Capacity-Based Incentive Model

The capacity-based scenario continues up-front rebates, as offered under the ERP, SGIP, and Japanese programs. We propose to continue this model only until the CSI transitions to performance-based incentives. This scenario incorporates the proposed goal of installing solar projects on 50% of the new home market by 2016. It is the high-cost scenario for commercially-owned projects, because federal tax benefits are not fully optimized.

For illustrative purposes, we calculate residential rebates at $2.80 per Watt. The rebate schedule would decline by $0.28 per year, with installed system prices projected to decline an average of 5 percent per year. Commercial projects would receive incentives between $2.20-$2.80 per watt, and decline $0.20-$0.28 per year. The lower rebate for larger projects still reflects a shorter pay back for commercial customers due to the additional tax benefits and economies of scale, which result in lower installed system costs. We estimate that a capacity-based incentive program, if continued through 2016, would require a $1.8 billion budget over the life of the program.

To achieve the goal to install solar systems on 50% of new homes built by 2016 requires an exponential growth rate of about 55% per year. As shown in Table 4 below, this requires solar installations on 400,000 homes (assuming an average of 2.5 kW per system), for a total of 1,000 MW. We assume that 300,000 existing homes could be retrofitted with systems averaging 3 kW, totaling 900 MW. This reflects a growth rate of about 40% per year. The remaining 1,100 MW would be installed on about 11,000 businesses, averaging 100 kW per system.

Table 4: Estimated Solar Installations Required To Achieve 3,000 MW Utilizing Capacity-Based Incentives

	Number of Installations	Avg. System Size	Potential MW
New homes	400,000	2.5 KW	1,000
Existing homes	300,000	3 KW	900
All Commercial	11,000	100 KW	1,100
Total			3,000 MW