Government Policy and Incentives in Promoting Solar Energy

1603 grant

While the 1603 grant has been a major boost to the solar industry, the industry could see growth even more if the government extends the program. Currently, the program is set to expire at the end of this year. But supporters say that extending the program for one more year would be a fair and timely extension.  

Financial Crisis

During the financial crisis, tax equity deals, which allow companies to invest in projects with the expectation of receiving tax benefits, lost much of their appeal. The government responded to this by changing its formula for calculating grants, which some participants believed to be shortchanging them.  An economic slowdown can slow down capital intensive renewable energy projects. Moreover, an economic downturn can also put a damper on the distributed PV market, which has long been thought of as a promising technology. 

Despite

Despite this, there is an urgent need for government policy and incentives in promoting solar energy.  The global economy is experiencing a sharp increase in energy prices. These high costs have caused painful inflation in many countries. In addition, the energy price spikes have also pushed families into poverty. Consequently, this has had a negative impact on the economy, especially in the emerging economies.

program

The program is administered by the U.S. Department of Treasury. It allows participants to pay back their grants if they are not satisfied with the way the award was calculated.
This has led to many governments to consider ways to mitigate the economic impact of the energy crisis. However, the scope of these measures is limited, because of the increased cost of living.
A recent report by the Japan Research Institute has set four scenarios. Among them, the first scenario has the most potential to lead to an economic recovery.

assumption

It is based on the assumption that demand declines by 1.20 percent, with the service and manufacturing industries accounting for the largest share. This is followed by a decline in the purchasing power of consumers, which will then lead to a corresponding decrease in income. As a result, the economic recovery is likely to take longer than expected.

economic downturn

In this case, the economic downturn will lead to a contraction in infrastructure development and residential income. However, the demand losses from these sectors are small and only contribute about 1.2 percent of the total demand loss. Therefore, the recovery period will be comparable to the lockdown. Nevertheless, the overall economy will experience a slowed down growth rate.  

Who We Are

For this reason, the government should come up with a comprehensive strategy to address the needs of the distributed PV sector. This is necessary to ensure the resilience of the market, and to support the transformation of the clean energy industry. With the right incentive and policy strategies in place, the distributed PV sector can be strengthened to become an important part of a country’s clean energy infrastructure.