Evaluating the Energy Returns of Investment-Based Incentive Programs: The Case of Oregon's Business Energy Tax Credits
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Governments around the world provide financial incentives to encourage renewable energy generation and energy conservation. The primary goals of these efforts are to mitigate climate change and improve long-term energy independence by reducing reliance on fossil fuels. The consensus in the energy incentive literature is that performance-based incentives, which fund energy output, are more cost efficient than investment-based incentives, which fund capital input. This thesis uses a 30-year case study of Oregon's Business Energy Tax Credit (BETC) program to argue that investment-based energy incentives are moderately cost efficient relative to other state performance-based incentives and can be an effective driver of clean energy deployment. However, this analysis also finds that there are significant opportunities to improve the cost efficiency of investment-based energy incentive programs by targeting least cost projects. Namely, 50% of the first year kilowatt-hour electricity returns of the BETC program could have been achieved at 10% of the cost. These lessons from historical BETC spending should guide policymakers, NGO.s, and businesses who aim to make targeted use of fiscally-constrained energy incentive programs.