Policy and Regulation

Leveling the playing field for solar energy

From net metering systems to federal tax breaks to home equity lines of credit, Indiana offers several solar-power incentives to tax-paying Hoosiers. But right now, says Wally Tyner, the James and Lois Ackerman Professor of Agricultural Economics and a member of the Energy Center, the solar-energy savings are of greater benefit to Indiana farm businesses than they are to homeowners because tax policies allow businesses to deduct depreciation of solar investments from revenues in addition to receiving the federal solar investment tax credit.

Those economics could change, he says, if policies gave solar and coal power the same treatment.

In their benefit cost analysis, Tyner and graduate student Jinho Jung found that the probability of saving money by using solar energy rather than standard grid electricity is currently 92 percent for Indiana farm businesses but only about 50 percent for homes.

"Under current law and policy, whether you lose or make money with solar as an Indiana homeowner is like throwing the dice - you don't know," Tyner says. "But solar is a clear economical choice for farm businesses. The tax advantage from depreciation makes a huge difference in the overall economics."

If homeowners could also depreciate the cost of installing solar energy systems, their chances of saving with solar would rise to about 90 percent.

In an alternative scenario, Tyner and Jung removed the federal tax credit from solar energy since the credit is not available to coal power companies. They added depreciation to home solar energy systems since coal power companies can depreciate their building costs and applied a carbon tax to reflect the fact that solar energy does not emit carbon, unlike coal power.

"If you put solar energy and coal power on a level playing field, solar emerges as a clear winner," Tyner says. "Many more homes in this state would have it."

- Natalie van Hoose, Purdue News Service http://bit.ly/1I9qGXE

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