Back to OurEnergyLibrary search




A Survey of State and Local PV Program Response to Financial Innovation and Disparate Federal Tax Treatment in the Residential PV Sector

A Survey of State and Local PV Program Response to Financial Innovation and Disparate Federal Tax Treatment in the Residential PV Sector

Full Title: A Survey of State and Local PV Program Response to Financial Innovation and Disparate Federal Tax Treatment in the Residential PV Sector
Author(s): Bolinger, Mark, and Edward Holt
Publisher(s): Lawerence Berkeley National Laboratory
Publication Date: June 1, 2015
Full Text: Download Resource
Description (excerpt):

High up-front costs and a lack of financing options have historically been the primary barriers to the adoption of photovoltaics (PV) in the residential sector. State clean energy funds, which emerged in a number of states from the restructuring of the electricity industry in the mid-to-late 1990s, have for many years attempted to overcome these barriers through PV rebate and, in some cases, loan programs. While these programs (rebate programs in particular) have been popular, the residential PV market in the United States only started to achieve significant scale in the last five years – driven in large part by an initial wave of financial innovation that led to the rise of third-party ownership. Under third-party ownership (“TPO”), a PV system host does not own the system, but instead leases it or else buys the electricity it generates through a power purchase agreement (“PPA”).

The rise and success of TPO has been driven primarily by four factors:

  • Built-in financing converts an otherwise high up-front cost into a more-affordable cents/kWh or monthly payment that can be easily compared to utility bills;
  • Investment tax credit (“ITC”) monetization enables hosts with insufficient tax liability to still benefit from the ITC, assuming at least some degree of incentive pass-through;
  • Reduced performance risk stems from the TPO provider handling all system maintenance expenses; and
  • Larger federal tax benefits accrue to TPO providers than to host-owners, due to a combination of statutory differences in the residential and commercial ITCs, TPO financing practices that “step up” the commercial ITC basis, and accelerated depreciation deductions available to commercial but not residential taxpayers.

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of OurEnergyPolicy.org, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

Sign up for our Press Release Distribution List

    Your Name (required)

    Your Email (required)

    Please sign me up to receive press releases from OurEnergyPolicy.org.