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

We have just learned that Burbank Water and Power (BWP) - which had suspended its solar rebates back in April 2011 - is introducing what might be the most bizarre rebate procedure ever - a rebate lottery!  Here is the text of the announcement in its entirety from the BWP website:

Direction for how the program will accept new applications effective July 1, 2012 will be provided by the Burbank City Council on June 26. Staff is proposing the following:

1. Retain the current policy of dividing the remaining non-Performance Based Incentive (PBI) budget amount evenly between residential and small commercial solar installations. This is projected to provide approximately $60,000 in incentives for each customer category.
2. Lottery applications would be accepted from July 1 through September 1, 2012.
3. On September 4, 2012, BWP would use a lottery system to provide an order of rebate consideration for both residential and commercial (including Not-for-Profit organizations)solar applications. Priority will be given to business accounts that fall under a not-for-profit designation.
4. Applicants will be notified in early September of their lottery number and application status. ”Winners” will be provided one month to meet all previously defined system application requirements through BWP’s online PowerClerk system, including, but not limited to, a signed contract, meter service confirmation, and City permit application approval.
5. Rebates would open at Step 6: $1.28/watt for residential installations and $0.97/watt for commercial installations.

Additional details will be posted on this web site in early July 2012. If you have additional questions please contact the program manager at solarsupport@ci.burbank.ca.us

If this announcement is to be taken at face value, this means that they will be setting up a two-month lottery for the chance to be one of maybe 12 residential projects to get a rebate and only one fo 2-4 small commercial projects.  Seriously?  All this Sturm und Drang for a grand total of 16 rebates?  With no way for a BWP customer to know in advance whether they will be one of the lucky “winners"?

We sent an email to the address above asking for some clarification, but as of this publication we have not received a reply.  If you think this “lottery” is as silly as we do, please send an email to solarsupport@ci.burbank.ca.us - maybe they will be more willing to respond to you!

While we weren’t watching, the folks at Burbank Water & Power (BWP) pulled the plug on their solar rebate program, continuing the trend of on-again/off-again solar rebate programs at Southern California municipal utilities which has also included LADWP and Glendale Water & Power in the past year. Of the local munis, only Pasadena Water & Power has managed their program without interruption.

Here is the announcement from BWP’s website:

Due to the overwhelming success of the BWP Solar Support Rebate program and budgetary restrictions, effective April 21^st 2011 the program has been suspended.  Only those rebate applications in the on-line software PowerClerk with a status of “Confirmed Reservation” will be paid.  These payments will be made when all remaining documentation is provided, but no sooner than July 1, 2011.  All other solar rebate applications will be canceled and paperwork mailed back to the installer.  Please check back to this web site in the spring of 2012 for a possible update.  Solar Installers with customers that wish to proceed without a solar rebate should contact the program manager at solarsupport@ci.burbank.ca.us for details about the Solar Interconnection Agreement and other requirements.

Pardon us for a contrarian view, but when you have to suspend your program mid-year, it isn’t an “overwhelming success” — it is mismanaged.

Potential solar clients and solar companies alike need predictability - not programs that can simply disappear without prior notice.

Which brings us to another curious thing about this website announcement - it says that the effective date for the program suspension was April 21, 2011 but the earliest public disclosure that we can find about the change is this article in the local newspaper, the Burbank Leader, titled “Burbank Officials Suspend Solar Rebate Program,” dated August 30!  Now it is true that we do not monitor the BWP website on a daily basis, but it stands to reason that if this suspension had been announced earlier, we would be able to find some notice of it online before August 30 - four months after the suspension date! (Interestingly, the last press release displayed on the BWP website is from April 22 but it says nothing about the suspension.)

If that timing is accurate, it means that solar companies could have been devoting time and resources in a tight economy to developing business in Burbank for a third of a year, only to have that expenditure rendered largely useless at the caprice of another muni utility that cannot manage its budget.

(Editor’s Note: Part 1 of this series - Understanding Your Bill can be found here.)

Commercial solar power systems are economical now - and in the first part of our series we explained how understanding your bill is the key to understanding what is currently driving your costs and how much you will be able to save.

Now we turn to the next step in preparing to install a commercial solar power system - understanding the applicable rebates and tax incentives.  We have written at great length before about these topics, including a blog post summarizing the year-end state of all solar power rebates in the Run on Sun service area and our solar tax incentives page provides great detail into this topic for all types of system owners - commercial, residential and non-profit.  In this post we will analyze just those rebates and incentives that are applicable to commercial solar power installations.

PBI vs EPBB Rebates for Commercial Solar Power Systems

Rebates for commercial solar power systems come in two flavors - Performance Based Incentives (PBI) and Expected Performance-Based Buydown (EPBB) - but PBI rebates are by far the more common for commercial systems above 30 kW.  EPBB rebates are lump-sum payments made based on the expected performance of the system.  The rebate rate is denoted in dollars per Watt based on the calculated AC Watts for the system.  EPBB rebates are nice for the consumer as the money is paid as soon as the system is approved, but for larger systems, they represent too much upfront risk for the utility.  Since there is usually no requirement to monitor the performance of the system, the utility ends up putting out its money with little guarantee of reaping the expected benefit.

PBI rebates, on the other hand, are paid out over five years based on the actual performance of the solar power system as verified by monitoring devices attached to the system inverter(s).  PBI rebates are denoted in cents per kilowatt hour generated.  Since the utility only pays for power actually provided, rebate dollars are guaranteed of providing the bargained for benefit. However, because of the need to provide the utility with verified performance data, PBI rebates increase the Operations & Maintenance expense of a commercial solar power system - at least for the five years of the rebate.  On the other hand, if your system is well maintained and conservatively designed, you may actually receive more in rebate payments than originally projected.

Each utility will have a threshold system size beyond which the system owner must take a PBI rebate.

Regional Rebate Amounts for Commercial Solar Power Systems

Of late there has been a great deal of turmoil among the local municipal utilities regarding their rebates.  This has lead to uncertainty and delays.  As of this writing, here is the landscape for commercial solar rebates in the Run on Sun service area:

This means that as of this writing, only SCE and PWP are paying rebates on commercial solar power systems greater than 30 kW. While LADWP is expected to come back online this summer, in what form remains to be seen.

We believe that these suspensions have come about because the lobby for commercial solar rebates is small and too often silent.  Of course, when no public discussion occurs before the decision is made to suspend rebates - as happened in both Glendale and Burbank - it is pretty hard to organize solar supporters.  Indeed, in Los Angeles, where the plans to severely limit solar rebates were publicly debated, the solar community came out in numbers to argue for those rebates - which resulted in LADWP only suspending their program for a comparatively short time.

The conclusion in inescapable - until there is a statewide feed-in tariff at a reasonable rate that offers predictability along with economic viability, the market for commercial solar in this state will continue to be subject to the caprice of unaccountable bureaucrats.

Tax Incentives for Commercial Solar Power Systems

While the news regarding rebates remains murky, the news on the tax front is - at least for this year - very good.

One caveat before we begin - while we believe this information to be accurate as of the date that it is written, you must always consult with your tax professional as to the applicability of these incentives to your tax situation.  Accountants shouldn’t design solar power systems and we don’t give tax advice.

Commercial solar power systems qualify for a federal Investment Tax Credit of a full 30% on the direct cost of the system.  (By “direct cost” we mean those costs directly associated with installing the solar power system.  The applicability of the Credit to indirect costs - such as deciding to re-roof your building before adding solar - must be decided on a case-by-case basis - see why that tax pro gets paid the big bucks?)  That Credit can be taken over two years and is a substantial incentive if you have the tax liability to offset.  Fortunately for systems that are put in service in 2011, commercial solar power system owners can elect to receive a Grant directly from the Treasury for the full 30%, regardless of their tax appetite.  Moreover, that Grant is paid out typically within 60 days of project completion, as opposed to being credited in the next tax payment cycle.  This provision in the tax code is subject to expiration at the end of this year, and there is no telling whether a more conservative Congress will renew it.  (The tax Credit, however, continues through 2016.)

Commercial solar power systems also qualify for accelerated depreciation.  For the past several years, that was a five year period with 50% in Year 1 and the remaining 50% divided evenly over the next four years.  (California offers a similar depreciation schedule.)  However, once again 2011 is special.  This year alone, that depreciation is 100% in Year 1, meaning that system owners may realize more of their savings sooner.

Collectively, rebates and tax incentives can reduce the cost of a commercial solar power system by 50% or more.  When combined with the savings from the energy generated, it is easy to see why a commercial solar power system is one of the best investments a building or business owner can make.

Up Next - Part 3 of Our Series: Understanding Your Bid for a Commercial Solar Power System

We have just learned that as of February 26th, Burbank Water & Power has suspended solar rebates for commercial systems larger than 30 kW until August 1, 2013!  In taking this sad and unexpected step, BWP joins the ranks of LADWP (all solar rebates suspended until July 1 of this year at the earliest) and Glendale which earlier suspended all commercial solar power rebates until 2015!

This, quite frankly folks, is no way to run a railroad.  How a municipal utility can get away with changing course in mid-stream without holding hearings or providing notice to stakeholders is hard to fathom.  (At least the decision making process at LADWP has been debated in the open - which drew a significant crowd of solar supporters.)  We cannot find any information about why this change was made on either the BWP website, the City’s website or in local news searches.  We will update this story when we learn more.

(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.

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