Fluctuating PV Incentives

Financial incentives are intended to level the playing field between conventional and renewable energy sources, and to spur industry growth. These programs make RE projects much more affordable, enabling the market to grow more rapidly—but they can also create a subsidies-dependent industry. While conventional energy suppliers also depend on subsidies, PV incentive programs have experienced significant fluctuations. One negative result has been to slow the growth of PV markets.

Many FIT programs, such as those in Germany, Italy, and Spain, have decreased payments in efforts to stabilize their overheated PV markets. At the state level, rebate programs (such as those in Arizona, California, and Colorado) have been significantly cut or suspended—often due to demand rising more quickly than expected and an early exhaustion of earmarked funds.

New Jersey’s FIT program stimulated megawatt-scale PV projects to give that state the second-largest installed PV capacity in the United States. However, this program also created an oversupply of solar renewable energy credits (SRECs), causing the SREC spot pricing to drop from about $500 (in 2011) to currently around $200 (the New Jersey SREC “Energy Year” runs from June 1 through May 31). A similar scenario played out with a FIT program in Pennsylvania, although on a smaller scale, with SREC prices dropping from a high of about $300 (in mid-2010) to about $10 at the end of 2011.