California Readies Largest U.S. Solar Energy Plan

According to solar industry sources and the draft plan released by the CPUC, the plan will be noteworthy in a few major ways: it will establish an 11-year solar rebate program running from 2006 through the end of 2016 for new and retrofit installations of solar photovoltaic (PV) systems. It will also provide substantial funding of $3.2 billion with $2.8 billion of that coming from the CPUC and $400 million coming from the CEC.

Initial rebate levels in the plan for solar photovoltaics and concentrated solar (up to one MW) will be set at $2.80 per watt in 2006 and are scheduled to be dropped by 10 percent each year thereafter. Rebates funds for next year alone will be replenished with $300 million while the PUC and CEC work out the plan's official launch in 2007.

The PUC plans to have the program funded by directing electric utilities to use their revenues from gas and electric distribution rates. The plan also leaves open the option that utilities recover associated revenues through the ratemaking process. Environment California, an environmental organization supporting the plan, expects any new surcharge on monthly bills to be in the range of 60 cents per month. Either way, low-income households will be exempted from any additional payments. Plus, 10 percent of the fund will be set aside for low-income and affordable housing projects.

While the exact nature of plan will be determined between now and 2007, the rebate structure is expected to move from California's current capacity-based approach to a performance-based incentive (PBI). For example, instead of awarding a project in one lump sum for the total capacity of installed PV, as current incentives are structured, a PBI plan would reward the project on a per kWh basis of energy output from the system. The PUC says these PBI plans may motivate better investments in and maintenance of solar projects, a point many industry experts generally agree with.

Additionally, rebates for solar heating and cooling, and concentrating solar (solar thermal electric) will be developed in 2006, according to a joint PUC and CEC staff presentation publicized Monday. The draft release of the plan added that solar water heating incentives should be provided only as part of a closely monitored pilot program.

The PUC's public release of the plan marks the beginning of the official one-month public comment phase, with a final vote among the five CPUC commissioners expected on January 12, 2006.

Industry experts say since the solar energy plan is being put forward through the CPUC, there are much higher expectations of its success than the former SB-1 bill introduced in the state's legislature.

A similarly ambitious policy goal came very close to passing for the past two years in the State Assembly. With Governor Schwarzenegger leading the charge, two versions of the SB1 bill failed after competing interests and amendments eroded essential bipartisan support.

Unlike the state legislature, however, the CPUC is widely considered to be in a much better position to make this broad solar policy a reality.

"It still has to be out for public comment but we fully expect it to pass," said David Hochschild, Director of Policy at the Vote Solar Initiative in California. "The PUC Commissioners are a lot more independent than the legislature. They are not running for re-election, cannot be removed, and don't have to resist campaign re-election dollars."

"What the PUC is doing is really producing the most important piece of the puzzle: the incentive dollars and the long-term policy, those elements are most important," Hochschild said. "The bottom line is that about three billion dollars over ten years will be the biggest solar incentive in the country and second biggest in the world behind Germany."

Bernadette Del Chiaro, Clean Energy Advocate Environment California, agrees that the odds for this becoming a reality in California are much higher than previous efforts in the legislature.

"I've learned my lesson peering into crystal balls but I would say this is absolutely different than the State Legislature," Del Chiaro said. "We're talking five people, and we just need three of those five people to vote for this. Three of those commissioners were appointed by the Governor. It's safe to say that four of the five are in lockstep with this plan."

Both Del Chiaro and Hochschild said the Governor's support has provided a tremendous level of public support. They each cited numbers between 45,000 and 50,000 of people who have written to the PUC in support of a major solar program.

"It has broken the record on any issue the PUC has received on any issue including the energy crisis," Hochschild said. "We're finally seeing the popularity of solar translate into real dollars."

Those real dollars are at just the right level, said Barry Cinnamon, President of Akeena Solar, and the new President of the California Solar Energy Industries Association (CALSEIA).

"What's important is that they seem to have done a good economic analysis to what it would cost and they're looking at funding it adequately in the neighborhood of three billion dollars," Cinnamon said.

Cinnamon is also pleased with the approach through the PUC, which insulates the plan from bitter conflicts that arose with SB1 in the legislature, much of these stemming from differences between what union interests and the solar industry wanted. While he won't bet on it, he doesn't expect the same union frictions to vocalize during this one-month public comment period.

"We're not seeing the same antagonisms between unions and the solar industry," Cinnamon said. "Everyone was a little burned during the legislative process and since then there have been olive branch gestures between the two groups."

Should the plan pass, as many are expecting it to, it won't be a one-stop-shop for rebates but rather will be administered through both the PUC and the CEC. The PUC will administer the solar program rebates for all existing residential buildings, commercial buildings, industrial and agricultural facilities.

The CEC will work specifically with the new buildings market, which is likely to benefit from a different approach. And unlike some versions of SB1, there is no mandate that builders use solar, an item that proved very contentious the first time around with builders and the legislature.

Energy efficiency audits will be required for certain structures to be eligible for the rebates while new construction rebates will require participation in the local utility's energy efficiency program. Advance meters and time-varying rates will be provided for solar.

The rebates won't be available for all Californians either. Since the PUC only has power over investor-owned utilities (IOUs), which provide power for approximately 80 percent of California, the plan will initially exempt municipalities like the Sacramento Municipal Utility District (SMUD) and the Los Angeles Department of Water and Power (LADWP), for example. Del Chiaro, however, expects the establishment of this program for IOUs will offer new leverage and pressure for municipalities to come up with similar programs.

For now though, even without municipalities, Del Chiaro said she will be more than pleased to see this battle finally won for solar in California.

"This is the motherload," she added. "This is where you start."

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