Shift in U.S. Federal Solar Funding Needed for Large-Scale Deployment

"Solar electricity generation is one of very few low-carbon energy technologies with the potential to grow to very large scale.  As a consequence, massive expansion of global solar generating capacity to multi-terawatt scale is very likely an essential component of a workable strategy to mitigate climate change risk.  Recent years have seen rapid growth in installed solar generating capacity, great improvements in technology, price, and performance, and the development of creative business models that have spurred investment in residential solar systems.  Nonetheless, further advances are needed to enable a dramatic increase in the solar contribution at socially acceptable costs.  Achieving this role for solar energy will ultimately require that solar technologies become cost-competitive with fossil generation, appropriately penalized for carbon dioxide (CO2) emissions, with — most likely — substantially reduced subsidies." --MIT Report

Current tax incentives aimed at encouraging users to install solar technologies fail to reward actual energy produced, said the authors of the report, published by the Massachusetts Institute of Technology Energy Initiative, which promotes adoption of renewable energy.

Solar energy received approximately $5.3 billion in federal support in the 2013 fiscal year, up from about $1.1 billion in 2010, according to the U.S. Energy Information Administration.

Most federal tax credits for solar are to expire at the end of 2016.

"Ideally ... rather than subsidize investment, we would subsidize production, so you receive the greatest benefit for each kilowatt-hour of solar energy you generate," said Francis O'Sullivan, a co-author of the report, called "The Future of Solar Energy."

Solar industry subsidies have long been politically controversial, becoming even more so after the 2011 bankruptcy of Solyndra, a California solar panel manufacturer that received $535 million in federal loan guarantees from the Obama administration.

The MIT Energy Initiative report also said federal funding for solar research and development should prioritize emerging technologies that could have a transformative impact on costs. Research on incremental improvements to existing technology is already well funded by commercial firms, the report's authors said.

"Smart people in industry have every incentive to work on that, but they don't really have any incentive to look forward 20 years, and we think that's the DOE's (Department of Energy's) job," said Richard Schmalensee, a professor at MIT's Sloan School of Management who chaired the study.

Improved technology at lower prices has pushed growth in solar capacity, with the amount of U.S. electricity generated by solar technologies up 82 percent between February 2014 and February 2015, according to the EIA.

Still, solar energy accounted for just 0.4 percent of U.S. electricity generation in 2014.

"The real question is, 'Can solar help us deal with climate?'" Schmalensee said. "That means solar at scale in the decades ahead."

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