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Los Angeles solar power rebates slashed 32%

August 4, 2011 |  2:06 pm

Solar power

This post has been corrected. See the note at the bottom for details.

Rebates for Los Angeles solar panel installations are 32% lower under the newly relaunched Solar Initiative Program, which will start accepting applications next month. The program was put on hold in April as the demand for incentives hovered around $112 million, far outpacing the program's $30-million budget. During the hiatus, the Department of Water and Power was able to catch up with a backlog of applications and identify alternative financing options.

A mixture of bond financing and lower incentives will allow the DWP to double the budget to $60 million. The department's general manager, Ronald O. Nichols, said the lower rebates, which previously covered as much as 45% of the costs for residential buildings are "more in line with market pricing and allow greater participation."

If the program is approved by the DWP board and the City Council, rates for potential costs for large-scale (1,500 kWh/month) users could increase to $4.59 by 2016. The program hinges on what’s called a feed-in tariff, which allows business owners and eventually homeowners to connect to the electricity grid and sell their unused electricity back to the utility at a fixed rate for 20 years, about $0.19 per watt.

"We also want to grow solar at a steady and sustainable pace while being prudent about the cost to all customers who pay for this program through their rates," Nichols said in a news release.

Of nearly 8 million single-family homes statewide, 60,000 have solar panels. Fewer than 2,000 homes in L.A. are solar-powered.

When the rebate program first started in 2007, incentives were $3.25 per watt, or $13,000 for a four-kilowatt system. Under the September relaunch, the rebate will be $2 to $2.20 per watt, depending on how efficient a system is -– a reimbursement of $8,000 to $8,800.

Rebates for commercial buildings went down by 8%, and rebates for government and nonprofit facilities went down by 32%. Although home and business owners will see smaller rebates paid over 11 to 15 years, they have larger federal tax incentives to offset the lower returns, now ranging from $7,000 to $8,000, up from $2,000.

"Our rebates for residential, commercial, government and nonprofit customers will still beat the state incentive levels when you consider that DWP will continue offering a higher incentive to customers who elect to sell their Renewable Energy Credit to LADWP" –- an additional $0.40 per watt, said Lorraine Paskett, DWP senior assistant general manager.

solar power

Pacific Gas & Electric, serving California 15 million customers from Eureka to Bakersfield, has approximately 50,000 solar installations in its service territory. Spokesman Denny Boyles said that although rebates are decreasing, the demand for solar panels is not slowing down.

"Everybody in the state has lower rebates," Boyles said. "The California Solar Initiative is a front-loaded program where rebates shrink over time." Incentives were higher when the program began to attract interest in solar. The program assumed the cost of solar would drop, leasing programs would increase and the need for rebates would slowly dissipate, she said.

From April to October, PG&E offered $0.65 per watt for commercial, residential and government buildings. That dropped to $0.35 in October and is set to fall again to $0.25.

"The solar initiative was designed to let the solar market tell us where they are in price," Boyle said.

Southern California Edison and the California Center for Sustainable Energy are also decreasing rebates over time. Edison offers $1.10 per watt for residential buildings and $0.35 per watt for non-residential structures. Both dropped from $2.50 and are set to drop to $0.20 over time. The California Center for Sustainable Energy offers $0.35 per watt for all types of buildings, eventually falling to $0.20.

According to the Bloomberg New Energy Finance Solar Value Chain Index, the price of solar photovoltaic technology is declining.

"These prices mean that in a sunny region, solar power can be generated for $0.18 per kilowatt from large projects and $0.20 per kilowatt from retail rooftops," said Michael Liebreich, chief executive of Bloomberg New Energy Finance. "Compare that to daytime electricity prices in some markets equivalent to $0.20 to $0.25 and you can see things are about to get really interesting."

David Graham-Caso, a Sierra Club official for the L.A. Beyond Coal campaign, said that once the market is up and running, solar-technology prices will drop because of economies of scale, eventually making rebates unnecessary.

"In the short term, the program requires investment, but over time it saves money, creates jobs and moves us away from coal," he said.

If rebates are too small, there is also the option of leasing solar systems for about $100 a month, eliminating the hefty upfront costs. Ethan Sprague, spokesman for solar power leasing company SunRun, said prices are not dropping fast enough to make up for the cost of solar.

"[Lower rebates] will result in only the wealthy being able to afford solar," Sprague said. "That's certainly not a fast path to mainstream adoption. In short, this decision gives residential customers the short end of the stick and hinders widespread adoption of solar, as well as L.A.'s solar leadership."

Sprague said 33% of SunRun customers report income levels of $70,000 or less. If the new rebate levels remain as they are, "the vast majority of L.A. homeowners will not be able to go solar and lock in their rates for 20 years with a lease, and they'll be stuck with increased utility expenses after the anticipated DWP rate increase."

With more money and smaller payouts, the DWP is adding a suspension mechanism to prevent overspending. It is limiting solar reservations to $40 million per fiscal year to stay within the program's overall budget.

[For the record, 10:04 a.m. Aug. 8: An earlier version of this post said rebates for Los Angeles solar panel installations would be 60% lower under the newly relaunched Solar Initiative Program. They will be 32% lower. Also, the post indicated that because of the program DWP ratepayers could see their monthly bills go up by $4.59 by 2016.  That figure is for large-scale users (1,500 kWh/month).]


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Upper photo: Stella Isbell with Solar Depot in Petaluma, Calif., takes a close look at solar panels at the Solar Power International 2010 Convention at the Los Angeles Convention Center. Credit: Al Seib / Los Angeles Times

Lower photo: Homeowner Michelle Gerdes watches as workmen from Solarcity install solar modules on the roof of her Long Beach home. Credit: Al Seib / Los Angeles Times