Where are Solar PV Incentives in 2020?

By: DSIRE Insight Team

Many states and utilities offer a variety of financial incentives for solar photovoltaics (PV) in order to encourage solar adoption and achieve state solar development goals. As the cost of solar has declined, many states have phased out their incentive programs. However, at least 44 states offer at least some type of financial incentive for solar energy, with property tax exemptions being the most common type of incentive.

State and Utility Solar PV Incentives (August 2020)

Tax Credits

At the federal level, solar energy projects are eligible for a 26% investment tax credit. This credit will decrease to 22% in 2021 and again to 10% in 2022. The credit will remain at 10% for commercial projects, while the credit will expire completely for residential projects at the end of 2021.

In addition to the federal investment tax credit, 9 states currently offer income tax credits for which solar is an eligible technology. New Mexico lawmakers enacted legislation earlier in 2020 bringing back a revised version of its expired Solar Market Development Tax Credit, which provides a credit for 10% of system costs up to $6,000.

Rebate Programs

State or utility solar rebate programs currently exist in 17 states (including only utilities with at least 40,000 customers). Most rebate programs provide an incentive based on the capacity of the solar system, while a few provide a flat incentive. Most rebate programs provide incentives between $0.20 per Watt and $0.75 per Watt, with some incentives providing as much as $3.00 per Watt.

The Virginia Department of Mines, Minerals, and Energy is currently developing a solar rebate program focused on low to moderate income customers, pursuant to legislation enacted earlier in 2020. The legislation specifies that the incentive may be up to $2.00 per Watt.

Performance-Based Incentives

At least 11 states and DC offer performance-based solar incentives that provide a per-kWh payment to project owners based on actual system production. Xcel Energy’s Solar*Rewards program is an example of a performance-based incentive, where Colorado and Minnesota solar owners can receive payments ranging from $0.005 to $0.07 per kWh of production.

A number of states that have solar energy carve-outs within their renewable portfolio standards also have active markets for Solar Renewable Energy Certificates (SRECs). An SREC represents 1 MWh of solar energy, and electric power suppliers must generate or procure a certain number of SRECs to comply with their state’s standard.

Property and Sales Tax Incentives

Property and sales tax incentives are the most common types of solar incentives across the country. Thirty-six states have adopted property tax exemptions for solar energy systems, or authorized local governments to implement property tax exemptions. While the majority of these exemptions apply to the full added value of the solar installation, some states’ property tax incentives apply to a percentage of the added value or allow an exemption for only a certain number of years.

Another 22 states exempt solar energy systems from sales taxes. Like property tax incentives, most sales tax incentives for solar provide a full exemption. In Washington, solar energy systems up to 100 kW are eligible for a full sales tax exemption, while systems over 100 kW and up to 500 kW are eligible for a 50% exemption.

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Learn more about incentives for solar energy with the DSIRE Insight Solar Single-Tech Subscription ($4,500 per year) or the Solar Policy Data Sheet ($500). Contact us for more information.

States Evaluating EV Registration Fees and Alternatives to Support Transportation Infrastructure Funding

By: DSIRE Insight Team

States rely on gasoline tax revenues in large part to fund transportation infrastructure. Gas taxes serve roughly as a fee on road usage; people that drive more generally buy more gas and therefore pay more in gas taxes. However, this system of allocating road infrastructure expenses has never been perfect, as fuel use is not exactly analogous to the burden that a vehicle places on road infrastructure. States have been facing declining transportation infrastructure funding due both to increasing vehicle fuel efficiency and the fact that gas taxes in many states have not risen with inflation. Increased adoption of electric and other alternative fuel vehicles could exacerbate this issue, as these vehicles do not use gasoline, and therefore their drivers do not pay gas taxes. As states seek to increase electric vehicle (EV) adoption in order to meet decarbonization and other policy goals, they face the challenge of determining a way to recoup transportation infrastructure expenses while still enabling the development of the EV market. States have largely addressed this issue so far by adopting increased registration fees for electric vehicles, but some states are considering other methods.

Registration Fee Increases Through 2019

By the end of 2019, 28 states had adopted increased registration fees for EVs. The amount of these fee increases varies considerably among the states that have adopted them. These increases for EVs range from $50 (in Hawaii) to $225 (in Washington state). Fees proposed in state legislation have been even more varied, ranging from $25 to $1,000. Some fees are determined based on formulae that approximate how much an EV owner would pay in gas taxes if they drove a comparable conventional vehicle, although the specifics of these formulae vary among states.

State Electric Vehicle Registration Fee Increases At the End of 2019

Alternative Methods to Charge for Transportation Infrastructure

While most states have addressed this issue with simple flat-rate fees or fees based on vehicle type, a few states have considered alternative reforms to transportation infrastructure funding mechanisms.

One method is to charge a per-kWh excise tax on electricity supplied by EV charging equipment. This is essentially the same as a gas tax, just charged on electricity. This system is relatively simple to administer, as it can be applied to electricity sales from the utility supplying the electricity, which are already taxed for standard sales tax purposes. However, this does require electricity supplied to EV charging equipment to be metered separately from other electricity consumption.

Another method is a charge on vehicle miles traveled, which could either replace or supplement gas taxes. This system removes the dependence on vehicle fuel consumption as a measure of road usage, making it able to address the gas tax revenue decline from higher-efficiency conventional vehicles as well as electric vehicles (although some proposed mileage fees only apply to EVs). However, mileage is also not a perfect representation of the effect a vehicle has on roads, as a larger vehicle will cause more burden on roads per mile driven than a smaller vehicle. Mileage charges can vary based on vehicle weight in order to address this issue (existing state vehicle registration systems already apply different registration fees based on vehicle type or weight). Mileage charges are potentially more complex to administer than gas or electricity excise taxes, though, as mileage is not something that is already part of a taxable transaction.

Some proposals in state legislatures have taken a hybrid approach between a flat-rate registration fee increase and a more complex reform like mileage fees. These proposals increase registration fees for electric vehicles, but also increase fees for higher-efficiency conventional vehicles by a smaller amount, with the amount of the fee proportional to the gas mileage of the vehicle. These sorts of proposals aim to allocate transportation infrastructure expenses more accurately among all types of vehicles without necessitating a broad change in the policy framework.

State Electric Vehicle Registration Fee Increases At the End of Q1 2020

Registration Fee and Alternative Proposals in 2020

Only one state, Virginia, has passed an increased EV registration fee so far in 2020 (Virginia already had an increased fee, with the 2020 action increasing it further). Virginia’s new fee system allows EV (and hybrid) drivers to choose between paying an increased registration fee or participating in a mileage-based user fee system. Several other states considered registration fee increases or other alternatives, but none of these proposals have been enacted, and many have died with the end of their states’ legislative sessions.  Some state lawmakers also introduced bills aiming to repeal previously adopted fee increases, but none of these bills have advanced either.

Legislators in Vermont and Washington proposed alternative EV fee systems. A Vermont bill expressed support for the adoption of a per-kWh EV charging fee that would be phased in according to the level of EV adoption. The bill does not specify the amount of the fee or the phase-in schedule, delegating those decisions to state regulators. Washington legislators proposed a miles-traveled fee for EVs and hybrid vehicles, with the fee set at 3.5 cents per mile for EVs and plug-in hybrids and 2 cents per mile for conventional hybrids. The bill requires the state transportation department to develop an implementation plan for administering the fee, including a mileage-reporting system and a payment system. Neither of these bills has advanced in their respective legislatures.

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You can keep up with EV fee and alternative proposals through the 50 States of Electric Vehicle reports or DSIRE Insight’s biweekly EV policy tracking reports.

Energy Storage Targets on the Rise Across the Country

By: DSIRE Insight Team

Energy storage has the potential to provide a wide array of benefits to the electric grid, and states across the country are increasingly considering statewide targets for the deployment of energy storage resources. The Database of State Incentives for Renewables and Efficiency (DSIRE) recently added energy storage targets and incentives to the database.

First Movers: California, Oregon, Massachusetts, New York, & New Jersey

California was the first state to adopt an energy storage target, setting a 1,325 MW target across the state’s three major investor-owned utilities, Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison. The California Public Utilities Commission (CPUC) officially established the target in 2013, pursuant to legislation enacted in 2010, with the requirement for each utility subdivided by systems installed at the transmission, distribution, and customer levels.

State Energy Storage Targets (adopted as of 3/31/2020)

Several years later in early 2017, Oregon became the next state to adopt a storage target, requiring Portland General Electric and PacifiCorp to each procure a minimum of 5 MWh of energy storage by 2020 (10 MWh total). Later in 2017, the Massachusetts Department of Energy Resources established a 200 MWh energy storage target, following the completion of an energy storage cost-benefit study. In 2018, Massachusetts lawmakers increased this target to 1,000 MWh by the end of 2025.

New York became the fourth state to adopt an energy storage target, with 2017 legislation directing the Public Service Commission to develop a specific target. The Governor announced a goal of 1,500 MW of storage by 2025 in early 2018, and the Commission later issued an order establishing a target of 3,000 MW by 2030. New York’s storage target follows the recommendations of the state’s Energy Storage Roadmap, published in 2018.

New Jersey became the fifth state to adopt an energy storage target in 2018, setting its target at 2,000 MW by 2030, with a short-term target of 600 MW by 2021. New Jersey researchers published an energy storage analysis in 2019 including policy recommendations to help achieve these targets.

New in 2020: Nevada

Nevada became the latest state to adopt an energy storage target in March 2020, with the Public Utilities Commission of Nevada setting a target of 1,000 MW of storage capacity by 2030. In 2017, Nevada lawmakers enacted legislation directing the Commission to determine whether it is in the public interest to adopt energy storage procurement requirements and to study all measurable costs and benefits. The Commission released its final study in October 2018, which found that 700 MW to 1,000 MW of battery storage could be cost-effectively deployed by 2030.

On the Horizon: Virginia

Virginia may soon become the seventh state to adopt an energy storage target. In March 2020, Virginia legislators passed S.B. 851, which includes a storage target of 3,100 MW by 2035, as well as a target of 100% renewable energy by 2050. The Governor has until April 11, 2020 to act on the bill, and the legislature is set to reconvene on April 22nd to address the Governor’s amendments and vetoes to 2020 legislation. However, these dates may be pushed back due to COVID-19.

The DSIRE Insight team is also tracking proposed legislation in Connecticut, which would establish an energy storage procurement target of 1,000 MW by December 31, 2030, as well as multiple Massachusetts bills that would increase the state’s storage target. Legislation introduced in Pennsylvania would also direct the Public Utility Commission to determine an appropriate storage target.

Keep up with legislation and regulatory proceedings related to energy storage targets and other energy storage policies with the 50 States of Grid Modernization report or DSIRE Insight’s other grid modernization policy tracking subscriptions.

Highlights and Trends from a Busy Year in State Solar, Grid Modernization, and Electric Vehicle Policy

By: DSIRE Insight Team

The year 2019 was an exceptionally busy one for state energy policy, and the DSIRE Insight team at the North Carolina Clean Energy Technology Center is working to help you follow all of the action. The team recently released the Q4 2019 and 2019 Annual Review editions of the 50 States of Solar, Grid Modernization, and Electric Vehicles reports. These reports track all of the proposed state bills and regulatory proceedings in the policy areas of distributed solar, grid modernization, and electric vehicles, allowing readers to follow the details of state policy changes while also getting a sense of big picture policy trends across the United States.

Record Numbers of Actions

The three reports found that a record number of actions [1] were under consideration over the entirety of 2019. While the increase in number of actions was very modest for distributed solar (265 actions in 2019 vs. 264 in 2018), both grid modernization (612 actions in 2019 vs. 460 in 2018) and electric vehicles (601 actions in 2019 vs. 424 in 2018) saw huge jumps in activity this year. The number of policy actions in grid modernization and electric vehicles has more than doubled since 2017.

50 States of Solar

While the total number of policy actions for distributed solar did not change much in 2019, the types of actions under consideration shifted considerably. Fixed and solar-specific charge proposals declined in 2019; utilities proposed fewer and smaller fixed charge increases during 2019 than in previous years, and no utilities proposed mandatory residential demand charges. Some utilities did propose charges based on solar system capacity, but only one of these was approved. Replacing the activity on fixed charges and additional fees were actions on community solar program rules (many of them seeking to increase low-income participation), actions on incorporation of solar-plus-storage systems into interconnection rules and crediting systems, and actions on third-party ownership options. and

2019 Action on Distributed Solar Policy & Rate Design

Action on net metering and related compensation systems for distributed solar continued in 2019. Several states initiated the move to net metering successor tariffs, while others initiated value of solar studies to inform the development of successor tariffs in the future. Some states elected to retain traditional net metering after consideration of successor tariffs, and one state returned to traditional net metering from a successor tariff adopted in a previous year. In addition to these actions on crediting rules, 2019 also saw many actions refining net metering program rules to establish different customer classes, increasing system size limits, and adopting rules for solar-plus-storage systems.

50 States of Grid Modernization

Grid modernization refers to actions seeking to make the grid more resilient, responsive, and interactive, among other goals, and is used to describe a wide range of topics including both deployment of new technology and adoption of new policies, utility business practices, and rate designs.  All of these topics interrelate, and utility commissions have increasingly recognized and acted on this interrelation. State regulators denied several utility technology deployment proposals in 2019 because the utilities did not demonstrate how the technology deployments would be coupled with rate design changes in order to maximize customer benefits.

2019 Action on Grid Modernization, Energy Storage, & Utility Reform

Although proposals for new technology deployments and technology incentive programs increased in 2019, consideration of more fundamental policy changes also emerged as action categories. Several states considered or are now considering major utility business model reforms, such as introducing retail competition and joining regional wholesale markets. Many states are also considering new utility performance incentive mechanisms and advanced rate design pilots.

Energy storage remains a key part of the grid modernization policy environment. Proposals for energy storage deployment were again the most common single type of action, and many other policy actions, such as changes to integrated resource planning and distribution system planning, updates to interconnection standards, and additions to energy efficiency and demand-side management plans, are taking place in order to incorporate energy storage into the electric system.

50 States of Electric Vehicles

Electric vehicle policy activity has expanded dramatically since our tracking began in 2017. While the raw number of actions under consideration has grown, another notable indicator of activity is the geographic spread of electric vehicle policy action. Forty-nine states and DC considered electric vehicle policy, regulation, studies, and deployment in 2019, with only West Virginia not addressing these issues. This makes electric vehicles the most geographically widespread category out of the three reports, as both distributed solar and grid modernization saw action in 46 states and DC.

2019 Action on Electric Vehicles & Charging Infrastructure

States are grappling with several major policy questions as electric vehicle use and infrastructure development expands. One question is whether to regulate providers of electric vehicle charging stations as public utilities. In 2019, states that considered this question universally decided that the answer is “no.” All states that reached a conclusion on the public utility regulation question during 2019 decided not to regulate charging stations as public utilities, opening the market to third-party providers. However, states have taken different approaches on the related question of whether utilities are allowed to own charging infrastructure.

Another major policy question is whether (and how) to charge electric vehicle owners an additional fee in order to make up for the reduction in gasoline tax revenue associated with electric vehicle use. Ten states elected to increase electric vehicle registration fees during 2019, with the additional fees ranging from $50 to $225. Some states have considered more complicated methods for recouping road infrastructure costs from drivers, such as mileage or vehicle weight-based charges, but all of the new fees going into effect have been simple fixed annual fees, although often with differentiated fees for all-electric and hybrid vehicles.

States and utilities are also considering a variety of policies and programs to spur electric vehicle use. Some states are requiring utilities to develop comprehensive transportation electrification plans, providing incentives for electric vehicle or charging infrastructure purchases, or adopting procurement targets for state government vehicle fleets. Utilities are also taking independent steps to increase electrification, such as proposing bus electrification programs, subscription pricing pilots, and rate design innovations to promote DC fast charger development.

Looking Ahead

The year 2020 figures to be another busy one for policy actions in distributed solar, grid modernization, and electric vehicles. It will be interesting to see what existing trends continue and new trends emerge. For access to all of these reports as well as detailed biweekly policy tracking, please consider subscribing to DSIRE Insight.

[1] An action is defined as a relevant (1) bill that has been introduced or (2) a regulatory docket, investor-owned utility rate case, or rulemaking proceeding. For the 50 States of Solar, only proposed legislation that has passed at least one chamber is included.

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View the executive summaries or purchase full copies of the latest 50 States reports here. For more information, email us at afproudl@ncsu.edu.

Three Trends in State PURPA Implementation

By: DSIRE Insight Team

Our team recently announced the launch of two new research offerings through DSIRE Insight related to the Public Utility Regulatory Policies Act, or PURPA, and investor-owned utility avoided cost rates. PURPA has been a key policy for renewable energy development in the U.S., requiring utilities to purchase electricity from small renewable or cogeneration facilities (termed Qualifying Facilities, or QFs) at the utility’s avoided cost of electricity. While PURPA is a federal law, states have a large role in PURPA implementation; states are largely responsible for determining how avoided costs are calculated and setting PURPA contract terms. Differences in PURPA policies can have a large effect on patterns of renewable development across states.

States Considering Changes to PURPA Implementation, Jan. – Aug. 2019

Our team tracks changes to PURPA and changes to state implementation of PURPA under consideration across the country and identified three recent trends among states:

1) States Moving Toward Competitive Procurement Mechanisms

Several states are adopting competitive procurement methods for determining avoided costs under PURPA. Traditionally, avoided costs have been determined through a regulatory process using utility cost data. With a competitive procurement process, QFs instead submit bids to supply a certain amount of generation and/or capacity, with avoided costs being determined by the winning bids. Competitive procurement processes rely on there being a set amount of capacity to be supplied by QFs, which can conflict with PURPA’s requirement for utilities to purchase all capacity offered by QFs. However, states have a number of policy options available to induce QFs to participate in quantity-limited competitive procurements even with PURPA “must-buy” provisions still in effect.

One approach, taken by North Carolina through H.B. 589 of 2017, is to make contract terms more favorable for contracts entered into through competitive procurement. In North Carolina, traditional PURPA contracts using standard avoided costs are now only available for a maximum term of 5 years, while competitively-bid contracts can last 20 years. As longer terms are considered more favorable, developers have an incentive to participate in the competitive procurement process despite the generally lower purchase prices.

Another approach is to set avoided costs for all PURPA contracts using the results of a competitive procurement process. Michigan adopted this process for Consumers Energy in June 2019. With avoided costs being determined by the competitive process, developers have an incentive to bid, as they otherwise risk being undercut by other developers who do participate.

Colorado has used a competitive bid process to set PURPA avoided costs for decades. Unlike Michigan and North Carolina, Colorado has until recently not allowed QFs to enter into contracts with utilities without using the competitive bid process. Due to concerns that these rules conflict with PURPA requirements, Colorado regulators are considering rules that would establish alternative means for at least some QFs to enter into PURPA contracts, although these methods may still use market-based mechanisms.

2) States Considering Standard Offer System Size Limit Changes

PURPA requires the use of avoided costs only in standard contracts, which are available for QFs up to a certain system size limit (based on generation capacity). QFs above this size limit must negotiate purchase rates with utilities even in states without competitive procurement processes. States can set the system size limit for standard contracts anywhere from a minimum of 100 kW to a maximum of 80 MW. Some states are considering changes to their standard contract size limit.

Washington regulators recently adopted rules increasing the standard offer size limit from 2 MW to 5 MW. The Missouri Public Service Commission is considering draft rules that would increase the standard contract size limit to 1 MW from the current 100 kW. The rates for standard contracts above 100 kW would be different than those offered to smaller QFs.     

North Carolina, on the other hand, lowered the state’s standard offer size limit from 5 MW to 1 MW in 2017, with a further decrease to 100 kW to occur when a total of 100 MW of projects have been awarded the standard offer. A Michigan utility has proposed to lower the standard offer size limit to 150 kW from the current 2 MW, but state regulators have not yet approved this change; the Michigan Public Service Commission increased the standard offer size limit to 2 MW in 2017.

3) States Examining Treatment of QF + Storage Pairings

As energy storage has grown as part of the electricity system, questions about how PURPA applies to combinations of renewable generation and storage have emerged. The Federal Energy Regulatory Commission (FERC) was considering many of these issues in a case concerning Montana wind projects where the developer proposed to add battery storage while maintaining the projects’ status as QFs. The total capacity of the projects would exceed 80 MW, the maximum for QFs, if the storage capacity counted towards the total capacity, but not if only generation capacity was counted. The matter was withdrawn before any substantive ruling was made. In the meantime, it is not clear whether storage that is added to an existing QF has to register as a separate QF, or whether the storage capacity counts in determining the total capacity of the QF.

In the absence of FERC rulings, a few states have been considering how to treat energy storage under PURPA. North Carolina regulators are in the process of determining what will happen when QFs with existing PURPA contracts add energy storage, with utilities proposing that the addition of storage should require the QF to enter into a new contract using current avoided cost rates. South Carolina’s major energy legislation passed in 2019 contains provisions on PURPA requiring new avoided cost methodologies be developed that consider the costs and benefits of energy storage. The Oregon Public Utility Commission is also conducting a regulatory proceeding examining the prices to be paid to renewable QFs paired with storage.

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Learn more about PURPA changes under consideration or current investor-owned utility avoided cost rates through our new DSIRE Insight offerings. For more information or to request a sample, email us at afproudl@ncsu.edu.