State Clean Energy Policy Analysis: Renewable Energy Rebates

1. State Clean Energy Policy Analysis: Renewable Energy Rebates SCEPA Webinar Eric Lantz Markets and Policy Analyst February 12, 2009 NREL is a national laboratory of the U.S. Department of Energy Office of Energy Efficiency and Renewable Energy operated by the Alliance for Sustainable Energy, LLC

2. Background • Rebates provide a direct cash incentive for renewable energy technology • Drivers • Deployment • Cost reductions at scale • Demonstrate technology feasibility • Internalize environmental/social costs National Renewable Energy Laboratory Innovation for Our Energy Future

3. Rebate Program Prevalence D.C. U.S. Virgin Islands Both state & utility/other programs available State programs available Utility/other programs available Source: www.dsireusa.org December 2008

4. PV Rebate Activity in New Jersey Source: New Jersey CORE Rebate Program Data http://www.njcleanenergy.com/ National Renewable Energy Laboratory Innovation for Our Energy Future

5. 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. National Renewable Energy Laboratory Innovation for Our Energy Future

6. Small Wind Power Rebate Activity in California Source: Emerging Renewables Program Statistics http://www.energy.ca.gov National Renewable Energy Laboratory Innovation for Our Energy Future

7. 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). National Renewable Energy Laboratory Innovation for Our Energy Future

8. 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. National Renewable Energy Laboratory Innovation for Our Energy Future

9. Impacts on Renewable Energy Deployment Source: State Program Data National Renewable Energy Laboratory Innovation for Our Energy Future • 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

10. Impacts on Energy Security Source: US Energy Information administration, State Program Data, and estimated industry capacity factors National Renewable Energy Laboratory Innovation for Our Energy Future • 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

11. 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 National Renewable Energy Laboratory Innovation for Our Energy Future

12. Impacts on Environmental Policy Drivers Source: NREL estimates derived from state program data and eGRID 2007 1.0 • 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 National Renewable Energy Laboratory Innovation for Our Energy Future

13. Summary of Qualitative Impacts National Renewable Energy Laboratory Innovation for Our Energy Future

14. Summary of Qualitative Impacts National Renewable Energy Laboratory Innovation for Our Energy Future

15. 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 National Renewable Energy Laboratory Innovation for Our Energy Future

16. 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 National Renewable Energy Laboratory Innovation for Our Energy Future

17. 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. National Renewable Energy Laboratory Innovation for Our Energy Future

18. 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@nrel.gov National Renewable Energy Laboratory Innovation for Our Energy Future