Governor Schwarzenegger released the latest version of his comprehensive solar energy legislation that will become part of SB 1, a bi-partisan bill co-authored by Senators Murray (D-LA) and Campbell (R-Orange County). The bill would usher in a boom of solar development over the next decade equivalent to 40 new "peaking power" natural gas power plants.

Unlike last year's plan, the Governor's new Million Solar Roofs Initiative does away with a mandatory requirement that all California builders include solar energy systems on all new homes. Instead, this year's bill focuses on ensuring long term stability for solar through a guarantee of declining buy-down rebates for no less than 10 years.

"This is the best piece of solar legislation ever introduced in the U.S.," said David Hochschild, Director of Programs for the California-based Vote Solar Initiative. "This will send a message to the state and to the country that California is serious about this."

Current solar incentives in California have helped place as much as 80 percent of the entire U.S. solar market in the state, but the future of those incentives is uncertain. This new legislation would act to extend the current incentive structure in the state for ten years on a declining schedule of no less than 7 percent per year.

Hochschild expects the bill's initial rebate level for both residential and commercial systems to be somewhere around or above where it is today at $2.80 per watt. The rebates are designed to provide funding for roughly 3,000 MW of solar PV power, equivalent to around 1 million homes or businesses all with 3kW systems. With these high numbers of guaranteed installations, the bill could achieve one of its major goals of pushing solar prices downward by breaking the "chicken or the egg" scenario with respect to manufacturers committing to increased solar photovoltaic (PV) production.

"It sends the message that there's market certainty -- that's what solar manufacturers need to know before ramping up manufacturing," Hochschild said. "You can't get cost savings through economies of scale without the demand there."

A similar model was enacted in Japan in 1994 and Hochschild said the long term nature of those rebates brought down the cost of PV in 72 percent in 10 years.

To make room for this new capacity, the bill will also raise the net-metering cap from its current level of .05 percent to 2 and later 5 percent.

Funding for the incentives is unlikely to come from the state's ailing budget but from a small fee added to ratepayer electric bills. The Public Utilities Commission would ultimately decide how to arrange the funding mechanism.

California Builders won't be completely off the hook either. The state's building industry, which puts up approximately 150,000 new single family homes a year, will be required by 2010 to offer a solar PV option to prospective buyers. This means they will have to offer literature, educational material and other basic information regarding a solar option on the home. While this is a much softer measure than requiring builders to include solar on new homes, it could still represent a significant new market since research has shown that 10 percent of new home buyers would opt for a solar system if one were offered.

Making it an extra option to the consumer and not a mandate on builders could make or break the bill's chance of making it through the state legislature by eliminating resistance from the building industry.

"I personally would support more pressure on builders, but politically this will result in builders supporting it or at least being neutral on it," Hochschild.

Like last year's proposal, however, what could prove to be a sticking point is that solar thermal hot water technologies are again left out. The common reasoning toward legislation focusing solely on solar PV and not on solar thermal is that hot water systems are a more affordable up front commitment and cost competitive on their own.

Les Nelson, Executive Director of the California Solar Energy Industries Association, disagrees and cited a low number of new solar thermal installations, 600 per year for the entire state, as proof the industry needs a boost just as much as solar PV does.

"(Solar thermal) it's great, it's cost effective and competitive with electricity and people are staying away from it in droves," Nelson said jokingly.

Nelson said there would be "big issues" if the bill's final form includes nothing for solar thermal.

That's a point where Hochschild and Nelson disagree. Hochschild feels solar thermal is already cost effective on its own and that leaving solar hot water out of the bill won't be a big sticking point.

"Solar thermal is outstanding, and I expect that it will grow rapidly whether or not it's included in this bill," Hochschild said.

Either way, the specifics of Schwarzenegger's recent plan is likely to be changed and amended along its course. A lack of solar thermal could be the least of the bill's worries as the state's powerful electric utilities are sure to lobby against it in any form.

"It's not just solar they (the utilities) have been resisting, but the larger model of distributed generation." Hochschild said. "It threatens their way of doing business, it will be a big fight."