Solar Energy Perspectives - IEA

Chapter 10: Policies
It would make less sense to favour one module technology over another. Similarly, for utilityscale
solar plants, it may not be advisable to differentiate tariff levels between PV and CSP,
even less so between different types of PV or different types of CSP. Apart from some global
support, markets should be encouraged to choose the technologies that best fit their needs –
by, for example, rewarding thermal storage of CSP plants through time-of-use pricing, or
possibly distinguishing different availability factors through specific payments. Hybridisation
with fossil fuels should not be discouraged by arbitrarily limiting the share of fossil versus
solar energy inputs, but solar incentives should be made available only to electricity
generated from solar energy.
In the longer run, CO 2 pricing could become the most efficient way to introduce a wedge
between fossil fuel costs and prices. In some scenarios, it may stop fuel prices from collapsing,
thereby preserving the competitiveness of renewables. CO 2 pricing would thus support not
only solar and other renewable energy technologies, but also energy efficiency improvements,
including those related to penetration of efficient electricity technologies in many energy
uses; such technologies are enabling solar and other renewables to increase their shares in
the broader energy mix.
Paving the way
Most solar electricity capacities today have resulted from the implementation of FITs. FITs
should therefore be considered the primary option for jumpstarting new solar electricity
markets, especially if small-scale PV is likely to represent the bulk of investments. Some
generosity in incentive levels might be the price to pay for the initial take-off.
However, after some time as markets grow, cost concerns gain greater attention from policy
makers; incentive levels need to be more precisely calibrated and possibly quantitative limits
considered. As technologies and markets further mature, and especially for large-scale
systems, other, more market-oriented support schemes might be preferred, whether FIPs,
RPSs or tenders, possibly associated with tax credits. Innovation could receive specific
support, such as the loan guarantees developed by the US Department of Energy and
expanded by the Recovery Act of 2009.
In the longer term, if solar energy – and especially solar electricity, as suggested in the next
chapter – is to reach very high penetration levels, electricity markets will need to undergo
some deep changes. Current design is unlikely to attract enough investment into solar electric
capacities, other renewables or the enabling technology environment – whether balancing
plants, storage capacities, smart grids or super grids. Pricing the environmental harms of each
particular form of energy generation, starting with climate change from CO 2 emissions,
should naturally be part of these market design changes.
While incentive schemes for early deployment today represent the greatest challenge for the
development of solar electricity, there are other important policy issues. For example,
ensuring sufficient investment in research and development (R&D) is the main challenge
confronting solar fuels, and still an issue for all other solar energy technologies. Solar heat
is too often ignored by policy makers, and by architects and engineers. Its deployment is
mostly impeded by non-economic barriers and split incentives such as differing landlordtenant
priorities. Financing is the main barrier to large-scale dissemination of off-grid
systems (see Box: Financing off-grid solar electrification), and remains a very important
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