Keeping Incentives Sustainable: Solar in Long Island

solarI was glad to see that the solar industry is growing somewhere in 2009. The Long Island Power Authority (LIPA) recently reported a more than tripling of their first quarter rebate applications from 2008. But this growth success means that their program is poised to run out of money before the end of the year. The number of applications hit 183 January-March, up from 59 during the period in 2008. While this remains a pretty small number, the quick growth represents strong progress.

But since only $12.5 million was allocated for the program in 2009, current projects estimated ~$7.7 million cost more than half of the 2009 budget. So, LIPA is facing a difficult decision in a tight fiscal time. Do they let the program continue its boom cycle until it busts later this year?

Instead of such a crash for the solar industry, I would recommend they decrease the generous subsidy (which today equals $3.50 per watt) at an accelerated pace. Since the price of solar modules is falling, subsidy levels per unit of energy should fall accordingly. Their subsidy budget of $12.5 million supports 3.6 MW of solar at $3.50 per watt. A rebate drop to $3 per watt this summer and then $2.50 per watt by the end of 2009 could keep the program thriving and increase its cost-effectiveness.

As grid parity for solar is approached ~2010-14, the subsidy could fall toward $1 per watt or even lower (more than tripling the program’s cost-effectiveness).

Bottom line: Congrats to LIPA for setting up a solar deployment program that is producing results — a growing solar market. But to ensure such initiatives can be sustainable in the long-run, policymakers need to be ready to accelerate the fall in subsidy rates when rapid growth occurs. Otherwise, the boom and bust cycle of solar in Spain in 2008-09 will be repeated.

The great news is: going forward, it should get cheaper and cheaper per unit of energy for regional, state, and national markets to deploy renewables and mitigate climate change.

Onwards in the Sustainable Energy Transition-

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