Are federal tax incentives heavily biased toward centralized, non-residential solar installations? Is the U.S. government’s focus much too narrow and discriminatory? That is the argument put forth by John Farrell in a recent article for Renewable Energy World. And he is largely right, for now.

Farrell’s argument is this: federal tax credits unjustly and unnecessarily favor concentrated solar power plants. The widely accepted reason for this is low-price, cost-competitive solar power. However, Farrell posits that the cost of building a concentrated (solar thermal) power plant is much the same as a solar photovoltaic installation. The difference in price is due solely to disproportionate federal tax credits. And I would tend to agree with him. Take, for example, the existing cap on residential solar installations. There is no cap on the amount of tax credits available for a commercial installation, while there is a $2,000 cap for residential installations. To use Farrell’s example, a business owner and a homeowner both install a $24,000 solar electric system. The business gets a tax credit of $7,200 while the homeowner peaks at two thousand dollars. The numbers are obviously skewed in one direction.

Why the Imbalance?

The reasons for such an imbalance are not hard to infer. Assuming good intentions, it is an attempt to encourage businesses, certainly much larger consumers of power than individual families, to turn to renewable solar energy and thus make a faster impact on emissions and energy costs. Or, on a more malevolent note, to discourage energy independence among U.S. homeowners and keep control of the electrical grid much where it is now–with a handful of utility companies.

But as Farrell points out, what does it matter where solar electricity is derived…be it on a million rooftops or in the deserts of the Southwest? The rooftop model would certainly cut down on transmission costs and losses incurred from transmitting over long distances and families with solar panels on their roofs tend to monitor their energy usage closely. But residential installations aren’t likely to go up fast enough to make a significant difference without tax incentives taking a serious swing in the other direction.

Federal Government Needs to Make a Long-Term Commitment

Soon, Farrell and other proponents of equal opportunity for residential systems may get some good news. The U.S. Senate and House of Representatives have both passed what has now become known as the Foreclosure Prevention Act, which contains an amendment that would extend clean energy tax credits and repeal that $2,000 cap on residential solar installations. Yet even this amendment, which is identical in language to the Clean Energy Tax Stimulus Act, favors the centralized grid. It would extend the residential tax credits for one year while extending the commercial credits for eight years. I agree with Farrell, that the Federal government needs to make a long-term commitment here. It seems rather foolish to go through this rigamarole every year, unless the ultimate goal is to allow the centralized, concentrated solar plants to get running (several are set to be online by 2012) and then phase out the residential tax credits.

Getting Solar on More Roofs Means Using Less Non-Renewable Energy

Now, one might ask, what’s the big deal so long as we’re using clean, renewable energy? And that’s a good point. I am thankful to be debating how we will use solar power rather than if we will use it. Nonetheless, the U.S. is facing a wonderful opportunity. Many states have already gotten behind solar home systems. But, as Farrell also points out, state funding cannot compete with the federal government for long.

The fact is, as much as I would like to see every roof in America decked out in solar panels, and maybe someday I will, it is not likely to happen as fast or efficiently as we need it to. We are going to need both large plants and small rooftops at work here. I agree with John Farrell, let’s level the playing field, and remember not to simply focus on building more and more solar power plants but also to use less and less energy…perhaps that’s a vote for 100 million solar roofs.

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Posted on August 6th in Solar Information by Dan.