
- Support levels will be reviewed periodically and in response to sudden changes in technology costs. However, tariff levels will be grandfathered, so that projects continue to receive the levels of support offered at their registration.
- Projects below 50 kWp must be installed by MCS accredited installers. 50 kWp to 5 MWp projects will be subject to accreditation similar to the current RO process.
- Projects installed in the interim period between the announcement of the FIT (15 July 2009) and the start of the scheme (April 2010) will be eligible to receive the tariff with some conditions on the support period. However, any non-domestic projects that receive grant funding from central government will have to return the grant before they can receive FIT payments.
- Regardless of technology, projects installed prior to 15 July 2009 will be eligible to receive generation payments currently being auctioned of 9p/kWh and export payments of 5p/kWh, provided they were previously receiving support under the RO scheme.
- Projects up to 50 kWp in size will no longer be able to claim the RO; existing installations will be automatically transferred to the FIT. New and interim period projects between 50 kW and 5 MW will be given a one-off choice between claiming support under the FIT or the RO. Existing projects between 50 kW and 5 MW in size will remain under the RO, with no opportunity to transfer to the FIT.
- No further capital/financial support for the up-front capital costs of projects. (though Green Deal for dwellings is under consultation as a no up front cost incentive for energy efficiency and renewables)
- Feed - in - tariff rates for PV grid connected
43.3 p/kWh < 4 kW > 37.9 p/kWh < 10 kW > 32.8 p/kWh < 100 kW > 30.7 p/kWh
i.e. 43.3 pence/kWh fed in from a less than (or equals?) 4 kW peak power installation
37.9 p/kWh for >(or=?) 4 kW <(or=?) 10 kW
32.8 p/kWh for >(or=?) 10 kW <(or=?) 100 kW
30.7 p/kWh for >(or=?) 100 kW
Stand alone installation: 30.7 p/kWh
From 1 August 2011, the tariff rate for > 50 KWp will be 19.0 p/kwh.
Typical domestic (< 4 kW peak?) installations registered (on or?) after December 12, 2011 will attract only (~)21 p/kWh.
United States
Federal
Federal tax Grant of 30%, which expires December 31, 2011, or a Federal tax credit of 30%, which expires December 31, 2016 are available for residential systems and businesses. Details of this and state incentives are summarized at DSIRE. Legislation currently under consideration in Congress: "Renewable Energy and Job Creation Act of 2008" This multifaceted energy bill would extend investment tax credit. By June 2008, it had passed the House but had not overcome opposition from Senate Republicans who had filibustered it over tax provisions that would finance the program. In September 2008, it passed in the Senate with amendments.
California
Starting January 1, 2007
Administrative basis: California Public Utilities Commission (PUC) decision of August 24, 2006
Feed-in Tariffs and Investment subsidies :
- Systems >100 kWp: $0.39/kWh
- Systems <100 kWp can choose either $2.50/Wp or $0.39/kWh
Contract duration 5 years, constant remuneration
Net metering
- Up to 2.5% of peak demand, rolls over month to month, granted to utility at end of 12 month billing cycle
Approved equipment
- Since 1 July 2009, the CEC list of approved solar panels has been tightened to the SP1 / NSHP list to provide more protection to the end-users.
Colorado
Colorado became the first U.S. state to create a Renewable Portfolio Standard (RPS) under Amendment 37 in November 2004. amended in March 2007
Investor-owned utilities serving 40,000 or more customers to generate or purchase 10% of their retail electric sales from renewable-energy resources as well as a rebate program for customers
Utilities must provide increasing proportions of renewable or recycled energy in their electricity sales in Colorado: 3% in 2007; 5% in 2008-2010; 10% in 2011-2014; 15% in 2015-2019; and 20% in 2020 and thereafter. At least 4% of the standard must be generated by solar-electric technologies, half of which must be generated at the customer. Cooperatives and municipal utilities must follow a lower scale culminating in 10% in 2020. The 2007 amendments directed the Colorado Public Utility Commission (PUC) to revise or clarify its existing RPS rules on or before October 1, 2007. The PUC's rules generally apply to investor-owned utilities.
According to Green Power Network in 2006, U.S. tradable renewable energy credits (RECs) traded between ¢0.5 and 9.0/kWh. Many were at ¢2/kWh ($5-90/MWh)
Net metering::
- Credited to customer's next bill; utility pays customer at end of calendar year for excess kWh credits at the average hourly incremental cost for that year, limit on system size 2 MW, no enrollment limit
Utility rebate programs
Many states have counties and utilities which offer rebates of from $500 to $4/watt installed, as well as feed-in tariffs of up to $1.50/kWh. See reference for list. 40 states have net metering. See reference.
Source of the article : Wikipedia
EmoticonEmoticon