IN AN ATTEMPT TO ASSIST STATE AND FEDERAL LEGISLATORS IN FORMULATING EFFECTIVE POLICIES FOR ENCOURAGING THE USE OF SOLAR ENERGY SYSTEMS IN BUILDINGS, THIS REPORT PROMOTES QUANTITATIVE ASSESSMENTS OF THE KINDS OF INCENTIVE PROGRAMS NOW BEING CONSIDERED FOR ADOPTION BY STATES AND THE CONGRESS. THE LIFE-CYCLE COST MODEL MEASURES COSTS TO THE PURCHASER OF A SOLAR HEATING SYSTEM BOTH BEFORE AND AFTER THE IMPOSITION OF SEVEN SELECTED TYPES OF INCENTIVES: A DIRECT GRANT, AN INCOME TAX CREDIT, A PROPERTY TAX REDUCTION, A SALES TAX REDUCTION, A DEPRECIATION TAX WRITEOFF, AN INTEREST RATE SUBSIDY, AND A SPECIAL TAX ON FUEL. A COMPUTER PROGRAM FACILITATES THE MODEL'S IMPLEMENTATION IN THE SIX CASE STUDIES, FOUR OF WHICH DEAL WITH RESIDENCES IN CLIMATE REGIONS TYPICAL OF MADISON, WIS., AND ALBUQUERQUE, N. MEX. THE OTHER TWO CASE STUDIES ARE FOR A COMMERCIAL BUILDING IN A CLIMATE REGION TYPICAL OF MADISON, WIS. ALL SIX CASE STUDIES ARE BASED ON ASSUMPTIONS REGARDING SOLAR ENERGY SYSTEM COSTS, PERFORMANCE, AND DURABILITY; FUEL PRICES; HEATING LOADS; AND TAX AND INTEREST RATES. FINDINGS INDICATE THAT (1) IN SOME STATES, CURRENT INCENTIVE POLICIES WILL PROBABLY NOT MERIT THE REQUIRED ADMINISTRATIVE COSTS; (2) THE EFFECTIVENESS OF INCENTIVES WILL DIFFER BY REGION, TYPE OF BUILDING, AND FUEL PRICES; (3) MORE INCENTIVES ARE REQUIRED TO MAKE A SOLAR ENERGY SYSTEM COST EFFECTIVE FOR USE ON A COMMERCIAL BUILDING THAN ON AN OWNER-OCCUPIED RESIDENCE FOR BUILDINGS OF EQUAL SIZE AND HEATING LOAD; AND (4) SYSTEM COSTS TO OWNERS WITH AND WITHOUT ALTERNATIVE INCENTIVES MUST BE FURTHER COMPARED AND ASSESSED TO DETERMINE AN ECONOMICALLY EFFECTIVE INCENTIVE POLICY. GRAPHS, TABULAR DATA, FOOTNOTES, AND OTHER ILLUSTRATIONS ARE PROVIDED, ALONG WITH REFERENCES. (MHP)