The Use of Capital- and Performance-Based Buy-Down Programs for PV in California, Pennsylvania, and Massachusetts

As one of the first states to implement a system-benefits charge funded buy-down program for photovoltaics (PV) and other customer-sited renewable technologies, California has set the standard for other states to follow. Eleven states now offer capital-based buy-down programs in one form or another. This case study focuses on only three of these programs: California, which has had the most success in stimulating the installation of large amounts of PV capacity, and Pennsylvania and Massachusetts, whose programs are just getting underway yet deserve mention because of their innovative incorporation of performance-based incentives into a standard buy-down program. Innovative Features

• The California Energy Commission's (CEC) buy-down program, which provides a capital-based incentive of $4.50/W for up to 50% of installed system costs, has met with significant response in recent years. Concerns have been raised, however, that the CEC's program may not provide adequate incentives for system performance, that it has not driven significant PV cost reductions among small systems, that its buy-down payment levels are high, and that it might not lead to sustainable markets for PV once the subsidy is removed.
• Pennsylvania and Massachusetts have designed programs that seek to overcome one of these shortfalls by awarding a portion of the incentive based on system performance. Pennsylvania's program awards $3/W at installation, and then pays both the system owner and installer a smaller performance-based incentive at the end of one year. Massachusetts awards 70% of a $5/W incentive up front, and pays out the remaining 30% based on system performance over three years.
• Massachusetts is also targeting geographically clustered installations in an attempt to minimize programmatic and system costs.

Results

• Over $80 million in support of 21 MW of PV has been reserved under the CEC's program, with 9 MW already installed. 1.1 MW of small wind has also been reserved, with 500 kW installed so far. Furthermore, another 16.5 MW of PV capacity has been reserved under the CPUC's self-generation program ($4.50/W for PV systems between 30kW and 1 MW). This aggregate reserved volume of 37.5 MW of PV is impressive considering the relatively small size of the PV market domestically and abroad, and shows that buy-down programs can significantly increase demand for PV in both the residential and non-residential sectors.
• Modified buy-down programs in Pennsylvania and Massachusetts demonstrate how funds can support PV using performance-based incentives, though it is too early to judge the success of these programs.