What’s the best way to encourage renewable energy to grow in the United States? A new study says that cash incentives would be just as effective as current tax credits, but would help cut costs for taxpayers by at least half. The study examined the importance of incentives in the growth of renewables, the cost-effectiveness of current incentives, and ways that they could be improved.

Right now, homeowners wanting to get solar power on their rooftop can take the federal solar tax credit. When tax time rolls around, you can claim up to 30 percent of the cost of your solar system on your taxes. If your tax liability isn’t that high, the extra credit will roll over to the next year. The tax incentive has been an important part of helping solar power quickly grow; wind and solar have grown six-fold even in the middle of a deep recession. But the new report, from the Climate Policy Initiative, says that a cash incentive could work as well for much less money.

According to the study, a 14 percent cash incentive would provide the same benefit as the tax credit, while costing government 57 percent less. By providing up-front investment, the government could help homeowners reduce the need to get outside financing, which would help reduce the overall cost of the project. The other benefit of the cash incentive is that it can help anyone, regardless of their tax liability. The report recommends that the government offer homeowners options for both the incentive and the tax credit.

The study also found that a cash incentive could improve wind policy. By extending the current wind production tax credit, but delivering it as a cash incentive, the government could help wind project owners get the same benefit while reducing government costs by nearly half.

Main photo credit: isak55/Shutterstock