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Solar Carve Outs, What Are They and Why Are They Important

Jessica PirroMay 15, 20192070

Right now there are more than thirty states in the United States that currently have renewable energy policies. The majority of these goals, targets and mandates will allow for compliance from a range of different sorts of renewable energy technologies.

There are a few cases where states have included a technology specific mandate as a part of their renewable energy policies. One of these policies is called a solar carve out.

What exactly is a solar carve out?  

Policy makers have a go-to option for helping to grow the renewable energy industry within their state, these are called renewable portfolio standards (RPS). These policies require an increase in percentages of in-state electricity generation or the consumption that come from renewable resources. The state legislators can send a strong signal to the industry that renewable energy is a priority.

These, renewable portfolio standards and clean energy goals allow for compliance from a very wide range of renewable or zero-carbon technologies, like wind, hydropower, solar, geothermal, biomass and more.

The way to ensure that a certain amount of the renewable energy goal meets a certain specific technology, the policymakers will “carve out” a piece of the overall renewable energy targets for technology. A solar carve-out is a mechanism that requires a certain portion of the state’s renewable energy target that is to be met by solar energy alone.

How do the carve outs work?

The renewable energy targets are usually set in one of two ways. They are either set up as a percentage of the electricity utilization that needs to be met by the renewable energy or as a specific amount of electricity that is expressed in certain terms of megawatt-hours or kilowatt- hours - that must come from renewable resources. Each scenario requires a solar carve out that requires a portion of the target that is met by solar.

If a state has a renewable portfolio standard that requires that 10 percent of electricity is renewable in 2020, this solar carve out would then say that 1 percent of the state’s electricity must come specifically from solar. The solar carve out isn’t an additional, additive renewable energy policy, but instead a policy that works within the bounds of pre-existing renewable energy targets.

What states have carve outs?

State

Solar carve out

Target Year

Delaware

3.5%

2025

Illinois

1.5%

2025

Maryland

2.5%

2025

Massachusetts

3200 Mega-Watts

2020

Minnesota

1.5%

2020

Missouri

0.3%

2021

Nevada

1.5%

2025

New Hampshire

0.7%

2020

New Jersey

5.1%

2021

New Mexico

4%

2020

North Carolina

0.5%

2018

Ohio

0.5%

2026

Pennsylvania

0.5

2021

Washington D.C.

10%

2041

What makes solar carve-outs important?

To provide a low cost electricity option to their ratepayers, these utilities have incentives and procure electricity from the least expensive resources. The same things is true for when utilities decide which renewable energy technologies to purchase to meet their consumer demands.

When renewable energy targets were first introduced by state governments, the wind energy was far from the least expensive renewable resources that utilities could procure.

A result, the states that wanted to help develop the local solar industry began to use solar carve outs as a way make sure that solar played a role in meeting state targets, regardless if it’s the cost option for renewable energy. Just like the subsidies and incentives in all industries, the solar carve out was a way to kick-start the industry with a legislative signal intent.

In more recent years the cost of solar has reduced by a lot, making it very competitive with not just wind but traditional, fossil fuel fired resources. Solar is now considered a very attractive investment for many utility companies even during the absences of additional subsidies. The solar carve outs are decreasing in necessity and popularity among policymakers.

What do solar carve outs mean for the residential buyer?

Since solar carve outs are a way for state policy makers to express their intent to help the local solar industry grow. In order for the policy makers to do so, the solar carve outs they are often paired with a lot of desirable solar incentives and policies to make it more achievable investment for the property owners. If the state that you live in has a solar carve out, more than likely you will have great local incentives.  

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