Solar Industry Wants Million Solar MW Cut

By Published On: August 6, 2010

California regulators face growing pressure to scale back the state’s ambitious Million Solar Roofs program as $3.3 billion in photovoltaic installation public subsidies dwindles. The pressure comes from within the solar industry itself. Big solar manufacturers and companies that offer turnkey installation agreements are urging the California Public Utilities Commission to scale back the program’s megawatt installation goal. The commission, however, is eyeing how to stretch the remaining money to cover more rooftop installations and keep the incentives flowing until 2016 when the program is supposed to meet its goal and then sunset. The California Solar Energy Industries Association is worried that reducing the megawatt target could spell a premature end to the program and that reducing incentives could hamper solar sales. The group includes small solar installers. “We don’t want this thing to fall off the cliff,” Sue Kateley, the association’s executive director told Current. A premature end due to a budget shortfall coupled with abandoning the megawatt target could cause many small solar companies to simply fold up their tents, leaving solar customers with few qualified people to service and maintain their systems over their 20-year plus lifetime, she said. Meanwhile, trimming program incentives could blunt sales of systems just when the market is heating up, solar industry executives say. That’s why many big and small solar companies alike are imploring the commission to keep the incentives at their present level. Beyond that, big solar and small solar seem to part ways. The big companies want to change the paradigm to grade the program’s overall success based on the degree to which it transforms the solar market, irrespective of the number of megawatts the state sees installed for its money. They claim that stretching out the funds “could detrimentally impact the market transformation goal” of helping to create a sustainable solar industry. Their national umbrella group, The Solar Alliance, told the CPUC in comments filed last week that stretching out the incentives could introduce market uncertainty and interrupt the brisk customer demand that is transforming the solar industry. The comments came as the CPUC considers mid-stream revisions to the ambitious California Solar Initiative, which is the major piece of the state’s Million Solar Roofs program. Ratepayers fund that program and utilities in turn pay out the incentives for solar system installations. Solar Alliance attorney Joan Armstrong noted the program’s megawatt target is “only a goal, not a requirement” and that the “most important” objective is to help create “a self-sustainable solar industry.” Pacific Gas & Electric and the California Center for Sustainable Energy voiced support to the CPUC for slacking off on the megawatt goal. Market momentum is more important than how many megawatts are installed, wrote Andrew McAllister, center policy and strategy director, in comments to the CPUC July 28. The center administers solar incentives in San Diego County. Kateley said that big solar installers can get ample business from installing systems for utilities should the California Solar Initiative program dwindle, but smaller installers don’t have that option. She said that in revising the program, the CPUC should seek to create a sustainable solar industry in the state that is balanced between a mix of both big and small independent companies. A feed-in tariff, in which utilities are required to pay a set tariff for any solar power fed into the grid, would be an effective supplement to the solar initiative in creating a sustainable solar industry, she added. California Governor Arnold Schwarzenegger and state lawmakers kicked off the solar program with much fanfare in 2006. It’s supposed to run through 2016 if the money lasts and see that 3,000 MW worth of photovoltaic systems are installed statewide on as many as a million separate rooftops. Approaching a million installations is slow. To date, the state has seen 609 MW worth of systems installed on about 65,000 rooftops, according to a recent CPUC report. Less than halfway through the program some half the total money either has been spent or is reserved for installations. While those future installations already approved could more than double the total capacity installed, they still could leave the program short of its megawatt goal. To address the potential shortfall, CPUC president Mike Peevey issued a decision for comment last month covering the lion’s share of the state solar program in the areas served by investor-owned utilities. He proposed trimming performance-based incentive payments (which are paid out over five years based on the actual power produced by systems, as opposed to the upfront payments that help underwrite system purchase and installation costs). He also broached reducing incentives for government and non-profit organizations and shifting $20 million earmarked for administering the program into the incentive budget. Peevey noted the CPUC is finding that performance-based incentive payments are costing more than the commission budgeted when it set up the program. He stated that by taking advantage of third-party financing--which captures lucrative tax incentives--solar companies offering power purchase agreements to government agencies and non-profits account for a third of the megawatts being installed, more than expected. Peevey reasoned that given the tax incentives, the CPUC could trim incentives for government and non-profits by 50 percent to keep money earmarked for those organizations within budget. Barry Cinnamon, Westinghouse Solar president, concurred. The cut backs are warranted, he said, because at this point the higher incentives are just “gravy” for the installers who collect the big federal tax credits on government and non-profit projects. Meanwhile, in light of the budget overruns for government, non-profits, and performance-based incentive payments, Peevey’s initial decision suspended new applications for these categories. However, under pressure from the industry, Peevey lifted the suspension July 29 in response to concerns about the potential impact of holding up the payments on the solar market’s “development.” He said that the postponement “creates an unacceptable level of market disruption.” In the interim, the CPUC is continuing to weigh whether to trim incentive payments. It’s doing so at a time when the price for solar modules has declined.

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