Glossary

Bonds allow governments (and corporations) to raise money by borrowing. A few states and local governments have established bond programs to support energy efficiency and renewable energy for government-owned facilities. After a government has raised an authorized sum of money through the sale of bonds, the money collected is used to improve energy efficiency or to install renewable energy systems on government facilities. The bonding authority is usually reimbursed using the energy savings resulting from these projects.

States offer a variety of grant programs to encourage the use and development of renewables and energy efficiency. Most programs offer support for a broad range of technologies, while a few programs focus on promoting a single technology, such as photovoltaic (PV) systems. Grants are available primarily to the commercial, industrial, utility, education and government sectors. Most grant programs are designed to pay down the cost of eligible systems or equipment. Others focus on research and development, or support project commercialization. In recent years, the federal government has offered grants for renewables and energy efficiency projects for end-users. Grants are typically competitive.

To promote economic development and the creation of jobs, some states offer financial incentives to recruit or cultivate the manufacturing and development of renewable energy systems and equipment. These incentives commonly take the form of tax credits, tax exemptions and grants. In some cases, the amount of the incentive depends on the amount of eligible equipment that a company manufactures. Most of these incentives apply to several renewable energy technologies, but a few states target specific technologies, such as wind or solar. These incentives are usually designed as temporary measures to support industries in their early years, and they commonly include a sunset provision to encourage the industries to become self-sufficient.

Loan programs provide financing for the purchase of renewable energy or energy efficiency systems or equipment. Low-interest or zero-interest loans for energy efficiency projects are a common demand-side management (DSM) strategy for electric utilities. State governments also offer low-interest loans for a broad range of renewable energy and energy efficiency measures. These programs are commonly available to the residential, commercial, industrial, transportation, public and non-profit sectors. Loan rates and terms vary by program; in some cases, they are determined on an individual project basis. Loan terms are generally 10 years or less. In recent years, the federal government has offered loans for renewables and energy efficiency projects.

Personal tax incentives include income tax credits and deductions. Many states offer these incentives to reduce the expense of purchasing and installing renewable energy or energy efficiency systems and equipment. The percentage of the credit or deduction varies by state, and in most cases, there is a maximum limit on the dollar amount of the credit or deduction. An allowable credit may include carryover provisions, or it may be structured so that the credit is spread out over a certain number of years. Eligible technologies vary widely by state. In recent years, the federal government has offered personal tax credits for renewables and energy efficiency.

Property tax incentives include exemptions, exclusions, abatements and credits. Most property tax incentives provide that the added value of a renewable energy system is excluded from the valuation of the property for taxation purposes. For example, if a heating system that uses renewable energy costs more to install than a conventional heating system, the additional cost of the renewable energy system is not included in the property assessment. In a few cases, property tax incentives apply to the additional cost of a green building. Because property taxes are collected locally, some states have granted local taxing authorities the option of allowing a property tax incentive for renewable energy systems.

Sales tax incentives typically provide an exemption from, or refund of, the state sales tax (or sales and use tax) for the purchase of a renewable energy system, an energy-efficient appliance, or other energy efficiency measures. Some types of equipment purchases may be eligible for only a partial abatement of the sales tax. Several states have established an annual “sales tax holiday” for energy efficiency measures by allowing a temporary exemption – usually for one or two days – from the state sales tax.

Many states have established minimum efficiency standards for certain appliances and equipment. In these states, the retail sale of appliances and equipment that do not meet the established standards is prohibited. The federal government has also established efficiency standards for certain appliances and equipment. When both the federal government and a state have adopted efficiency standards for the same type of appliance or equipment, the federal standard overrides the state standard even if the state standard is stricter.

Some states have adopted a licensing process for renewable energy contractors. Several states have adopted contractor licensing requirements for solar water heating, active and passive solar space heating, solar industrial process heat, solar-thermal electricity, and photovoltaics (PV). These requirements are designed to ensure that contractors have the necessary knowledge and experience to install systems properly. Solar licenses typically take the form of either a separate, specialized solar contractor’s license, or of a specialty classification under a general electrical or plumbing license.

Policies requiring renewable energy equipment to meet certain standards serve to protect consumers from buying inferior equipment. These requirements not only benefit consumers; they also protect the renewable energy industry by making it more difficult for substandard systems to reach the market.

Interconnection standards specify the technical and procedural process by which an electric customer connects an electricity-generating system to the grid. Interconnection standards include the technical, contractual, metering, and rate arrangements that system owners and utilities must abide by. Standards for systems interconnected at the distribution level are typically adopted by state public utility commissions, while the Federal Energy Regulatory Commission (FERC) has adopted standards for systems interconnected at the transmission level. Not all states have adopted interconnection standards, and some states’ standards apply only to investor-owned utilities -- not to municipal utilities or electric cooperatives.

Several states require electric utilities to offer customers the option to buy electricity generated from renewable resources, commonly known as “green power.” Typically, utilities offer green power generated using renewable resources that the utilities own (or for which they contract), or they buy renewable energy credits (RECs) from a provider certified by a state public utilities commission.

Most public benefit funds (PBF) were developed during electric utility restructuring in the late 1990s by some states to ensure continued support for renewable energy, energy efficiency and low-income energy programs. These funds are commonly supported through a very small surcharge on electricity consumption (e.g., $0.002/kWh). This charge is sometimes referred to as a "system benefits charge" (SBC). PBFs commonly support rebate programs for renewable energy systems, loan programs, research and development, and energy education programs.

Solar and wind access laws are designed to establish a right to install and operate a solar or wind energy system at a home or other facility. Some solar access laws also ensure a system owner’s access to sunlight. These laws may be implemented at both the state and local levels. In some states, access rights prohibit homeowners associations, neighborhood covenants and local ordinances from restricting a homeowner’s right to use solar energy. Easements, the most common form of solar access law, allow for the rights to existing access to a renewable resource on the part of one property owner to be secured from an owner whose property could be developed in such a way as to restrict that resource. An easement is usually transferred with the property title. At the local level, communities use several policies to protect solar access, including solar access ordinances, development guidelines requiring proper street orientation, zoning ordinances that contain building height restrictions, and solar permits.