Despite a huge pot of incentive dollars available for commercial and residential solar hot water, California’s entire CSI Thermal program remains cloudy. That is, while there has been some limited success in the Northern California commercial program, the rebate remains in its earliest (and richest) step one phase for both residential and commercial property owners for all utilties/administrators.

If you're not familiar with the CSI Thermal program and incentives, here's a brief rundown of the incentives and eligibility requirments. In addition to the regular program, there's an additional (and more lucrative) incentive for low-income housing. Low income single family home owners can receive $3,750 in rebates — double the regular rebate — and for commercial, qualifying low-income multifamily units receive $19.23 per therm displaced instead of the $12.82 per therm displaced in the regular CSI Thermal program. Both commercial programs are limited to $500,000 maximum rebate, however.

So there's a lot of untapped funds out there, but why? Let’s look at the current stats for residential and commercial applications for the regular program, as of the third week in July 2012, and then we'll comment about the challenges.

Residential Solar Water Heating: Few Takers

According to the CSI Thermal program’s public incentive tracker for gas, less than 2% of the step one incentive has been allocated in PG&E, CCSE/SDG&E, and SoCalGas territories. For the regular program, a $1,875 state rebate is available for single-family residents plus the 30% Federal Investment Tax Credit (ITC).

We believe that the reason for the slow uptake in the solar thermal and space heating residential sector is that natural gas prices remain at historical lows, causing solar thermal to have a relatively slow return on investment for single family home owners.

To boost more home solar thermal sales, either manufacturing and installation costs for OG-30O solar thermal systems have to come down — difficult — or natural gas prices have to go up — unlikely for now. Another short term scenario would be for the CSI Thermal program to increase the incentive amount for residential solar hot water, making solar thermal more competitive with the current price of gas. Of course, that would result in fewer people receiving the rebate, but at least homeowners might actually use it. If there's still no interest, then the money can be redistributed to the commercial CSI Thermal program which is seeing some success:

Commercial Solar Water Heating: Mixed Results

The commercial side of the CSI Thermal program for gas customers is somewhat better. With up to $500,000 per installation available to apartment buildings, nursing homes, hotels, hospitals, laundromats, condos, and other multi-unit residential building owners, one would think the program would be in step 2 by now, but that's not the case. The incentive pool is slowly drawing down in PG&E and CCSE territories, but commercial property owners in SoCalGas territory (the Los Angeles vicinity) have had surprisingly little interest.

For PG&E customers, of the $11,700,000 available in step one, just $3,993,244 has been allocated, or about 34%. So, there has been some interest there, but still about 2/3 of the incentive pool left at this ($12.83/therm) step.

In CCSE/SDG&E territory, the numbers are better. Of the $3,000,000 available in step one, $1,632,745 has been spoken for by various commercial applications. That’s a respectable 54%, so rebate information and solar thermal financing appear to be having an effect in the San Diego area, which CCSE represents.

The bad news (opportunity?) comes from Los Angeles. There, commercial and apartment building owners are not getting the message in the L.A. basin, which is administered by SoCalGas. With $15,300,000 available in step one, only $994,574 (about 6.5%!) has been used so far.

There are multiple problems here. First is the lack of public awareness about the incentives. Second, there is the lack of awareness or understanding about new solar thermal PPA financing, mitigating upfront risks. Third, financiers for solar thermal PPAs often seek very large projects, leaving out smaller commercial installations that might otherwise be aggregated into a fund, so the finance community has to find better models. Finally, as discussed in an earlier blog post, the L.A. area has a lack of solar thermal installers eligible to receive the CSI Thermal incentive. Training and outreach are needed to plumbers and contractors who could transition into the market.

None of these issues will be addressed overnight. In the meantime, solar thermal installers in Los Angeles who do qualify for the incentive must overcome the other challenges of marketing and public awareness and solar thermal PPA financing for smaller commercial installations.

Free Hot Water is an engineer, manufacturer, distributor of high quality solar thermal systems for commercial and residential applications. Browse our catalog of over 1200 products at www.shop.freehotwater.com or create an account to become a FHW certified installer.