State Clean Energy Policy Analysis: Renewable Energy Rebates

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State Clean Energy Policy Analysis Renewable
Energy Rebates
SCEPA Webinar Eric Lantz Markets and Policy
Analyst February 12, 2009

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Background

• Rebates provide a direct cash incentive for
  renewable energy technology
• Drivers
• Deployment
• Cost reductions at scale
• Demonstrate technology feasibility
• Internalize environmental/social costs

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Rebate Program Prevalence
Source www.dsireusa.org December 2008
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PV Rebate Activity in New Jersey
Source New Jersey CORE Rebate Program Data
http//www.njcleanenergy.com/
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Solar Water Heating Rebate Activity in Hawaii
Source Richmond, R. (2007). Solar Water Heating
Program Overview. U.S. DOE Solar Hot Water Market
Expansion Workshop.
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Small Wind Power Rebate Activity in California
Source Emerging Renewables Program Statistics
http//www.energy.ca.gov
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General Case Study Conclusions

• Program success has been variable however, when
  properly designed, market growth can be dramatic
• Programs that target technologies that are not be
  ready for the marketplace are not likely to
  facilitate market expansion or result in high
  levels of consumer uptake
• In cases where well-designed incentives are
  ineffective, resources may be better targeted at
  non-cost related market barriers (i.e.
  interconnection standards, net-metering, or
  public awareness).

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General Case Study Conclusions

• At the current level of observed cost reductions,
  it is unlikely that rebate programs alone will
  achieve widespread renewable energy deployment
• Complementary policies are likely to be necessary
  to ensure the near-term competitiveness of
  renewable energy technologies.

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Impacts on Renewable Energy Deployment

• Qualitative Overview
• High impact on market growth, learning by doing,
  meeting RPS set asides, and stimulating early
  adoption
• Moderate impact on cost reductions and reducing
  technical barriers
• Limited impact on reducing fossil fuel
  consumption and driving technological innovation
• Quantitative Impacts

Source State Program Data
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Impacts on Energy Security

• Qualitative Overview
• High impact on distributed generation resources
• Moderate impact on peak demand, diversifying
  energy technologies, and building grid resiliency
• Limited impact on total energy production and
  reducing the transfer of wealth outside of US
• Quantitative Impacts

Source US Energy Information administration,
State Program Data, and estimated industry
capacity factors
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Impacts on Economic Development

• Qualitative Overview
• High impacts on the potential for developing
  community owned assets
• Moderate impacts on attracting new investment
• Limited impacts on job creation, electricity
  price stability, and state economic growth
• Quantitative Impacts

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Impacts on Environmental Policy Drivers

• Qualitative Overview
• Generally limited across various potential
  environmental policy goals
• Impacts are limited due to the technology scale
  and market share that rebate program technologies
  typically command
• Quantitative Impacts

Source NREL estimates derived from state program
data and eGRID 2007 1.0
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Rebate Program Challenges

• Fiscal
• Establishing the proper rebate amount
• Maintaining appropriate market growth
• Dealing with cost reductions or the lack thereof
• Freeridership
• Program Funds
• Marginal Program Value
• System performance
• Administrative costs
• Non-cost barriers
• Policy duration/unexpected results

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Key Design Elements

• Appreciate market-initiating attributes and scale
  limitations of the rebate programs
• Use complementary policies to address non-cost
  barriers
• Target the right technology at the right time
• Consider existing state, local, or federal
  incentives
• Target technologies with foreseeable concrete
  cost reductions at scale and develop an approach
  to address unexpected changes in cost
• Establish the proper rebate amount based on
  existing market trends, the cost of alternatives,
  and the desired market growth/size
• Include a clear and specific mechanism for
  reevaluation and adjustment of rebate values
  based on changes in market dynamics
• Ensure adequate funding

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Conclusions

• Rebates function well when applied to
  market-ready technologies and when programs have
  explicit goals
• Rebates may function poorly when context-specific
  market factors are not considered or when the
  precise rebate amount is not tailored to existing
  market and policy conditions.
• Rebate programs may be most effective when
  designed and implemented as one component in a
  suite of policies.

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Thank you Questions?
Eric Lantz Markets and Policy Analyst Strategic
Energy Analysis Center National Renewable Energy
Laboratory www.nrel.gov/analysis 1617 Cole
Blvd. Golden, CO 80401-3393 P (303)
384-7418 email Eric.Lantz_at_nrel.gov