A leading state rebate program for rooftop solar is nearly out of money, and the amount of money it's paying out has declined steeply. Yet Californians keep installing more solar. In the first quarter of 2013, almost a fifth of the solar installed in the state was put in without subsidies. As prices continue to fall and increasing costs of fossil fuels make solar ever more attractive, has California reached a solar tipping point?
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Greentechmedia's researcher Shayle Kann thinks it might have. In a post published Friday, Kann noted that of 71.3 megawatts of distributed solar installed in California in the first quarter of 2013, 13.2 megawatts came into production without any state subsidy.
Not that those 13.2 megawatts were built with no financial incentives whatsoever. There's still the federal Investment Tax Credit (ITC), which refunds 30 percent of the cost of rooftop solar installations. That credit is set to expire in 2017. There are also aspects of the way California fine-tunes utility rates that make solar work out to be cheaper than buying power from the local utility, at least in some areas for some ratepayers.
And the biggest incentive for solar installation has been net energy metering, in which rooftop solar owners run their electric meters backwards with every kilowatt-hour their solar panels produce, until their monthly bill zeroes out. Net metering can make solar very attractive, especially for homeowners with hefty monthly electric bills. (Though given that net metering programs also allow property owners to shell out their own cash to generate free power for the utility once their meters have been zeroed out, calling it a "subsidy" is stretching the meaning of the word.)
Despite the existence of other incentives, Kann suggests that that non-subsidized 13.2 megawatts of new solar suggests that things are about to change in California:
[Formerly,] once rebate funding was depleted, the market disappeared. This served as a de facto cap on residential solar growth, and it is why the California statistic is so significant. If state-level incentives are no longer required, there are 3.5 years of runway before the ITC expires for the market to adapt, expand and mature. Assuming nothing else serves as a major barrier -- and this is a big "if" given net metering battles and the ever-increasing need for project finance -- the sky is the limit.
In other words, with plummeting prices making solar ever more attractive as an alternative to paying your utility, California might not need to encourage solar development anymore: it might just snowball without any help.
Other analysts are more cautious. In a Tuesday post on the blog theenergycollective, Haas Business School energy expert Severin Borenstein suggests that those above-mentioned rate structures have more to do with the recent solar juggernaut. Extravagant power consumers can pay much more per kilowatt-hour than those of us with three rooms lit with LEDs. Power-user PG&E customers, for example, can pay 34 cents per kilowatt-hour, while thrifty conservers pay 13 cents. Much of the solar installed recently, says Borenstein, is replacing that high-end power, and there's only so much of that to replace.
"So," asks Borenstein, "as the [California Solar Initiative] fades away, is residential solar PV on stable footing going forward?"
Probably not. The tax credits are under constant pressure in Washington. The very-steep increasing-block rates seem unlikely to continue, primarily because the tiers don't reflect real cost differences of supplying power. The power purchase agreements don't lower the basic costs of residential solar, though they do reduce the customer's risk from poor PV system performance or a utility rate spike.
Borenstein points out that installation costs are still a bigger chunk of the upfront costs of rooftop solar (per watt, at least) than they are for larger pprojects, and adds:
Fundamentally, the declining costs of PV panels is better news for utility-scale solar than for residential solar. And in the competition among renewables that means it's likely to be bad news for residential solar.
Much of what will determine whether the distributed solar sector will succeed or fail is in the utilities' approach to buying the power those panels generate, whether through net metering or some other form of power purchase agreement. Utilities have been fighting robust net metering programs in California for the last couple years, and models like German Style feed-in tariffs are so threatening to utilities' business plans that even solar advocates sometimes decide not to mention them in polite company.
ReWire will report on recent developments in the field of selling your power to the electric company in Part 2 of this piece.