California Formally Adopts Performance-Based Solar Incentives

The plan, a 10-year, $2.9 billion program designed to foster increased used of solar energy in the state, now will include a performance-based incentives. The California Public Utilities Commission (PUC) adopted the plan last week following the signing of SB1 into law.

Beginning Jan. 1, 2007, the PUC will offer performance-based incentives for solar energy systems greater than 100 kilowatts (kW) in size installed in businesses and other large facilities. For systems smaller than 100 kW, incentives for residential and small businesses will be based on each system's estimated future performance. Both mechanisms reward the selection and proper installation of high quality solar systems.

This decision implements the first phase of the CSI, which was adopted by the PUC in January 2006. The goal of the Solar Initiative is to increase the amount of installed solar capacity in California by 3,000 megawatts (MW) by 2017. Offering incentives for small and large solar energy projects will help create a sustainable solar industry and boost solar power's long-term position in California's energy portfolio while immediately providing clean energy for residents and business owners.

Beginning Jan. 1, 2007, residential and small commercial systems will receive incentives of $2.50 per watt and will be eligible for additional federal tax credits. Government and nonprofit organizations will receive $3.25 per watt to compensate for their lack of access to the federal tax credit. For systems larger than 100 kW, incentive payments over the first five years of operation will be $0.39 per kilowatt-hour (kWh) of output for taxable entities and $0.50 per kWh of output for government/nonprofit organizations.

The incentive program will be managed regionally by the existing self-generation program administrators -- Pacific Gas and Electric Company, Southern California Edison, Southern California Gas Company, and the San Diego Regional Energy Office. The administrators will develop a statewide online application to help simplify the process for solar applicants.

SB 1, by contrast, requires the Commission to implement the California Solar Initiative with a number of specific provisions, particularly with regard to total budget dollars and eliminating funding from gas ratepayers. Importantly, SB 1 is consistent with most of the key California Solar Initiative program aspects in this decision just adopted, particularly the adoption of performance-based incentives and raising the cap on net metering to enable more systems to get credit for hours when solar energy production exceeds the customer's immediate energy needs.

Certain program details and budgetary issues will need future modification in light of SB 1, and the Commission will modify this decision as necessary before SB 1 takes effect on Jan. 1, 2007.

"Today's decision marks another milestone in California's commitment to renewable energy," said PUC President Michael R. Peevey. "Solar power is an important part of the Commission's plan to increase the amount of renewable energy in the state. Today's decision focuses on resolving critical path issues needed to get the California Solar Initiative up and running."

The proposal the Commission voted on is available on the PUC's website at the link below.