Yesterday, the California Public Utilities Commission approved the California Solar Initiative, a comprehensive proposal that provides an additional $2.9 billion in incentives toward 3,000 MW of solar development over the next 11 years.
The California Solar Initiative includes the following provisions:
Incentives of $2.9 billion over a 10-year period. Initial PV incentive levels are set at $2.80 per watt effective Jan. 1, 2006, reduced by an average of approximately 10 percent annually. Incentive levels for solar thermal electric projects and solar heating and cooling will be determined in 2006. Funds will come from electric and gas distribution customers of investor-owned utilities, and will go toward the installation of solar photovoltaics initially, with solar hot water heating and solar heating and cooling systems being added after workshops are conducted later this year.
The California Energy Commission (CEC) will oversee one component of the program to focus on builders and developers of new housing, to encourage solar installations in the residential new construction market. The PUC will oversee the remainder and majority of the California Solar Initiative, which will cover existing residential housing, as well as existing and new commercial and industrial properties.
The program sets aside 10 percent of program funding for low-income customers and affordable housing installations. The PUC will also explore the option of offering low-cost financing options to those types of installations in workshops this year.
The program includes an additional amount of up to 5 percent of the annual budget for potential research, development, and demonstration activities, with emphasis on the demonstration of solar and solar-related technologies.
The program includes a requirement that solar incentive payments be made not just for installed capacity, but also with emphasis on the performance and output of the solar systems installed, to ensure that these solar investments are delivering clean energy as promised. Until such time as the Commission makes a determination on performance-based incentives, which they intend to do in 2006, the incentives would continue on the basis of installed capacity.
The program design requires all facilities that receive an incentive to undergo an energy efficiency audit (at a minimum) to identify more cost-effective energy efficiency investment options at the building. The PUC also intends to have further workshops to determine incentives for newly constructed buildings that participate in utility energy efficiency new construction programs and exceed the existing building standards by a certain threshold.
The estimated average cost to a residential electric customer will be approximately $12 a year; the average residential natural gas cost will be $1.40 per year. However, the total impact on a residential customer’s monthly bill is expected to be minimal in most cases, because the cost of this program will be largely offset by the expiration, at the end of 2007, of a surcharge on utility bills to repay rate reduction bonds authorized in 1996 for electric sector restructuring.