What is a solar carve-out?

Updated

a literal solar carve-out
Solar carve-outs ensure a state gets a certain percentage of its total electricity from solar power.

A solar carve-out is the part of a state’s Renewable Portfolio Standard (RPS) that sets a specific goal for electricity generation from solar panels. 

Current solar carve-outs in the United States call for between 0.3% and 5.1% of all energy generation in a state to come from solar, with target dates ranging from 2021 to 2032. Laws that establish solar carve-outs often include incentives that reward solar owners for the energy their panels generate.

Those incentives usually come in the form of Solar Renewable Energy Credits, or SRECs, which system owners earn for each megawatt-hour (MWh) of electricity generated by their panels. 

Utility companies buy the SRECs as “proof of renewable generation,” which helps them meet their goals under the RPS and solar carve-out. If those goals aren’t met, the utilities are subject to huge fines, which is what gives SRECs their value—it’s cheaper to buy clean energy credits than it is to plan, gain approval for, and build large-scale solar installations.

Another kind of incentive under a solar carve-out is called a performance payment (aka feed-in tariff), which are payments for each kilowatt-hour (kWh) of energy generated; either instead of SRECs or in exchange for turning over all SRECs generated by the system. These more direct payments skip the middleman—in this case an SREC broker or bundler—and reward solar panel owners directly on an ongoing basis.

It’s worth noting that SRECs or performance payments are not necessarily the product of a solar carve-out. There are states without carve-outs (such as Tennessee) that have performance payments for solar even though they have no RPS.

It’s also worth noting that SRECs and performance payments are not the only incentives available in states with solar carve-outs. All 17 of the states with carve-outs offer either tax credits or rebates for solar, on top of SRECs and performance payments. Four carve-out states have no performance payments or SRECs, instead offering rebates and tax credits for solar.

How important is a solar carve-out?

Solar carve-outs are highly correlated with solar development, and many states that have used them are in the top states for solar energy per capita

But these successful policies are becoming less popular as the economics of solar power become more favorable. In fact, six states that had solar carve-outs with target dates before 2021 allowed those dates to pass without renewing or expanding the carve-outs.

Simply put, building new large-scale solar generation is so cheap now, the only barriers to having more solar built are time, transmission infrastructure, and, eventually, a need for energy storage.

Below is a table that shows all current state solar carve-outs in alphabetical order. In addition, we’ve included a column outlining the solar incentives available in these states. No other states have current solar carve-outs.

Table. States with solar carve-outs
State Carve-out Incentive
Delaware 3.5% by 2025 Grants (active) & SRECS (suspended)
Illinois 1.5% by 2025 Adjustable block program
Maryland 14.5% by 2030 SRECs
Missouri 0.3% by 2021 Rebates
Nevada 1.5% by 2025 None
New Jersey 5.1% by 2021 TRECs, for now
Ohio 0.5% by 2026 None
Washington D.C. 5% by 2032 SRECs
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 - Author of Solar Reviews

Ben Zientara

Solar Policy Analyst and Researcher

Ben is a writer, researcher, and data analysis expert who has worked for clients in the sustainability, public administration, and clean energy sectors.

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