Posts Tagged ‘California Solar Initiative’

I wrote this post for Grist, where it first appeared.

As the Great Recession drags on in California — unemployment rate: 12.4 percent, state government in a state of collapse — the solar boom continues.

The Golden State’s decade-long program to install 3,000 megawatts of photovoltaic arrays on residential and commercial rooftops kicked off in 2007, not too long before the global economic collapse began.

Only three years in, the program — known as the California Solar Initiative — has achieved 42 percent of its 1,750 megawatt target in markets served by the state’s three, big investor-owned utilities, according to a report released Friday by the California Public Utilities Commission. Completed projects account for 20 percent of that 42 percent figure, while another 22 percent are pending installations. (In 2009, the solar program eliminated 180,136 tons of carbon, the equivalent of taking 31,000 cars off the road.)

Demand for solar is accelerating even as the housing market remains in the doldrums. Applications for the solar rebate program hit a high of 134 megawatts in April, and in the first six months of 2010 a total of nearly 300 megawatts’ worth of projects were received.

“The monthly demand for new applications has been well over 1,000 applications per month for the past year,” the report stated.

And Californians’ appetite for solar has grown even as the rebate for new photovoltaic systems has declined, as it is designed to do over the life of the program.

State and federal tax incentives have cut the cost of a solar array roughly in half. And last year’s global glut of photovoltaic modules and the influx of Chinese solar companies into the U.S. market has led to drops in the price of solar panels. (Installation costs still account for about half the price of a solar array.) Overall, the cost of solar systems smaller than 10 kilowatts has dropped by 15 percent between 2007 and 2010 while the price of bigger arrays has fallen 10 percent, according to a report released Friday by the California Public Utilities Commission. (In general, a 10-kilowatt solar array could power a large home or commercial building.)

But one of the biggest factors persuading Californians to go solar appears to be the increasing availability of solar leases. These financial arrangements allow homeowners to have a system installed at little or no upfront cost in exchange for a monthly fee.

Companies such as SolarCity, Sungevity, and SunRun offer solar leases and retain ownership of the rooftop arrays. In 2009, such ownership of solar systems enrolled in the state program jumped 155 percent. Forty percent of the megawatts now generated through the program are owned by leasing companies or other third parties.

Fueling that trend has been the hundreds of millions of dollars that financial giants such as U.S. Bancorp have poured into solar financing funds for SolarCity, Sungevity, and SunRun. So far this year, PG&E Corporation, the parent company of California utility PG&E, has created funds totaling $160 million to finance solar leases for SolarCity and SunRun customers.

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The other day I ran into Danny Kennedy, president of solar installation company Sungevity, on the playground as we were picking up our kids at Malcolm X Elementary (we live in Berkeley). I had spent the week chronicling layoffs at various solar and wind companies so it was with a bit of trepidation that Green Wombat asked Danny how business was going at at Sungevity.  “Great,” he replied as I quizzed him about the impact of the recession. “We’re as busy as ever.”

Apparently so. A report released Wednesday by the California Public Utilities Commission shows that residential and commercial rooftop solar installations in the Golden State more than doubled in 2008 from the previous year to 158 megawatts. What’s more, a record-breaking number of applications to participate in California’s $3 billion solar rebate program were filed in December as the drumbeat of bad economic news grew deafening and the state’s unemployment rate hit 9%.

Are Californians being crazily contrarian? While one would think that a $30,000 solar array would be one of those luxuries most people would put on the back burner in bad times, there are some solid economic reasons for the surge. First, rebates for solar systems under the California Solar Initiative get less lucrative in 2009 as incentives fall as the amount of installed solar rises.  Then in October Congress lifted the $2,000 cap on the federal tax credit on solar arrays, allowing homeowners and businesses to take a 30% tax credit on systems installed after Dec. 31.  Add in the state rebate and the cost of a solar system in California suddenly fell by half.

“The surge in applications occurring in the fourth quarter of 2008 is particularly noteworthy given the slowdown in the economy that occurred during the same time period,” the report’s authors noted. “In addition to environmental benefits such as cutting greenhouse gas emissions and other pollutants, it appears that solar energy is benefiting California by serving as an economic bright spot in the economy.”

And therein lies some lessons as the U.S. Congress debates how to promote green jobs. Two years into the California Solar Initiative, the taxpayers’ investment of $775 million in solar rebates has yielded $5 billion in private investment in solar projects and rapidly expanded the state’s renewable energy industry, according to the report. That’s helped create strong solar companies like solar cell maker SunPower (SPWRA) and markets for thin-film solar companies such as First Solar (FSLR). The decade-long program is on track to achieve its target of 3,000 megawatts of rooftop solar and in the first two years of the program more solar has been installed in California than in the previous 25 years.

While California regulators expect the pace to continue in 2009, the big unknown is how many homeowners and business owners will drop out of the program and cancel their applications if the economy continues to deteriorate rapidly this year. The current dropout rate is 15%, according to the report.

“We are hopeful that many of those pending projects will move forward,” Molly Tirpak Sterkel, who oversees the California Solar Initiative for the utilities commission, told Green Wombat. “We’re also cognizant of the economy and economic forces that may pose a threat to those installations.”

Demand for solar is far stronger in Northern California than in sunny SoCal. Northern California utility PG&E’s (PCG) customers have installed more than twice the megawatts of solar than Southern California Edison (EIX) customers. And the report notes that while applications for commercial arrays in PG&E’s territory rose 71% between April and December 2008, they fell 23% in Southern California Edison’s area. San Diego Gas & Electric (SRE), which covers a much smaller service area, saw applications triple for residential solar arrays.

Sterkel says it is unclear why Northern Californians are going solar at a much faster rate than their southern counterpart, but it may be due to differences in electricity pricing and more mature solar markets in regions like the San Francisco Bay Area. “There’s just that many more solar companies with experience, installations and sales channels, ” she says.

Solar panels seem to be sprouting from Bay Area rooftops like California poppies after a late winter rain. In Berkeley, the city has launched a program that pays for residential and business solar arrays upfront and let owners pay the cost back over 20 years through an annual assessment on their property taxes.

Which also may explain why I seem to be seeing more of those Sungevity signs around town.

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