More Federal Incentives Needed to Drive Solar Growth

27 July 2009 by

Although the United States has become one of the more aggressive nations in promoting renewable energy thanks in part to support from the Obama Administration, it is still lagging behind solar market leaders like Spain and Germany, according to a new report from Pike Research. A key finding reveals that federal level tax credits and depreciation incentives are not currently enough to encourage sustainable demand growth in the U.S. solar market.

The study, U.S. Solar Energy Demand, indicates that for sustained growth to occur in the U.S. solar power market, the federal government needs to increase incentives. However, the study cites that some states and municipalities have taken the lead in providing incentives through a variety of mechanisms ranging from upfront rebates and property tax credits to renewable energy credits and even European-style feed-in tariffs. These states include California, New Jersey, Florida, Vermont and New York, with solar demand heating up in certain markets such as California and New Jersey.

Even though there is demand for solar installations in the U.S., the credit crisis has resulted in tight funding for these projects because banks are unwilling to lend to projects that have undetermined cash flows, according to the study. “The weak supply of tax equity combined with heightened credit requirements has led to numerous project cancellations and delays nationwide, with over 75 MW, totaling$450 million, of idle projects in New Jersey alone,” said George Kotzias, industry analyst for Pike Research, in a statement.