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Governmental Incentives for PV Investments
The incentives that make PV viable today exist in three "buckets"; federal investment tax credit (ITC), state rebates or grants, and the tradable value of the "green power" produced via Renewable Energy Credits ("RECs", a.k.a., "Solar RECs" or "SRECs").

Federal Investment Tax Credit
The federal ITC is now 30% on solar, with special MACRS depreciation rules that radically improve initial cash flow (download SEIA's ITC Manual, 1.1MB file). The current Solar ITC is scheduled to expire at the end of 2008, but Congress is currently working through an extension and a provision to allow solar tax credits against the AMT. (download the 10/31/07 letter from the Solar Industry to Speaker Pelosi) After a 30% ITC, the $0.28/kWh cost of PV illustrated for Pennsylvania power drops to about $0.20/kWh

State Incentives
Few states have state-wide, long term rebate programs, but many are in development. An excellent consolidated website of current state programs is available at http://www.dsireusa.org/

In general, the better state rebate programs rebate an average of $2/w to $4/w of the ballpark $8/w turn-key cost. The rebates may be based on a flat amount per watt (such as in Florida where the rebate is a generous $4/w, but with a cap at $100,000 per rebate), or the rebate may be a "Performance Based Incentive", such as California's Solar Initiative program for commercial systems.

Combining the federal ITC with an illustrative $3 state rebate drops the $0.28/kWh cost of PV power drops to about $0.09/kWh, which compares favorably to most current rates – especially after a cost escalator is applied to current power costs from the grid versus the fixed cost of the PV power over term.

Solar Renewable Energy Credits (SRECs)
Of the three "buckets", the REC market is by far the most speculative, most complicated, and has the largest potential upside for PV investments.

REC markets are either "voluntary" or "compliance" based. Compliance markets exist only where a Renewal Portfolio Standards (RPS) with non-compliance penalties has been passed. 18 states have passed Renewal Portfolio Standards (RPS). Each state's RPS is a little different, but they all set a standard for that state's utilities to meet with regard to renewable energy. The current House version of the federal energy bill proposes a 15% national standard by 2020.

Not all of the RPSs have non-compliance penalties and not all have set-asides for solar, meaning the RPS could be fully satisfied by other renewable energy concepts that may currently be more cost efficient (some wind turbines, hyrdo, or landfill gasses). But several states have a mandatory solar set aside that is enforced by creating a financial penalty to the utility company for non-compli ance. Such penalties are roughly in the ballpark of 40 to 50 cents/kWh. This is a severe penalty when compared to the average cost to end user (or GR to utility) of less than 10 cents/kWh.

The REC trading market is just now beginning to develop, but in Massachusetts, SRECs have traded as high as 40 cents/kWh and in New Jersey the pricing is hovering at about 22 cents/kWh. In states such as California and Florida where the market is still effectively "voluntary", RECs have failed to gain value beyond about a penny per kWh.

ROI in PV Investments
The financial return on investment for solar projects can be outstanding – but as discussed herein, there are many variables. In a state with an incentive program, Eos can typically design and deliver a system with IRRs in excess of... read on>