November 26, 2008



Recent Changes to State and Federal

Incentives for Solar Energy

By: Kevin E. McCarthy, Principal Analyst


You asked for a description of recent changes to the state Clean Energy Fundís solar rebate program and federal incentives for solar energy systems.


The Clean Energy Fund has reduced the rebate it provides for small photovoltaic systems and has closed the residential part of the program. These systems have a generating capacity of up to 10 kilowatts (kw), i.e., the amount of power used by one hundred 100-watt light bulbs. As discussed in OLR report 2008-R-0649, the rebate is based on the photovoltaic systemís efficiency, which depends on such things as how the system is sited and the efficiency of the inverter (the device that converts the direct current produced by the photovoltaic cells into alternating current).  Report 2008-R-0649 provides further information about the rebate program and another program that subsidizes larger renewable energy systems.


For applications for small systems that were received on or before October 27, 2008 the rebate was capped at $5.00 per watt for the first five kw of generating capacity and $4.30 per watt for the next five kw of generating capacity. This rebate covered approximately half of the cost of a system with a generating capacity of 10 kw.  The cap has been reduced for applications received after October 27, 2008.  For governmental and institutional applications the new cap is $4.75 per watt for the first 10 kw of generating capacity. For residential applications, the rebate is capped at $4 per watt for the first 5 kw and $2.50 per watt for the next 5 kw.  Moreover, the residential part of the program is fully subscribed at present and is not taking applications. According to Lise Dondy, the fundís president, the residential part of the program will likely be redesigned with a smaller subsidy in order to spread out the funding available for the program, which has seen increasing demand. Dondy notes that the fund has recently started a solar leasing program. Further information about the fund and its programs is available at  


Dondy notes that a recently extended federal tax incentive will help homeowners who buy photovoltaic systems.  Federal law provided a 30% tax credit against the federal income tax for the purchase and installation of residential photovoltaic and other solar electric systems. These credits were scheduled to expire at the end of 2008 but the Energy Improvement and Extension Act of 2008 (P.L. 110-343) extended the credits until December 31, 2016 and eliminated a $2,000 cap on the credit for residential systems.  Further information about these credits, which the act extended to small wind energy systems and geothermal heat pump systems, is available at, which also has information about other federal and state incentives for renewable energy and energy efficiency.