Why ‘Market-based” is a Poor Criteria for Good Solar Policy

Date: 25 Aug 2011 | posted in: Energy, Energy Self Reliant States | 1 Facebooktwitterredditmail

Updated 8/26/11 and 9/1/11

Many renewable energy advocates argue that the market for solar renewable energy credits (SRECs) is a more cost-effective tool for incentivizing solar power than a feed-in tariff (or CLEAN contract) set in a regulatory proceeding. 


This chart illustrates the installed cost of solar in New Jersey from 2006 to 2011 (as reported by the National Renewable Energy Laboratory in Tracking the Sun III and converted to levelized cost) in green, the New Jersey SREC spot market price in red, and the German feed-in tariff price (constant exchange rate, adjusted for NJ solar insolation) for rooftop solar projects 30 kilowatts and smaller in blue. (Update 9/1: the previous chart showing solar cost in $ per Watt is here).

Does a “market-based” policy do a better job of matching the actual cost of solar? 

This comes to mind: “one of these things is not like the other…”

Update 8/26: I should add that the German feed-in tariff is the only source of revenue for solar projects, whereas the SREC in New Jersey comes in addition to the federal 30% tax credit and accelerated depreciation (and net metering).  Since the two federal incentives (and net metering values) have not changed, the fact that the SREC value is rising against the tide of falling solar prices is even more absurd.

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John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.