California Solar Outlook for 2008

After last year's competing reports on the California Solar Initiative (CSI), where the California Public Utilities Commission (CPUC) declared victory and SunCentric predicted a trainwreck, RenewableEnergyAccess.com kindly offered the California Solar Energy Industries Association (CALSEIA) an opportunity to provide current information on the status of the CSI from an industry perspective and give other updates on the new initiatives in California. CALSEIA appreciates this opportunity. This article will provide a brief review of the status of the CSI and an outlook for 2008.

CSI Status

The CSI started in 2007 and immediately the industry effectively reserved the highest incentive levels, with large commercial projects consuming the lion's share of the rebates. The program was created in the Legislature and rules for how the program works were established through the California Public Utilities Commission (CPUC). The program rules set a schedule for rebate levels to drop as reservation milestones were achieved. Unfortunately, in 2007 the industry saw the incentives drop while costs for product, labor, insurance, and completing the required paperwork increased. Because of this, CALSEIA is urging the CPUC to reallocate its budget to stabilize the rebate levels for commercial projects and provide a small increase to help the residential retrofit market.

CALSEIA was vociferous in its critiques of the program administration, which was particularly burdensome to the residential market sector. Thankfully, the CPUC recently approved changes to the program so that much of what was reported about the onerous administrative problems with the program has been addressed through changes to the program handbook that will take effect this month. Streamlined paperwork and consistent rules for estimating system size for remodeled homes will make a difference.

CALSEIA is hoping for further changes such as reexamining how the information collected in the "project cost worksheet" is used and addressing the waiver for Performance Monitoring Reporting Systems (PMRS) on small projects.

The project cost worksheet requires the installer to provide cost for all major components in the system. This should not be a problem unless this information is used outside of the program, something that happened when the state's tax collection agency, the Board of Equalization, began auditing solar businesses to assess back-taxes for sales tax on labor (CALSEIA subsequently petitioned the Board to clarify that it did not intend to impose sales tax on labor). The problem was that the Board had gathered this information from the data published for the rebate programs. CALSEIA's objective here is to ensure that the data the CPUC collects is delivered to them for internal use only — rather than for uses not intended.

With respect to the PMRS requirement, the CPUC requires all customers to pay for 5 years of data communication and performance monitoring and reporting services, subject to certain cost caps. This is something that CALSEIA supports. It is really great to go online and check the current and historical output of solar electric systems! The PRMS costs work like this: PMRS vendors charge a fee to provide online data on system performance and operation. In order to use their services, hardware and broadband internet or modem access is necessary. The CPUC established a rule that if the PMRS cost is greater than 1 percent of a project, the project can be exempted from the PMRS requirement if the installer shows an estimate for the installation, hardware, and data collection services. For smaller systems, we have found that all of these projects will exceed the 1 percent cost cap and we believe that the paperwork to verify a universal truth is simply unnecessary. This is particularly true in areas where customers lack internet services or on-site telephone (a growing number of homes in California are now using cell phones exclusively and dropping regular land-line telephone service).

2008 Outlook

The following is a summary of what CALSEIA sees on the horizon in 2008 — for the suite of solar technologies:

1. Continued focus on extending the federal tax credits for commercial (ITC) and residential (PTC) with an increase in the cap on residential solar.

2. Completion of a draft guideline for complying with local California Fire Department requirements for setbacks and venting areas. These guidelines are being developed through a Task Force with the California State Fire Marshal. The impact to solar is that the amount of roof surface area available for solar panels will be reduced and in some cases, so significantly reduced that projects will no longer be viable. The guidelines will be voluntary until adopted into regulation and will likely undergo further changes before adoption into a regulation, but local Fire Departments can adopt them as a local mandate. CALSEIA expects these guidelines to be a starting point as we develop hardware or technology solutions to address fire service access and venting requirements.

3. Implement the Solar Water Heating (SWH) Efficiency Act. CALSEIA will work with the CPUC to implement new legislation enacted in 2007 to create an incentive program for solar water heating. Expect a program to roll out after an evaluation of a current pilot program in San Diego.

4. CSI Incentives for Solar Thermal. The CSI does allow solar thermal that displaces electricity to receive incentives. New program changes adopted by the CPUC in December will allow solar thermal systems that displace electricity to qualify. Further refinements are in the works for 2008 to address metering and warranty requirements for these types of products.

5. Implement a feed-in tariff. A feed-in tariff, similar to the programs in use in Europe, provides opportunities for renewable energy production to be sold to the utility at a higher rate so as to encourage an acceleration in the use of renewable energy technologies. In December 2007 a new feed-in tariff was approved by the CPUC for wastewater and water treatment facilities using a "market referent rate" (an electricity rate based on the cost of electricity generated by a natural gas power plant) with a carbon-adder and time-of-use adjustment factors. Look for this new tariff to take effect in January 2008. Eligible projects cannot take the CSI incentive.

6. New solar legislation. CALSEIA will be working with members of the California Legislature to seek their help in enacting new laws that will increase opportunities to expand the use of solar technologies in California. With a looming state budget deficit, bills that impact the state budget will have a hard time. CALSEIA is working on passage of an extension to the state's property tax exemption for solar improvements. This bill does have budget implications but since it is an extension of current law, CALSEIA is hopeful that the bill will ultimately be approved. The current property tax assessment exemption is authorized until 2008-09 fiscal year. In addition, new legislation will be introduced that will allow CSI participants to sell excess electricity back to the utility. This bill is likely to use the market referent rate as a starting point. CALSEIA also hopes to see new legislation to extend the law enacted in 2007 that allows solar customers to opt in to Time of Use rates, rather than mandate this rate structure. CALSEIA is also seeking to enhance the state's Solar Rights Act.

7. A ballot initiative that would require utilities to obtain 50% of their electricity through renewable sources by 2025. In California, parties may take a proposed law directly to the voters if they collect enough signatures in support. A new ballot initiative to increase the State's Renewable Portfolio Standard (RPS) to 50% by 2025 has been proposed and proponents are collecting signatures now. CALSEIA has concerns that the proponents have crafted a bill focusing on utility-scale renewable energy when the state needs both distributed generation and utility-scale renewable energy to meet its energy needs. Further complicating the proposal is a requirement that all RPS projects be "prevailing wage" projects, which is generally a signal that the projects will mandate union labor (rather than competitive bidding). This ballot initiative could collect enough signatures to qualify for the November 2008 election ballot.

8. Rate Cases. CALSEIA was an intervener in the Pacific Gas & Electric (PG&E) General Rate Case and the San Diego Gas & Electric (SDG&E) General Rate Case. By engaging in the rate case proceedings, CALSEIA focuses on ensuring that new rates will be "solar friendly" for both residential and commercial customers. PG&E's new rates take effect this month. The SDG&E rate case should be completed later this year. The next General Rate Case will be Southern California Edison (SCE).

9. Public Utilities. In California there are several investor-owned utilities such as PG&E, SDG&E and SCE; and many publicly-owned utilities such as the Sacramento Municipal Utility District (SMUD) and the Los Angeles Department of Water and Power (LADWP). The investor-owned utilities are governed by the CPUC and the publicly-owned utilities are governed by locally elected boards. The publicly-owned utilities have solar incentive programs that vary throughout the state. Significant programs are underway in Los Angeles and elsewhere to increase the use of solar but there are hurdles because of restrictions on allowing 3^rd party ownership and rate schedules that challenge solar paybacks. CALSEIA will try to help encourage new rules at publicly owned utilities to help encourage greater use of solar technologies.

10. Efficiency Requirements for Pool Pumps — requirements that impact solar pool heating. In 2008 the Energy Commission will adopt regulations governing pool pump and pool installation practices to reduce electricity demand from pool users. Some of these changes have implications for solar pool heating, particularly limits on the number of hours the pool pump can operate and the flow rate of the pump. CALSEIA has been actively participating in this issue and helped redraft the proposed regulations in a manner that will not impede the operation of solar pool heating systems.

The solar industry in California is generally optimistic because it has been through the boom-and-bust cycle for nearly 30 years. CALSEIA believes that by giving some attention to the rebate levels to ensure market interest and some further streamlining, the CSI will ultimately prove to be the premier solar program and new programs will provide support and expand the use of the full suite of solar technologies.

CALSEIA will continue its efforts to expand the use of all solar technologies in California and establish a sustainable industry for a clean energy future.

This is the first in a series of columns written by CALSEIA. Future columns will provide legislative updates and other new initiatives originating in California. CALSEIA, the California Solar Energy Industries Association, was founded in 1977. CALSEIA is the largest solar industry association and represents all market segments in the solar industry: solar thermal, solar electric, concentrating solar power, manufacturers, distributors, installation companies, designers and consultants.

Sue Kateley is Executive Director of CALSEIA, a position she returned to in 2007 following 20 years at the California Energy Commission. From 1983 to 1986, Sue served as Executive Director of CALSEIA. Sue's first job in the solar industry was as a purchasing agent for a solar company located in the Sacramento area, where she worked from 1978 until 1981.  In 1981, Sue started working for CALSEIA as Technical Adviser.