The impact of state policy on deployment and cost of solar photovoltaic technology in the U.S.: A sector-specific empirical analysis

Using a panel database for 27 programs in 16 U.S. states over 1998-2009, we assess the impact of 12 state-level policies on the cost and deployment of solar photovoltaic (PV) technologies for two sectors defined by system sizes: residential (<10 kW) and commercial (10−100 kW). We first examine the impact of policies on the deployment of solar PV. We show that cash incentives increase the deployment of commercial systems. We also show that interconnection standards potentially promote the deployment of residential systems, whereas property tax incentives potentially foster the deployment of commercial systems. We next examine the impact of policies on the cost of solar PV, and show that the key policies have different effects on costs. The cost of residential systems declines faster if there are cash or property tax incentives in place, whereas the presence of interconnection standards potentially accelerates the decline in commercial system costs. Further, states with a renewable portfolio standard see residential system costs potentially declining slower than states without such a policy. As solar PV is at the brink of becoming cost competitive, our findings assist regulators in fine-tuning their set of support tools.