Increased energy cost and incentive programs are the core of the renewable energy boom in the United States. If it were not for incentive programs, most customers would not be willing to make the long term investment necessary to purchase a renewable energy system.

Remember, unlike a traditional investment, everyone is paying a utility bill so whether a person invests in a renewable energy system or pays their utility bill they will be making a payment one way or the other. The advantage to purchasing a renewable energy system is that ultimately the system will be paid for and the savings will begin.

Depending on the state, funding for these programs is derived from various sources. No matter where the incentive money comes from, all incentives have limited resources and therefore may expire or decrease over time. In the case of California, for example, a state mandate requires utility companies to have a 20% renewable portfolio by the year 2010. In order to accomplish this, each utility company has their own incentive program.

For most programs, the first thing a customer must do is make a reservation for the incentive - before purchasing any equipment. This guarantees the money will be paid after the job is completed. In some situations there is a fee for the application or a deposit if the system is larger than a given size and all reservations expire if not used within a certain time frame.

FIXED DOLLAR SOLAR INCENTIVES
The most common type of programs are the one that pays a fixed dollar amount based on the system size minus some de-rating factor to compensate for the energy losses in the conversion process from the DC (Direct Current) for the solar panels to the usable AC (Alternating Current) coming out of the inverter.

Let's take a 10 kW (DC rated) solar system in California as an example: This DC rating is derived by the solar panel manufacture's rating of the panel. If one panel is rated at 200 Watts (DC), then a 10 kW system would require 50 panels. But like most incentives, the incentive is not based on the DC rating, but on the overall system size after it is de-rated to account for energy losses and inverter efficiencies when converting the DC power to usable AC current.

To understand the de-rating process in California more completely click here. For other states please contact us for available incentives, eligible equipment and de-rating factors

Returning to the example above, with a 10 kW DC rated system, the actual PTC rating may be 85%. This PTC rating is also sometimes referred to as the AC rating of the system. If the DC rating of the panels was 10 kW then actual PTC system rating would be 8.5 kW (AC).To finish our calculations, let us say that the incentive rate is $2.50 a Watt. Next take the price per Watt of the incentive times the PTC rating of the system times 1000 (to convert from Kilowatts to Watts) or $2.50 x 8.5 kW x 1000 = $21,250.

PERFORMANCE BASED SOLAR INCENTIVES
The second most common incentive is one that measures the actual output of the system and pays, commonly over 5 years, a set price per kWh generated. To understand a kWh or kilowatt hour it is the amount of energy one 100 watt light bulb uses in 10 hours or what a 1000 watt electric heater uses when on continuously for 1 hour.

If you have a 10kW AC rated system and the sun is out in full force for 6 hours then you will produce 10 x 6 or 60 kilowatt hours.Because the solar days vary from summer to winter your actual length of solar day will vary. Also, unless you solar system is a tracking system it will only achieve a maximum of 6 hours a day at peak performance.

Often times a performance bases incentive pays more than a Fixed Dollar incentive but the payments come either quarterly or monthly over time. Most large installations require a performance based incentive paid overtime.