A new report funded by the Solar Energy Industries Association (SEIA) that examines historical and current federal incentives in energy markets suggests that current solar industry incentives are consistent with previous development-stage energy sources subsidized by the U.S. government.

The study, titled “Assessment of Incentives and Employment Impacts of Solar Industry Deployment,” was released by the Howard H. Baker Jr. Center for Public Policy at the University of Tennessee, Knoxville, last week. It says solar power will continue to grow its share of the U.S. energy supply, but future growth will be dependent on continued government subsidies. It concludes, however, that the solar power industry can provide employment benefits, global market opportunities, and a resource to meet peak power demand at minimal marginal cost.

“The traditional technology adoption model labels early entrants into the solar market as innovators and early adopters,” the report suggests. “These individuals and firms enter for reasons that are not purely economic or based on a long-term strategy.” At present, solar energy technologies are currently in the rapid growth stage between early adoption and the chasm that comes before majority adoption where government incentives can be most critical in helping new energy technologies become significant sources of energy production, it says.

Relative to other energy technologies, federal investment in solar technologies have been “modest” in a long-term historical context,” the report asserts. The largest cumulative incentives have historically been given to mature energy technologies such as oil, hydro, coal and natural gas— which are still supported through federal incentives.

The hydroelectric sector, for example, saw similar obstacles. By the end of the 19th century, 200 power companies generated some or all of their electricity using hydro, but it was still limited by direct current. The federal government began to intervene to regulate development of the industry with the Rivers and Harbors Acts of the 1890s, requiring no-charge, no-time-limit licenses for hydroelectric facilities and giving the Army Corps of Engineers responsibility for maintaining open navigation on rivers.

Coal, which has been a significant fuel source in the U.S. since 1880, has seen subsidies in the form of federal tariffs on imported coal, tax exemptions, state-sponsored geologic surveys, research and development funding and industry support, and more recently, tax incentives and government investment in clean coal technologies.

Despite solar incentives, the report notes, the number of solar manufacturers has very recently decreased. Available data, which track only commercial manufacturers (not pilot-scale manufacturers) and exclude module assemblers, show some recent contraction in the industry across all regions, including those such as China, where the most significant manufacturing increases have occurred. “Expected attrition in the industry may have been accelerated by the short-term oversupply of photovoltaic panels and the losses the industry incurred because of oversupply,” the report says. “Yet to be seen is whether the depressed cost and improved financing options will foster continued rapid growth in the technology’s adoption, as occurred in the automobile markets in the 1930s.”

Over the past five years, solar capacity has been installed at a dramatic growth rate, it says. About 77% of the sector’s annual growth occurred during a period when State Renewable Energy Standards, less-expensive PV, and the federal investment tax credit (ITC) were in place. “The ITC, passed in 2006 and scheduled to remain in place through 2016, is an example of a long-term stable instrument that could help solar energy cross the ‘chasm’ to early majority adoption.”

Sources: POWERnews, University of Tennessee, Knoxville