A Bright Future with the California Solar Initiative

The California Million Solar Roofs Initiative, its legislative incarnation SB1, and now the proposed California Solar Initiative (CSI) have captured the imagination and widespread, enthusiastic support of the solar and environmental communities and the California public at large. The state’s Public Utilities Commission (PUC) – which last week unveiled the most promising version of the plan – received as many as 50,000 public comments in support of the initiative. Many newspaper editorials from all across the state have spoken out in favor of the plan. And as opposed to the legislative process, there is little doubt the plan won’t be passed when PUC commissioners meet on January 12 to cast their votes.

The plan builds on the successes and addresses problems of the SGIP and ERP in a way that puts our state on a firm, sustained, orderly development path for solar commercialization. It will provide the stability and confidence needed to attract the investment in new production, improved system design and installation techniques, more effective delivery infrastructure, and expansion of solar industry that will achieve the cost reductions needed to bring us into the Solar century. Many have looked at Japan’s solar rebate program and concluded that substantial “buy-down” incentives are key to success. Others conclude from the German program that a high “feed-in” tariff is the key factor. It has not been the specific incentive chosen that have made these programs succeed. Rather, it has been how each program has been implemented and sustained over time. In order to accelerate the long-term cost reductions required for full commercialization, the solar industry needs reliable, growing and sustained domestic market volume. PV manufacturers require long-term, reliable programs in order to invest the capital required to ramp up production to meet that demand. Therefore, to be effective, any renewable energy commercialization program must be based on the principles of Sustained, Orderly Development. Any public policy aimed at accelerating the commercialization of sustainable technology must itself be sustainable and lead to sustainable changes. It must expand the sustainable market, stimulate new production, and lower costs in ways that becomes embedded and permanent. What is needed are sustained incentives that will expand supply, help reduce transactional costs, and lower installed costs over time — and this is what the PUC has proposed. Now that the fight for a long-term program appears won, it’s critically important to make sure the next year of final program development moves ahead carefully in order to correctly address some issues. The few suggestions to the proposed PUC plan that I have include: – Be very careful in adopting a pay-for-performance or performance based incentive (PBI) plan. The CEC PBI pilot clearly shows the weakness of this approach in the real world. Even though, for commercial scale projects, it was literally the only game in town, just 30 percent of the $10 million PBI fund was used after nearly a year of the pilot program. If a PBI is implemented it should be, as proposed, a split between PBI and upfront buy-down. I strongly suggest that no more than 25 percent of the incentive value be set as a PBI. That amount is clearly large enough to assure that the steps needed to promote good design and installation are taken. Also have the PBI pay out in three years or less. Any system performing well for the first couple of years will continue to do so with a high level of confidence. – While keeping the downward pressure on PV prices by ramping down the incentive levels, be sure to keep the flexibility for the incentive levels to respond to the market and module costs. It will take some time to translate improved investor confidence generated by sustained, reliable programs like this into plant expansion and to resolve the current supply/demand imbalances. Keep the ability to slow down or speed up the ramping down of incentive levels in a market responsive way. – Be sure that the implementation details lower, not increase, transactional costs. Inch thick mounds of paperwork do not lower costs nor improve performance. Also be sure that the incentive process is efficient enough to avoid creating unsupportable cash flow problems for otherwise cost-effective PV projects. Most California PV purveyors cannot afford payment delays beyond 60 days after a project is completed and inspected. It is also critical that the solar industry responds to the challenge and quickly make the investments and improvements that will get PV costs again on the downward path. To do otherwise will be to give credence to this initiative’s critics. Given the program and policies the PUC is proposing, PV has the ability to meet the aggressive penetration levels needed for it to play a significant role in meeting the sustainable, clean energy targets that a wide variety of pressing concerns require, and in the time frames needed. PV deployed under sustainable energy policies that are themselves based on sustained, orderly development and commercialization principles like the California Solar Initiative can help transform our state and the very world we live in. About the author… Donald Osborn is CEO of Spectrum Energy Inc. a solar photovoltaic systems integrator. Osborn is also the former head of the Solar Program of the Sacramento Municipal Utility District (SMUD) which was involved in the installation of approximately 10 MW in over 1000 solar projects up until 2002. He is also the outgoing chair of the American Solar Energy Society (ASES) Policy Committee. He received the 2001 Energy Globe award and the 2000 ASES Abbot Award for significant contributions over 25 years to the solar energy field.
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