Additionality of solar tax incentives under community choice aggregation in Ohio

Abstract In the State of Ohio, the electric regulatory landscape permits local governments to become energy suppliers to residents and small businesses through community choice aggregation (CCA). Some CCAs provide enrollees 100% renewable electricity. Concurrently, the federal government offers an income tax credit (ITC) for the purchase of a solar array. With policy incentives, it is important to ensure they encourage behavior beyond the baseline scenario without the ITC. This is known as “additionality.” Renewable aggregation programs may crowd out the benefits of the ITC, violating additionality. This paper assesses additionality of the ITC in the context of Ohio’s CCA programs. The actual additionality can depend on whether renewable energy is already being supplied to the site of a solar array. Hence, we study the relationship between CCA and solar adoption probability to determine whether tax incentives are additional. Using panel data methods and post-estimation simulations, we discern if additionality is violated where these programs overlap. We find aggregation programs increase the probability of solar adoption and that $0.79 of every dollar spent on the income tax credit in Ohio is non-additional. This will help policymakers determine the efficacy of funds allocated to their programs.