Gov. Arnold Schwarzenegger’s plan to spend billions of dollars to put electricity-producing solar panels on a million California rooftops could be running into stormy weather.
For the second year running, the governor is sponsoring legislation that would put photovoltaic solar systems at the head of the line for the bulk of state alternative energy funding.
For Schwarzenegger and his backers in the environmental community and the solar industry, a massive push to use abundant “free power” from the sun is an easy call.
“Today, in California, where we are famous for the sun, we are going to put the positive benefits of that sun to good use,” Schwarzenegger said in February, announcing his personal support for SB 1, the solar power bill.
Schwarzenegger is thinking big: He wants to increase the state’s total solar output from about 101 megawatts to 3,000 megawatts by 2018. That’s enough nonpolluting power to run about 2.25 million homes and eliminate the need to build six large natural gas-fired generating plants.
The governor isn’t the only Hollywood star backing sun power. Actors Edward Norton and Ed Begley Jr., both well-known environmental activists, spoke at a recent media event in South Central Los Angeles in support of SB 1.
But the bill, despite such high-profile backing and a bipartisan 30-5 vote in the state Senate, is facing potential difficulties in the Assembly. Opposition from business lobbies, utilities, unions and even consumer groups is setting the stage for what could be a close vote. The first hint of how the bill will fare in the Assembly is expected to come today when it faces its first hearing in the Assembly Utilities and Commerce Committee.
Most of the complaints about the governor’s solar program center on its estimated 10-year, $2-billion-to-$3-billion price tag. Much of that would be paid by power users in the form of surcharges imposed by the California Public Utilities Commission.
Proponents estimate that the annual rate hike would be about $15 per residential customer. But business groups -- usually among Schwarzenegger’s staunchest supporters -- complain that increases for large power users such as big-box retailers and industrial operations would be much higher -- a key point in a state that already has the highest electricity rates in the continental United States.
The governor’s solar plan is “so expensive that it’s not cost-effective,” said Joseph Lyons, an energy lobbyist for the California Manufacturers and Technology Assn.
“Our members need rate relief, and this goes in the other direction,” Lyons said.
Southern California Edison Co., the state’s second-largest investor-owned utility, is also skeptical, saying the governor’s bill favors rooftop solar systems over what it says are more cost-effective centralized solar generating stations.
Even fans of solar power -- who view photovoltaic panels as a crucial part of the state’s alternative energy mix -- question the wisdom of earmarking the bulk of funding for one source, to the detriment of less-glamorous energy efficiency and conservation programs.
“Solar is not even close to competitive,” said Severin Borenstein, director of the University of California Energy Institute in Berkeley. He noted that solar power’s long-run, average production cost of 25 cents to 30 cents per kilowatt hour, not including government subsidies or tax credits, is much higher than the 5 cents to 9 cents for wind power and 6 cents to 7 cents for modern, natural-gas-fired generation plants.
Even a leading energy consumer advocate, the Utility Reform Network, is critical of the governor’s solar dream, contending it would drive up utility bills for some lower-income residential ratepayers.
“It singles out one technology ... it’s not giving us the biggest bang for the buck,” said Michael Florio, an attorney for the group.
Meanwhile, enthusiasm among home builders is lukewarm at best. They fear that a requirement that solar be offered as an option on most new homes beginning in 2010 would be unpopular with buyers.
Builders estimate that a typical residential solar installation adds roughly $120 a month to the cost of a 30-year mortgage. “And the savings are only about $50 a month,” said Tim Coyle, a lobbyist for Associated Builders and Contractors, a trade group. “So you’re upside down by about $70 a month.”
Labor unions also potentially could lead to the bill’s defeat in the Assembly. They’ve already successfully pushed for an amendment to the bill that would allow only contractors with the highest-level electrical licenses to install solar systems. Most union electricians work for contractors holding such C-10 licenses, while many existing, nonunion solar installers have C-46 licenses, which require less training.
Unions in the building trades also are seeking another amendment that would force solar companies to pay so-called government-mandated prevailing wages, a move that installers contend would add as much as 30% to the price of a job. A squabble over prevailing wages derailed Schwarzenegger’s effort to pass a similar solar bill last summer at the end of the 2004 legislative session.
But all the sniping is a diversion from the basic belief that sun-blessed California should kick-start its efforts to create a world-class solar industry, said Bernadette Del Chiaro, a statehouse advocate with the group Environment California.
“SB 1 promises to change basically the face of solar from being limited to the backwoods hippie cabin or the Malibu millionaire’s mansion and put it into the hands of the average Californian,” Del Chiaro said.
The state, proponents said, needs to follow the model of Germany and Japan, where large government subsidies helped spread solar technology and brought down installation costs.
Manufacturing breakthroughs, particularly in Japan -- which accounts for about 50% of solar panel production -- have brought down installation costs by 5% to 10% a year from 1993 to 2003, the California Energy Commission said. And homeowners can sell their surplus power to the local utility grid.
Schwarzenegger’s plan would make much more money available so more homeowners and businesses could take advantage of the subsidies. SB 1 would start with the currently available subsidy of about $10,000 for a typical residential system. The subsidy would decline incrementally to zero by the end of 2016.
Research by the Senate Energy, Utilities and Communications Committee staff indicates that homeowners could expect to pay about $17,000 for a three-kilowatt system after receiving the rebate and a 7.5% state tax credit. Businesses could see bigger savings because of a 10% federal tax credit and accelerated depreciation.
Keeping the subsidies flowing to foster demand is essential for the “orderly development” of solar power, said Greg Johanson, president of Solar Electrical Systems, a Westlake Village installer.
“It will give us the deep roots we need to make investments so the industry will grow and be successful,” he said.
But solar, though an important part of the state’s alternative energy mix, should stand on its own merits and not depend on a $2-billion utility rate hike, said Sen. Debra Bowen (D-Marina del Rey), who owns a solar system on her Sacramento residence.
She said the governor’s solar plan in its current form -- dubbed the Million-Roof Initiative -- makes a better slogan than sound public policy.
“It’s a great slogan, but it’s an expensive way to go,” Bowen said.