Empirical analysis of the solar incentive policy for Tennessee solar value chain

Highlights: • Tennessee solar value chain (TNSVC) is modeled to analyze effect of policy on demand. • TNSVC model replicates realistic scenarios to gauge the economic impact on state. • Simulation study determines that the TNSVC capacity is greater than demand. • Direct cash incentives have greater impact on demand than indirect incentives. • The model portrays a holistic approach to assist strategic energy policy analysis. - Abstract: The market for solar energy in the US has grown exponentially due to increased consumer demand resulting from price reduction via economies of scale, technological progress, and a variety of incentives from federal and state governments as well as utility companies. The installation of solar power in Tennessee has more than doubled each year from 2009 to 2011. In this paper, we focus on the behavior of the Tennessee Solar Value Chain (TNSVC) to study the factors that influence growth of solar industry in the state. The impact of existing incentives on the TNSVC is analyzed. The TNSVC is simulated based on inputs from on-site survey to estimate economic impact in terms of the number of jobs added and the tax revenue generated in the state. In addition, a sensitivity analysis for the impact on the TNSVC under different policies those may be adopted by the state of Tennessee in the future is conducted. This paper employs a holistic model which can predict PV installation demand, understand solar value chain capacity, and estimate the revenue generation. It should be noted that the method employed in this study is not unique to the solar energy industry in Tennessee. The data utilized in this study is a combination of public domain information and surveys of suppliers, manufacturers, distributors, and installers. This makes the model in this paper flexible enough to be applied to assess the solar value chain in other state or country