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Inquiry into Additionality in the Solar Policy Framework

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posted on 2024-04-19, 19:17 authored by Michael Liam SmithMichael Liam Smith

An inquiry into the additionality of the income tax credit program for solar purchasing in Ohio, where aggregation electric purchasing programs exist.

In the State of Ohio, a unique feature of the electric market regulatory landscape permits local governments to become energy suppliers to their residents and small businesses through programs known as community choice aggregation (CCA). Some of these programs guarantee 100% renewable electricity to all enrollees. Concurrently, the federal government offers an income tax credit (ITC) for the purchase of a solar array. When policy incentives are offered, it is important to ensure they impact their target audience to act in ways that would not be observed in the scenario without the tax incentive. This is known as “additionality.” In the context of carbon emissions reduction goals, individuals who claim the ITC while already having 100% renewable electricity would violate additionality. In other words, these renewable aggregation programs may crowd out the benefits of the ITC. This paper seeks to assess the additionality of the ITC in the context of Ohio’s CCA program. The actual additionality can depend on whether renewable energy is already being supplied to the site that constructs a solar array. Hence, we study the relationship between CCA and solar adoption probability to determine whether tax incentives are additional. Using non-parametric survival analysis, panel data methods, and post-estimation simulations, this paper seeks to discern if additionality is violated using the ITC in areas where a supply of renewable energy is already guaranteed. We find that aggregation programs increase the probability of solar adoption and that on average, in Ohio, roughly $0.44 of every dollar spent on the income tax credit is non-additional. This will help policymakers determine the efficacy of funds allocated to their respective programs.

History

Degree Type

  • Master of Science

Department

  • Agricultural Economics

Campus location

  • West Lafayette

Advisor/Supervisor/Committee Chair

Carson Reeling

Additional Committee Member 2

Michael Delgado

Additional Committee Member 3

Michael Wilcox