In 2006, the Californian legislature passed the sweeping California Solar Initiative, allocating over $2 billion for rebates targeting residential and commercial solar systems. The initiative’s original goal was to expand California’s solar infrastructure by 1,940 megawatts of electrical generating capacity.
Last May, all but 477 megawatts of solar capacity had been claimed. At that rate, any remaining rebates will likely run out by the end of this year or early next year, four years ahead of schedule.
Because the rebates are on the verge of running out, two of the three utility companies involved in the program started putting customers on a waiting list for California solar rebates last year. For any customers still interested in taking advantage of these California solar rebates, time is running out fast.
Where Did the Money Go?
For a program designed to provide rebates for 10 years, the CSI has managed to burn through nearly all of its funding in just half that time, which has raised reasonable questions about how $2 billion has been spent.
The answer lies with how the CSI provides rebates for California solar energy systems. The first rebate, the Expected Performance Based Buydown, provides a lump sum payment following system installation based on expected performance. However, the second type of rebate, the Performance Based Incentive, pays solar panel owners each month based on actual performance over a period of five years.
Many California solar power systems are actually exceeding expectations, which is a good problem for home and business owners because it means that their solar systems are generating more electricity and higher rebates. Unfortunately, those higher rebates are quickly draining the CSI budget.
Once the rebates do run out, the only financial incentives left will be the federal income tax credit, which covers 30 percent of the cost of a solar panel system, and any local or utility-based rebates not tied into the California Solar Initiative. Even though customers will have to pay more, they will still only have to pay for 50-70 percent of the total cost of a new solar panel system.
Unfortunately, California solar energy customers will also lose consumer protection regulations tied in with the California Solar Initiative. Under the CSI, solar panel providers had to explain why some solar power systems cost more than $14.70 per watt of capacity, a 70 percent premium over 2011’s average of $8.70 per watt.
Other regulations included equipment and installation quality standards to ensure that customers received efficient and durable systems. After CSI funding runs out, future customers will lose these protections. However, some lawmakers and business leaders have called for permanent regulations, which would be independently funded outside the California Solar Initiative.
One trend that will partially counter the loss of CSI rebates is the falling cost of photovoltaic panels. In the past three years, solar panel prices have dropped about 30 percent across the industry to the point where some wholesale companies offer 10 kW or larger panel arrays for as little as $1.40 per watt. Other emerging technologies like hydrogen fuel cells, expected to become the primary type of battery for solar power, are also becoming more cost effective each year.
Make no mistake – the end of the California Solar Initiative is a blow to California’s solar industry, but it is not an end. Falling panel prices and rising energy costs from utility companies will continue to drive demand in the following decades. Regardless, the CSI greatly expanded California solar power capacity. If all of the 1,940 MW of solar capacity were reserved for residential use, the new solar panels would be enough to power nearly half a million moderately sized homes. Even though it is near its end, the CSI has helped California become significantly more energy independent.