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The Committee provides legislative input
toward energy resource development,
including solar energy development. They also
provide oversight for federal energy

Solar Energy Growth

in the United States

conservation programs, including the

Department of Energys National
Laboratories, which researches alternative
energy solutions to mitigate the harmful

June 7, 2015
Lucas DuSablon
William Mattson

effects of global climate change.!!

Due to their position as a Senate committee,
the Committee has the ability to discuss, vet,
and propose legislation to aid the
development of solar energy in the US. The
Committees sphere of influence includes
President Obama, who has supported and
implemented several bills to aid alternative
energy development since his presidency
began in 2008.

To: Maria Cantwell, US Senate Committee on Energy and Natural Resources!
From: Lucas DuSablon and William Mattson!
Date: June 7, 2015!
Subject: Solar Power Growth in the US!
Executive Summary !
The US is currently faced with an energy crisis. Our country must increase its utilization of
domestically produced, sustainable, and renewable forms of energy in order to mitigate climate
change and reduce reliance on foreign energy. Solar energy is one of many energy sources capable of
assisting in this effort. Although the cost of implementing solar energy has decreased in recent years,
it still remains high relative to the Global Module Price Index (GMPI) and other western economic
powers. Accordingly, this report addresses steps that must be taken to overcome or reduce the high
cost of solar power development in order to catalyze the industrys growth and increase domestic
production of renewable energy.!
Solar energy has been researched and utilized for decades; however the majority of US solar
infrastructure has been built in the 21st century, particularly since the implementation of the Solar
Investment Tax Credit (SITC) in 2006. Solar systems use components called modules to convert
sunlight into energy. The most common module currently in use is the photovoltaic (PV) cell. The
prominence of PV cells has created a competitive international market for PV solar modules. A
recent set of tariffs imposed by the International Trade Commission on the importation of Chinese
and Taiwanese PV cells has caused a divide in the American solar manufacturing industry. Many
domestic manufacturers support the tariffs, as they will increase domestic demand, whereas others in
the industry oppose them for stunting the market by pricing out potential consumers. These
international disputes, combined with the expiration of the SITC on December 31, 2016, have left
the US solar industry with many lingering issues.!
This report addresses the aforementioned issue by evaluating policy options that will meet
goals to both reduce the high cost of US solar energy development, and increase US solar energy
generating capacity. Each policy option is assessed in terms of its ability to achieve the following
criteria: cost reduction effectiveness, solar generating capacity growth, political feasibility and
economic efficiency. The report proposes five distinct policy options: 1) to maintain the status quo,
2) to extend the SITC, 3) to subsidize solar development by state, 4) to reduce Chinese and
Taiwanese import tariffs, and 5) to federally regulate net metering and interconnectivity. In
evaluating these options, trade offs between cost reduction and undercutting American solar
manufacturers, and between catalyzing solar installation growth rate and improving our energy
infrastructure are critical considerations.
The final recommendation of this report is to subsidize solar development by state. Based
on this options performance against each evaluative criteria, as well as its comparison to other
options in the critical trade offs mentioned in the above paragraph, public subsidization will most
effectively decrease the cost of solar installations, increase solar generating capacity, ensure
continued robustness of the American solar market, and naturally induce state-level policies on net
metering and interconnectivity that are designed to attract and facilitate solar development.

To: Maria Cantwell, US Senate Committee on Energy and Natural Resources!
From: Lucas DuSablon and William Mattson!
Date: June 7, 2015!
Subject: Solar Power Growth in the US!
Policy Problem !
The US currently faces an energy crisis that must be addressed in order to meet both the
current and future demand for energy. The vast majority of energy produced in the US comes from
non-renewable sources, such as coal and fossil fuels.1 As reserves of these resources are depleted, it
is likely that they will become prohibitively expensive or run out entirely, leaving our country with a
glaring need for new, renewable forms of energy production.2!
The US must also increase its utilization of domestically produced, sustainable, alternative
forms of energy in order to mitigate climate change and reduce reliance on foreign energy. Despite
the fact that 91% of Americans support solar energy, current production capacity is only a fraction
of annual megawatt hours consumed.3 4 Although the technology cost of solar modules has
decreased in recent years, it still remains high relative to the Global Module Price Index (GMPI)
(Figure 1), as well as other Western countries celebrated for their commitment to solar development.5
Currently, there are not adequate incentives in place to overcome this cost and catalyze expansion of
solar generating capacity in the US.!
Given the support and need for solar energy, as well as the US limited production capacity,
steps must be taken to overcome or reduce the high cost of solar power development in order to
catalyze the industrys growth and increase domestic production of renewable energy.!
US Energy Information Administration, 2015, US Electricity Generation by Source
Ivan Kolesnikov, 2015, Crude Oil Price Forecast: Long Term 2012 to 2025
3 Gallup Poll, March 2015
4 Solar Energy Industries Association, 2015, Solar Market Insight Report
5 US DoE Sunshot, September 2014, Photovoltaic System Pricing Trends


Figure 1: German and US solar panel pricing per watt installed, compared to the Global
Module Price Index (GMPI). 6 !

Political Context !
Solar energy has been a widely discussed topic with strong political implications for decades.
President Jimmy Carter, intending to set a precedent for clean, renewable energy while emphasizing
the need to reduce dependence on foreign oil, first installed solar panels on the White House in
1979. In 1981, President Reagan removed the panels, arguing that the free market ought to
determine whats economically relevant for the country. Solar panels did not return to the White
House until President Obama re-installed them in 2014.!
Among those who insist that solar energy is a worthwhile investment, there are further
divides on how to facilitate the development of solar energy capacity. Economic incentives for the
installation of solar panels, such as subsidies and tax credits, have come and gone over the past
several years as policymakers experiment with different strategies to encourage solar energy
development. The economic benefits from solar energy development, both realized and
hypothetical, are substantial. In 2009, the Union of Concerned Scientists found that the economic

Kevin Bullis, Technology Review, December 2012, Why Solar Installations Cost More in the US than in Germany


benefits of a 25% expansion to solar energy production would create three times as many jobs as an
equivalent expansion of fossil fuel.7 Despite this, many policymakers still oppose solar energy due to
the high costs of production and installation, and drawn-out financial returns on investment.8!
International competition in the production of solar components has driven down costs, but
is complicated by foreign trade policy. China currently produces over 70% of all solar panel
components installed worldwide, with aims to increase to 80% by 2017.9 The solar modules
produced internationally are considerably cheaper than American alternatives. Therefore, companies
trying to expedite their return on investment have flocked toward internationally produced solar
modules.10 In an attempt to restrict the import of Chinese manufactured components to the US, the
International Trade Commission (ITC) imposed tariffs on the import of Chinese photovoltaic cells
and modules in 2012, and increased them to as high as 78% in 2015. The ITC ruled that Chinese
suppliers had received illegal subsidies and dumped their products on the US market below cost.11 !
Economic theory suggests these tariffs could be harmful to US producers. As a result,
groups such as the Solar Energy Industries Association (SEIA) have been extremely critical of such
policies. However, a coalition of individual firms led by SolarWorld USA, which benefits
substantially from these protectionist policies in the short-run, has applied substantial pressure on
the ITC to enact sanctions on Chinese and Taiwanese PV imports.12
Expansion of Solar Energy Installations in the US
As recently as 2000, the US was installing less than 5 megawatts (MW) of solar production
per year (Figure 2). With the implementation of the SITC in 2006, annual solar installations in the US
doubled from the previous yearincreasing from 79 MW in 2005 to 160 MW in 2007.13
Union of Concerned Scientists, March 2009, Clean Energy Green Jobs
Renewable Energy Corporation, Calculate Your Solar Panel ROI
9 Michael Platzer, Congressional Research Service, January 2015, US Solar Photovoltaic Manufacturing
10 Royal Chemistry Society, September 2013, Cheaper Chinese solar panels are not due to low-cost labour
11 Daniel Cusick, Environment and Energy Publishing, January 2015, Stiff New Sanctions on China, Taiwan Result from Solar Dumping
12 ibid
13 ibid


Figure 2: Annual US Solar PV Installations, 2000-2014. 14 !

In 2008, Congress and the Senate passed the Emergency Economic Stabilization Act, which
included an eight-year extension of the solar ITC, lending additional stability to the growth of the
solar industry and resulting in a massive increase in annual solar installations. In spite of recent
growth, the US current capacity for annual solar energy production is limited, representing just 3%
of annual American energy consumption (Appendix A).15 16!
While prices of balance-of-system components (everything besides the PV cells in a solar
system) declined by 10% on average in 2014, complete PV module prices actually increased by
approximately 4%, inhibiting production and leaving the market inaccessible for the majority of
consumers.17 In spite of the economic barriers posed by the cost of solar installation, residential and
utility-solar installations have soared in the US over the last three years. However, new commercial
solar installations have actually decreased every year since 2012.18 The utility-solar sector is currently
the largest solar sector in the US in terms of annual capacity additions--experts believe this trend is
Solar Energy Industries Association, 2015, Solar Market Insight Report
16 US DoE, 2013
17 Solar Energy Industries Association, 2015, Solar Market Insight Report
18 ibid


assured to continue through 2016, but its fate after the 2017 expiration of the ITC remains in doubt.
The Obama Administration has been generally supportive of the development of solar energy,
however a new president will be taking office shortly following the expiration of the solar ITC,
making the long-term agenda of organizations susceptible to political appropriation, such as the
Department of Energy and the National Renewable Energy Laboratory, difficult to predict. !
Policy Goals !
There are two primary goals that the options in this report intend to achieve:!
1. Reduce or overcome the high cost of solar energy development in the United States in
order to facilitate growth and expansion; and
2. Increase the amount of solar energy generating capacity in the United States, which,
in turn, decreases the United States dependence on foreign and non-renewable energy
These goals align with those of the Senate Committee on Energy and Natural Resources.
Reducing or overcoming the costs of solar energy development helps the committee achieve one of
its primary goals: domestic energy development. This will increase the amount of solar energy
generated in the US, which will facilitate the long-term vitality of a domestic solar energy market.!
Policy Options !
The following policy options are designed to both reduce the cost of domestic solar energy
development and increase the amount of solar energy generating capacity:!
1. Maintain the status quo. The SITC is set to expire in 2016 and there are currently no
alternative federal-level financial incentives in place for the production of solar energy
beyond next year. In the absence of economic incentives, growth of new solar installations is
likely to wane.
2. Renew the SITC beyond the 2016 expiration date. The current SITC provides a 30% tax
credit on both residential and commercial solar installations, which has yielded an annual


growth rate of 76% since 2006.19 The SITC is a vital aspect of solar growth in the US, and its
renewal is essential to the continuation of current growth trends. We recommend renewing
the SITC for at least an additional eight years, its current duration, through 2024.
3. Subsidize solar development by state by offering a grant worth 15% of annual solar
investment to states that install 50% of the previous years solar generating capacity. This will
incentivize states to adopt policies that attract and facilitate solar development. Additionally,
the flexibility of this option allows states to pursue solar growth strategies tailored to their
geographic and economic contexts.
4. Reduce Chinese and Taiwanese import tariffs. This option lowers the cost of PV
modules by reducing the tariffs on Chinese and Taiwanese imports to a level that brings the
components to the US market at GMPI cost. By minimizing the tax burden on imports, the
cost for installation of solar developments is reduced, which will increase domestic
generating capacity.
5. Federally regulate net metering and interconnectivity. Net metering allows parties that
generate solar energy in excess of what they consume to feed that electricity back into the
grid. Regulations on net metering vary greatly by state; some have no limit on the amount of
energy a consumer can provide, while others have caps as low as .02MW h/yr. Improving
the support for net metering establishes a financial incentive, particularly for commercial and
residential installations, to expand solar generating capacity, while mandating
interconnectivity facilitates new installations.20 Additional analysis of net metering regulations
by state would be necessary in order to discern the optimal policy package and
implementation strategy for this option.


SEIA, January 2015, Solar Investment Tax Credit Fact Sheet

SEIA, January 2015, Net Metering Fact Sheet


Evaluation Criteria !
These criteria serve as the primary means to evaluate each policy option as it relates to the
stated goals, and are vital in choosing the recommended policy option. Each policy option will be
evaluated based on the following criteria:!
Effectiveness in reducing cost of solar energy development: Despite cost reductions of 6-8%
since 199821, solar energy development is still significantly more costly in the US than globally. Solar
system prices in the US remain four times as high as the GMPI (Figure 1). Effectiveness in reducing
costs will be measured by the difference between domestic pricing and the GMPI. While it is
unrealistic to expect the US to lower domestic price to GMPI levels, substantial reduction is
possible. Germany, which has been lauded for its commitment to the development of solar energy,
has achieved prices that are only $2.07 higher than the GMPI per watt.22!
Effectiveness in increasing solar energy capacity in the US: Cost-effective solar energy prices
are irrelevant unless they result in increased capacity to generate, store, and utilize energy generated.
Each policy option will be measured by percentage point increases in domestic solar energy
generating capacity as compared to annual consumption.!
Political feasibility: Each policy option must take into account the current political context
surrounding alternative energy development. President Obama strongly supports alternative energy
development through his All-of-the-Above Energy Strategy.23 Congress, however, has been reluctant
to support alternative energy policies, particularly those without a strong economic case.!
Economic efficiency: Each policy option will be assessed on its ability to maximize overall benefits
to all parties involved in solar energy development. !

US DoE Sunshot, September 2014, Photovoltaic System Pricing Trends
Kevin Bullis, Technology Review, December 2012, Why Solar Installations Cost More in the US than in Germany
23 Whitehouse.gov, Securing American Energy


Analysis & Discussion of Tradeoffs !

Assessing each of the aforementioned policy options in light of these criteria is integral to
the thorough evaluation of each option. Please refer to Appendix B for a Policy Option Matrix that
displays the following information in matrix form.!
Maintain the status quo. !
Effectiveness in reducing costs: the status quo will result in cost reductions via the SITC until
December 31, 2016. Beginning in 2017, costs will increase without the SITC.
Effectiveness in increasing capacity: upon the SITCs expiration, growth will stagnate.
Political feasibility: this option is politically feasible, as it requires no additional funding, although
there may be support for renewing the SITC.
Economic efficiency: although the status quo will result in no public cost beginning in 2017, it greatly
reduces the benefits to all actors in the solar energy market.
Tradeoffs with other options: the status quo performs well in terms of political feasibility; however it
performs quite poorly against all other criteria. Renewing the SITC would result in continued cost
reduction, increased solar capacity and greater economic benefits. The status quo does not
address state-specific needs, international tariffs, or net metering.
Extend the SITC beyond the 2016 expiration date. !
Effectiveness in reducing costs: the SITC has helped lower costs over the past seven years; however it
is unlikely to lower costs any faster than its current rate. It is possible, however, that as the
industry continues to grow with the help of the SITC, costs will eventually fall at a faster rate as
the market becomes more robust.
Effectiveness in increasing capacity: assuming historical 76% growth rate, total generating capacity has
the potential to reach over 700% of domestic consumption by 2024. Even at 50% of the


historical growth rate, total generating capacity would reach 100% of annual consumption by this
options expiration (see Appendix C for detailed growth projections).
Political feasibility: projecting the feasibility of renewing the SITC is difficult due to uncertainties
surrounding the 2016 Presidential Election. The future congressional makeup also has a
significant impact on the political feasibility of this option.
Economic efficiency: this option is efficient for all parties involved, as it represents the current
situation as of 2015. Extending the SITC would not require any additional financial resources
other than whats currently in place. The SITC has proven to be an effective way of incentivizing
both solar energy suppliers and consumers.
Tradeoffs with other options: the SITC represents an option quite similar to the status quo, rendering
it much easier to facilitate than other options. It has also proven to be successful in reducing the
cost of solar energy. Despite these benefits, political uncertainty in 2016 and beyond poses a large
barrier for this policy option.
Subsidize solar development by state.!
Effectiveness in reducing costs: there is no direct cost reduction of solar components as a result of this
subsidy program. However, installation costs will be decrease as states adopt policies to attract
and facilitate solar development. Component costs will be reduced over time as states increase
their solar generating capacity in order to receive grant funding.
Effectiveness in increasing capacity: states are likely to participate in the program in order to receive
grant funding. The grant is contingent upon a relatively high annual growth rate in solar energy
capacity for each state. States are also likely to mandate interconnectivity to the electricity grid,
which would ensure our energy infrastructure will be able to accommodate the projected capacity


Political feasibility: this option is likely to be cheaper than the SITC, which ought to garner
significant support from Congress. Giving each state the choice to participate in the program,
rather than mandating their involvement, also improves political feasibility.
Economic efficiency: this option is efficient for each US state as it provides them flexibility to address
solar energy development based on their unique geographic, economic and political contexts.
Also, grant funding may go toward public services within each state, which further improves the
economic viability of this option for American taxpayers.
Tradeoffs with other options: subsidizing solar development by state provides a financial incentive in
lieu of the SITC. The option does not directly improve net metering opportunities and
interconnectivity to the electricity grid. However, such improvements are likely to follow as states
are incentivized to facilitate solar development and may use grant funds to facilitate
interconnectivity and establish net metering regulations to attract non-utility solar developments.
Reduce Chinese and Taiwanese import tariffs. !
Effectiveness in reducing costs: reducing tariffs immediately gives consumers access to low cost PV
components. American producers of PV components will be forced to lower their prices in order
to compete with the low-cost Chinese and Taiwanese components that will now be available on
the US market.
Effectiveness in increasing capacity: decreased component costs will lower barriers to development and
catalyze capacity growthat least in the short term. However, with no stipulations addressing
interconnectivity or net metering, this option does not address the updates to the American
energy infrastructure that will be necessary in order to accommodate a substantially enlarged solar
generating capacity.
Political feasibility: the US has an exceedingly complex trade relationship with China, meaning a
possible reduction to this tariff will be impacted by a multitude of other factors. Additionally, the


International Trade Commission is an independent body under heavy pressure from US solar
manufacturers, who will be severely undercut if these tariffs are reduced.
Economic efficiency: this option re-distributes economic benefits to American consumers of solar
components. The tariffs allows domestic suppliers to produce goods without extreme cost
competition, reduction is likely to decrease the economic benefits of these American
Tradeoffs with other options: eliminating the tariff and allowing for an open global market has similar
benefits to subsidizing the industry. Thus, the benefits of eliminating the tariff are similar in
magnitude to several other options. This option does not address concerns about establishing
interconnectivity, nor does it incentivize domestic and commercial solar growth via net metering.
Federally regulate net metering and interconnectivity. !
Effectiveness in reducing costs: no direct cost reduction would result from net metering; however it
provides a financial incentive for those who currently produce solar energy. Additionally,
reducing the regulatory burden on private solar developers would eventually lower the cost of
solar installations.
Effectiveness in increasing capacity: net metering facilitates solar capacity growth to an extent, as the
opportunity to sell excess energy generated provides an incentive to enter the solar market as a
producer. Mandating interconnectivity to the electricity grid simplifies the development process
of new solar installations and ensures all of the energy they generate is incorporated into the
utilitys service area.
Political feasibility: even if net metering and interconnectivity legislation eventually made it through
the House of Representatives and the Senate, a federal regulation that requires participation is
likely to be met with resistance from states that do not generate significant amounts of solar


energy, similar to the backlash against the US Environmental Protection Agencys Clean Power
Economic efficiency: this option is extremely efficient for those within the solar energy industry.
Individual and commercial producers of solar energy gain a financial benefit by selling excess
energy back to utility companies. These regulations would also reduce the installation cost of new
solar developments for developers.
Tradeoffs with other options: establishing standardized net metering regulations is a large benefit to
those already generating solar energy, and it may inspire future residential and commercial solar
energy development. Although this option would accelerate financial return on investment for
non-utility solar installations, it does not address the high technology cost of solar components
whose recent reduction is likely to stagnate without an extension of the SITC. This option also
scores the lowest on political feasibility.
Recommendation !
Based on our analysis above and an assessment of the tradeoffs associated with each policy
option, we strongly recommend subsidizing solar energy development by state. This policy
option provides significant capacity growth in each state, regardless of their previous solar
generating capacity. Setting the growth rate target relative to generating capacity allows states to take
a targeted approach based on their unique circumstances.
Although the SITC substantially decreased the cost of solar installations, this option
accommodates for the cost increase resulting from the expiration of the SITC by incentivizing states
to implement policies that attract solar development. Reducing the regulatory burden on solar
developers establishing interconnectivity to the electricity grid will decrease the cost of solar
installations. Additionally, with a matching rate that is one half of what the SITC offers, this option
is likely to be significantly less expensive to American taxpayers.!

Environmental Protection Agency, June 2014, Clean Power Plan Proposed Rule


This option is also likely to induce future net metering and interconnectivity regulations as
states attempt to attract solar development to achieve a 50% growth rate. As states gain grant
revenue from the installation of solar energy, residential and commercial solar producers are likely to
advocate more strongly for net meteringarguing that those monies should be re-distributed to
producers of solar energy.


Appendix A: Calculating the Generating Capacity of a Solar Installation!

Annual solar photovoltaic (PV) installations are measured in megawatts (MW). Because there are
8,700 hours in a year, each MW installed is assumed to produce 8,700-megawatt hours per year (MW
h/yr). With approximately 18,000 MW of solar installations, the US is capable of generating
approximately 156,000,000 MWh/yr. According to the US Department of Energy, Americans
consume approximately 4,686,400,000 MWh annually.!

Appendix B: Policy Option Matrix

Policy Options

Evaluation Criteria

Status Quo

Extend the SITC

through 2024

Subsidize Solar by
Good; no direct cost
reduction from
subsidy, state
facilitation of
development will
lower installation
costs over time
Excellent; states
likely to mandate
interconnectivity in
near future based on
incentives, grant
contingent upon high
growth rate

in Reducing

Poor; without SITC,

costs of installations
likely to increase

Very Good; the

SITC has proven to
significantly reduce
the cost of solar
energy components

in Increasing

Poor; lack of financial

incentive beyond
2016 will stagnate
industry growth and

Very Good; trends

indicate SITC
significantly increases
capacity growth,
historic growth rate
high (see Figure 2)


Good; no additional
policies to implement,
there may still be
support for SITCs

Good; SITC is
proven solution,
although it may not
garner adequate
support in 2016
based on upcoming

Good; likely cheaper

than SITC, gives
states the choice to


Poor; no public cost,

but reduces benefits
to all parties involved
in the solar energy

Fair; SITC has high

burden to taxpayers,
but greatly increases
economic surplus in
domestic solar

Very Good; subsidy

includes some cost to
taxpayers, grant
money can fund state
public services,
increased benefits in
most markets

Reduce Import

Federally Regulate
Net Metering

Excellent; directly
lowers cost to
consumers in
domestic market,
cheaper international
modules available

Good; no direct
reduction in cost,
provides financial
return on investment
over time

Good; cheaper
modules lower costbarrier of

Fair; facilitates
capacity increase by
encouraging selling
excess solar energy,
limited residential and
commercial growth

Poor; International
Trade Commission
independent entity,
Chinese foreign
policy complex

Poor; strong
resistance likely from
utility companies and
individual states
currently without

Fair; cheaper for

consumers, but
directly undercuts
domestic producers

Very Good; adds an

additional benefit for
individual producers,
simplifies installation
for developers

Appendix C: Projected Solar Growth with SITC Extension

Projected Solar Growth w/ SITC Extension through 2024


50% Historic growth rate (38%)

100% Historic growth rate (76%)
% Annual US
% Annual US
Installed (MW)
consumption Installed (MW)