Fiscal Crisis Threatens California Solar Tax Credit

If the lights in your home burn bright thanks to solar panels mounted on your roof or a small wind turbine spinning overhead, your cost-per-watt of electricity is higher than the electrons flowing to your neighbor’s fossil fuel-powered radio, factoring in the cost of the system.

SACRAMENTO, California – June 27, 2002 [] If you live in California, though, your decision to tread lighter on the planet makes far more fiscal sense thanks to a mix of buy-down programs as well as local and state-wide tax credits. But the California advantage may soon become victim to the mammoth fiscal crisis facing the Golden State. Last week, Gov. Gray Davis said he supports suspending the Solar Energy System Credit (SESC), which provides taxpayers with a 15 percent tax credit on PV and wind systems up to 200 kW, to help fill the US$23.6 billion budget shortfall. The SESC became law as Senate Bill 17 in May 2001, after passing through the state legislature and is due to expire at the end of 2005, or earlier if Gray has his way. Sandy Harrison, Public Information Officer of the California Department of Finance confirmed that the measure is on the chopping block and has been adopted by the conference committee of the state Senate and Assembly. “That is something that is on the table as a partial budget balancing measure to try and get a deal done here,” said Harrison who added that eliminating the plan will save the state US$33 million. The RE community, born of activism and evolved into a viable industry is not going to let the SESC go away without a fight. Tuesday morning, David Hochschild and Adam Browning of The Vote Solar Initiative based in San Francisco sent out an urgent e-mail message encouraging solar enthusiasts to voice their opinions with Davis’ Sacramento office. “The state of California is in debt principally because of costly deals made with out-of-state energy companies,” said Hochschild, the organizations Director of Programs. “While it is true that the state is in tough fiscal straights, as I understand it, the state will actually make money (by keeping the tax credit in place) because of increased state property taxes.” Hochschild called the proposal to suspend the solar tax credit “misguided, unconscionable and shortsighted environmentally and fiscally.” Although the tax credit has solar in its name, it also applies to wind power systems of similar size. Mike Bergey, President of Bergey Wind Power based in Oklahoma said California is his company’s biggest domestic market for the 1 kW and 10 kW wind turbines his company sells. “Our view is that while we are certainly understanding of the budget situation, cutting back on energy sources that reduce peak demand would seem to be an unwise retreat and perhaps penny wise and pound foolish,” Bergey said. Last summer, when California faced rolling blackouts because of electricity supply problems during peak hours, small wind systems could have helped lessen the severity of the situation, according to Bergey. “A lot of people don’t realize that the availability of wind power coincides with peak electricity use in many parts of California,” he said. When homeowners consider adding a PV system to their roof or installing a small wind turbine, payback period inevitably enters into the discussion and this worries Bergey. “It (repealing SESC) will definitely slow business in California because customers are looking at the pay back period,” Bergey said. On small wind systems payback will increase for a year or two and that will definitely dampen sales somewhat.”
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