Solar Hot Water Incentive Program – California

Date: 27 Jan 2009 | posted in: Energy | 0 Facebooktwitterredditmail

The California Solar Water Heating and Efficiency Act of 2007 (AB 1470), creates a 10-year program aimed at installing 200,000 solar water heaters in homes and businesses using a $250 million fund.  The law authorizes the California Energy Commission to “impose the surcharge at a level that is necessary to meet the goal…” The surcharge will be applied to natural gas consumption on a per Btu basis and is estimated that it will cost the average residential natural gas user an additional 13 cents per month.

The rebates for the systems established by the Commission “shall decline over time” providing early adopoters with larger incentives. Similar to California’s incentives for solar electric projects, the declining incentives are structured in an effort to increase demand and drive down the cost of the solar water heating technologies.  The payments are paid out as a performance-based incentive basis so that they are earned based on the actual energy savings, or on predicted energy savings as established by the commission.

The state level program is modeled after the San Diego Solar Water Heating Pilot Program approved by the California Public Utilities Commission in February of 2007.  In San Diego’s 18-month program the solar incentives are calculated in two ways: The Prescriptive Method, used for smaller businesses and residential systems, evaluates each solar water heating system based on performance and is capped at $1,500; and, The Area Method, used for larger more innovative systems, calculates incentives based on a “per square foot of collector” and is capped at $75,000.

AB 1470 will lower the upfront costs of purchasing these systems and allow for a quicker payback period on these systems.  The average residential system costs from $3,000-$6,000.  Depending on how much natural gas consumption is avoided and what the cost of that fuel is, paybacks could range between 5-10 years.

Analysis by Environment California shows that all natural gas consumers stand to gain from the solar program.  In their publication, “Solar Water Heating: How California Can Reduce Its Dependence on Natural Gas,” they conclude that the program will help California reduce its current natural gas consumption by 5.1% and reduce the wholesale price of natural gas by 27%-37%.

The market for solar hot water systems is robust. Since 2000, about 9.2 million new water heaters are installed on average each year across the United States, with over half using natural gas.