Solar - Energy Policy Analysis: A Conceptual Framework - page 110

8.10). Federal subsidies and tax expenditures for solar energy technologies were estimated at
$1.1 billion for FY2010, including $968 million for solar electricity production (USEIA 2011b,
xviii, xvi).
During the past ten years, the U.S. Department of Energy invested more than $1 billion in pur-
suit of research and development to advance solar energy technologies and bring down the costs
of solar energy systems. Technological innovations have helped to reduce solar energy costs by
more than 60 percent since 1995 and are expected to enable large-scale solar energy to achieve
cost-competitiveness with fossil-fueled electricity generation by the end of the decade, without
any further subsidies. This means DOE expects the installed price of utility-scale solar energy to
be reduced to about $1 per watt, or roughly 6 cents per kilowatt-hour, making it cost-competitive
with conventional fossil fuel-based electricity sources (USDOE 2011a).
This unfortunate focus on large utility-scale solar energy obscures the fact that solar photovol-
taic arrays are cost-competitive for many applications in the marketplace today and have been for
some time. With less restrictive assumptions, photovoltaic arrays were cost-competitive for some
homeowners in 1981—if the homeowner was in the 50 percent tax bracket, paid $0.12 per kilowatt-
hour, received 2,500 kilowatt-hours of insolation annually, obtained a 50 percent tax rebate, and
could depend on the utility grid to back up the system (Maycock and Stirewalt 1981, 103).
There is no single figure at which photovoltaics become cost-competitive. Within each class
of applications, the tax structure, utility costs, and income of the property owner all collaborate
to determine a break-even point for investments (Maycock and Stirewalt 1981, 103). Specific
financial returns on photovoltaic systems vary by geographic location and are affected by federal
tax credits, state and utility rebates, current and future electric rates, and average solar insolation
of a location.
State net-metering laws that require electric utilities to credit homeowners for any excess
power they generate from solar technologies on their homes have proven particularly useful in
encouraging homeowners to purchase photovoltaic equipment. With net metering, if a solar instal-
lation produces more power than necessary for immediate use, the residential electric meter “spins
backwards” and excess power is sent into the grid for credit on the next electric bill (SunEdison
2011d). Net metering has made it possible for electric utilities to offer rebate programs encourag-
ing on-site consumers of electricity to install significant renewable energy resources such as solar
photovoltaics and wind generators, which have enabled the utility to meet electricity demand
without construction of new, environmentally disruptive central-station generating facilities. For
example, during 2010, Black Hills Energy, an investor-owned utility, was able to meet its obli-
gations under Colorado law to provide a portion of its energy through on-site solar installations
through a standard rebate offer program using net metering (Black Hills Energy 2011, 9). As a
result of this longstanding program, Black Hills Energy has been able to meet expanding demand
for electricity without construction of new power plants for many years.
Provided a photovoltaic system is installed in an aesthetically pleasing manner, it immediately
adds resale value to a home. Panels are typically warranted to produce power for twenty-five years.
Some last longer. After installation, the remaining production under warranty may be calculated
and multiplied by the current electric rate to determine an accurate dollar value that the system
adds to a home. Homes equipped with solar photovoltaics have lower operating costs in the form
of monthly electric bills than do comparable nonsolar homes. And with twenty-five years of
guaranteed production, a photovoltaic system allows a homeowner to fix the costs for electricity
at the cost of installation of the system, providing protection against future electric rate increases.
Moreover, a solar photovoltaics system typically provides electric bill savings equal to two to
three times the initial price of the system (SunEdison 2011b).