Policies to Support Solar Power Deployment
The Solutions Center’s Solar Power: Policy Overview and Good Practices is part of the Solutions Center’s Clean Energy Policy Briefs series.
As global electricity demand increases, governments are designing and implementing policies to scale up and catalyze renewable energy, which now meets 22% of global electricity demand (REN21 2014). Solar technologies are a critical component of this expanded deployment, and they have experienced unprecedented growth in recent years. Solar prices have decreased significantly over the last decade (REN21 2014) and in 2013, new capacity installation of solar electricity from photovoltaics (PV) surpassed all other renewable energy technologies worldwide—excluding hydropower—with 39 gigawatts installed that year. Concentrating solar thermal power, although it still represents a fairly nascent market, also continues to expand as installed capacity increased by 36% in 2013 compared to 2012. In addition to meeting energy demand in an increasingly cost-effective manner, solar deployment can also support critical economic, social, and environmental development goals (Flavin and Hull Aeck, n.d.).
Despite significant growth of solar markets in many countries, barriers to solar deployment still exist. Common critical barriers (Brown and Muller 2011; REN21 2014; and DOE 2014) include:
- Lack of consistent policy signals, which can create uncertainty in markets
- Restrictive and time-consuming regulatory and permitting processes
- Technical or infrastructural grid integration challenges
- Concerns of utilities related to integration of distributed or variable power in the grid
- Higher cost of solar technologies (real or perceived), especially in relation to fossil fuel subsidies
- Lack of affordable financing
- Need for skilled labor to support solar technology deployment, including system design, installation, and ongoing operation and maintenance.
The following summarizes the good practices and considerations presented in Policies to Support Solar Power Deployment.
Policies and Good Practices
Renewable Electricity Standards and Solar Set-asides
- Sending incremental and consistent policy signals to encourage gradual increases in solar deployment
- Setting appropriate and declining alternative compliance payment (ACP) rates
- Designing solar-specific RECs to meet solar set-aside requirement
- Establishing net metering and interconnection standards to complement solar RES; scaling up solar deployment requires development of multi-faceted policy packages
- Considering project size, location, and land use.
- Linking solar FITs to high-level solar targets and a strong policy framework
- Predictably and gradually decreasing solar FIT prices
- Understanding the benefits and value of solar
- Considering linkages with other policies.
- Considering project size
- Minimizing policy costs through effective design
- Facilitating participation through providing transparent, timely, and consistent information
- Ensuring developer experience and technical capability.
- Ensuring inclusive eligibility
- Setting appropriate capacity limits
- Designing appropriate billing approaches
- Considering aggregate net metering approaches.
- Designing a standardized interconnection policy
- Ensuring comprehensive policy coverage
- Setting appropriate capacity limits
- Reducing administrative and application costs.
Solar Investment and Production Tax Credits
- Establishing an appropriate incentive rate and controlling costs
- Determining the tax incentive period
- Considering other incentives for self-generation and smaller-scale systems.
Additional Approaches to Support Private Investment
- Demonstrating projects
- Reducing risk
- Reducing soft costs
- Training lending institutions.
Solar Power Policies in Action
The following country examples provide real-world experiences and lessons learned from developing and implementing policies for enabling solar power.
- Chile: Increasing Targets Over Time to Support a Long-term Vision for Solar Deployment
- Malaysia: Assessing Policy Trade-offs and Options to Inform FIT Design
- Morocco: Reducing Risk and Leveraging Expertise to Catalyze Deployment of Concentrating Solar Power
- Nepal: Considering Links Between FITs and Reverse Auctions
- United Kingdom: FIT Degression to Support Stable, Yet Iterative Policy Evolution and Solar Market Growth
- United States: ITC and Loan Guarantees as a Key Driver of Solar Investment