Thoughts on Solar by Run on Sun's Founder & CEO, Jim Jenal

(Editor’s Note: This is Part 2 of our end-of-the-year Solar Economics series. 
You can read Part 1 - Solar Tax Policies - here.)

One of the most important factors in the growth of the local solar industry has been the availability of utility-based rebates for solar power installations.  This year has seen a lot of developments in this area, and unlike the tax arena where the news is all good, the simple, sad truth is that rebates are declining throughout Southern California, with some utilities suspending their rebates altogether and others threatening to do so.  Will the defeat of Prop 23, assuring that AB 32 will go into effect after all, mean that there will be additional funds injected into solar rebates?  Will a feed-in-tarrif finally take hold in California?  And where are rebates now, anyhow?  We will try to answer some of those questions in this post.

Current Rebates - A Utility-by-Utility Review

Please note - for more detail about solar rebates generally, we have an extensive webpage regarding solar rebates and how they work, please check it out.

Southern California Edison (SCE) and the California Solar Initiative (CSI)

SCE is the only local utility that provides rebate funds under the California Solar Initiative (CSI). The bad news? It means that it offers the lowest rebates of any of the utilities in the area. The good news? You can know precisely what those rebates are at any time by checking out the statewide trigger tracker website. The CSI rebate structure is based upon a series of megawatt targets assigned for each of the three investor-owned utilities that are part of CSI. (In addition to SCE, that includes PG&E in Northern California and SDG&E in San Diego.) As each utility reaches the target for a given step, it moves down to the next step in the rebate structure until the megawatt target for that step is reached.  There are 10 steps in the overall program, relating to incentives that started at $2.50/Watt for residential installation when the program began in 2007, and go all the way down to $0.20/Watt at step 10. Each step is further divided into allocations for residential and non-residential (i.e., commercial and non-profit) with the highest rebate rates for non-profit installations (which are given a higher rebate rate because they are ineligibile for tax benefits), then residential and finally commercial.

As of this writing, SCE is on Step 5 for residential customers, meaning that SCE is currently paying them $1.55/Watt.  From an initial allocation of  25 MW in the step, 5.22 MW remain, but SCE has already received applications for 1.41 MW.  Thus, the total remaining in Step 5 is 3.81 MW. After SCE moves to Step 6, the solar rebate rate for residential customers will be $1.10/Watt.

For non-residential customers, SCE is technically still on Step 7.  We say “technically” because from an initial allocation of nearly 82 MW, 22.17 MW remain, but with 26.72 MW of applications already received, the step has a net negative 4.55 MW “remaining". Thus, it is extremely unlikely that a new commercial or non-profit rebate application submitted today would actually be paid a rebate under Step 7. Under Step 8, SCE will be paying $0.35/Watt to commercial customers and $1.10/Watt to non-profits.  (Five-year PBI rebates will be paid out at the rate of $0.05/kWh for commercial and $0.15/kWh for non-profits.  For more on PBI rebates, see our webpage.)

Los Angeles Department of Water & Power (LADWP)

The rebate program at LADWP has been on a roller-coaster ride this year - threatening to sharply lower the amount of rebates before last-minute actions by the LA City Council sent the proposal back to Committee for a re-do. Perhaps in response to the Council’s action, DWP is now reporting on its website that it is out of money for solar rebates until next July!  Here is DWP’s announcement in full:

SOLAR INCENTIVE PAYMENT LIMIT REACHED FOR CURRENT BUDGET YEAR

Due to the popularity of our Solar Incentive Program, the budget for incentive payments for fiscal year 2010/2011 is now fully subscribed. Incentive payments will be processed on a first come, first served basis once new funding becomes available, expected to occur on July 1, 2011. Please be assured that your LADWP solar inspection is unaffected by the incentive budget and will still take place and the system will be turned on by the solar inspector upon passing the solar inspection. The anticipated wait times for an inspection can be found below on this website. The payment delay will not have any affect on the incentive amount. We appreciate your patience and thank you for your participation in our Solar Incentive Program and contributing to the greening of Los Angeles.

It is pretty much anyone’s guess at this point what this all means. While there is strong support for the LADWP solar rebate program from the City Council (to say nothing of the support within the City itself), there is also a major political struggle ongoing between the Council, Mayor and the DWP. One clear loser in all of this - potential solar customers in the City of the Angels.

Glendale Water & Power (GWP)

Once upon a time, Glendale Water & Power offered the highest solar rebates around - until they suddenly didn’t offer any at all. Last summer, in a move that can only be described as bizarre, GWP quietly updated their website to announce that GWP would no longer be providing solar rebates for residential customers until July 2011 - if then! Here is the current update from GWP:

Funds/Incentives for this program are currently unavailable until July 1, 2011.

Thank you for your interest in Glendale Water & Power’s Solar Solutions Program. Due to the success of this program and the high interest from our community, we have received an unanticipated number of applications this year, and unfortunately at this time we are unable to continue offering our solar rebates due to program incentive limitations. However, all applications received before July 27, 2010 will be processed this year, and applications received after that date will be added to a waiting list.
New funding for our Solar Solutions Program will be available July 1, 2011. If you have submitted an application to be put on the waiting list, we will contact you at the beginning of June 2011, to find out if you are still interested in participating in our program. If you are and want to proceed, we will request that you provide us the additional documentation needed to continue the application process.
Please be aware that 2011 funding will also be limited. Applications will be processed off the waiting list in the order they were received.
For more information on our Solar Solutions Program, visit our web site at www.GlendaleWaterandPower.com or call the Solar Solutions Program at (818) 548-2750.

Worse still, GWP has advised us that they are suspending solar rebates for commercial customers for five years! (Curiously, we cannot find anything confirming that on the GWP website.)

If and when GWP gets its financial affairs in order, it is anticipated that their solar rebates in 2011 will be paid out as follows: Systems up to 30kW (DC) $3.22/Watt; systems greater than 30kW (DC) $0.394/kWh.  For affordable housing installations, the numbers are higher: $4.02/Watt and $0.596/kWh, respectively.

Pasadena Water & Power (PWP)

Compared to its neighbors in Los Angeles and Glendale, Pasadena Water and Power is a poster child for how to do things right. (Ok, that is perhaps daming with faint praise given the debacle in LA and Glendale, but still, PWP has been predictable and open about their solar rebates.) PWP last lowered its rebates in July 2010, and has now announced that its next rebate rate reduction (for residential customers only) will occur as of February 1, 2011.

As of this writing, PWP is paying $2.40/Watt for residential, $1.40/Watt for commercial, $2.15/Watt for non-profits and a whopping $4.00/Watt for low income/affordable housing installations.  PWP also offers PBI rebates at $0.363/kWh for residential, $0.212/kWh for commercial, $0.325/kWh for non-profits and $0.632/kWh for low income. The February rebate reduction for residential customers will bring those values down to $2.00/Watt or $0.302/kWh.

Burbank Water & Power (BWP)

Burbank Water and Power is presently on Step 2 of a 9-step solar rebate program.  While there are specified installation amounts associated with each step (as there are with SCE’s CSI program), BWP is also committed to reducing its solar rebates by “at least 7% per year until they are zero by the end of 2016."  The present Step 2 has the smallest installed capacity goal of just 825 kW - and as of this writing, the BWP website is reporting that only 30kW remain. Thus, it is anticipated that BWP’s rebates will step down sometime next year.

For residential customers today, the rebate is $3.14/Watt which will decline to $2.78/Watt when BWP drops to Step 3.  (For systems over 30 kW (AC), those rebate rates are $0.464/kWh and $0.415/kWh, respectively.)  Commercial customers are currently receiving rebates of $2.33/Watt which will decline to $2.07/Watt at Step 3.  (For larger systems over 30kW, those rebate rates are $0.288/kWh and $0.258/kWh, respectively.) Finally, non-profit customers enjoy rebates today of $2.67/Watt, headed down to $.2.36/Watt at Step 3.  (For larger systems those values are $0.311/kWh stepping down to $0.280/kWh.)

Feed-In Tariffs, Anyone?

Against this chaotic backdrop of widely (some would say wildly) varying solar rebates, the need for the market clarity of a true, state-wide feed-in tariff (FIT) stands in stark relief. A FIT established at the state level would provide the missing piece for solar growth - long-term predictability. While there are many FIT models, the essential concept is easy - the utility agrees to pay a set price (which could include increases over time) for every kilowatt hour generated for a specified period (typically ten to twenty years). It was Germany’s FIT that made that nation - with the equivalent amount of annual solar insolation as Maine - the leader in the world for installed solar and allowed its solar industry to explode. There is no reason why that success could not be replicated here - but so far utilities are balking at moving forward and the only programs coming out of the California Public Utilities Commission exclude residential and all but the biggest commercial customers altogether.

California can, and must, do better in the coming year. Are the folks in Sacramento listening? Time will tell.