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Concept
Financial incentives for photovoltaics
Summary
Financial incentives for photovoltaics are incentives offered to electricity consumers to install and operate solar-electric generating systems, also known as photovoltaics (PV).
Governments offered 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 were 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 of solar electricity meets the average price of grid electricity. As of 2022, in many jurisdictions, incentives have been significantly replaced by auctions as the cost of elelectricity produced by PV has indeed fallen below the price of electricity bought from the grid.
Incentive mechanisms are used (often in combination), such as:
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.
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