Rebate rule chills sales of solar
California homeowners are rejecting new rebates for solar power equipment, saying the state has made installing the rooftop panels far more costly than expected.
As a result, Public Utilities Commission reports show a decline of 78% in rebate requests in the first three months of this year, compared with last year, and the solar installation industry says it is threatened with collapse across much of California.
At issue is a requirement the state added Jan. 1 for getting a rebate under Gov. Arnold Schwarzenegger’s Million Solar Roofs program. Applicants must first sign up for costly pricing plans offered by utilities that charge more for their electricity during hours of peak demand.
Alfred Cellier had plans to install a $17,000 solar system at his Rancho Palos Verdes home until he penciled out the cost of the new state requirements and decided against it.
The retired electronics engineer said he was all for solar power “because it’s green and the right thing to do, but I don’t want to be treated unfairly.”
Sue Kateley, executive director of the California Solar Energy Industries Assn., said the rebate changes backfired. “It’s a mess,” she said. “It was everyone’s intent to expand the use of solar in California, not throw it into the ditch.”
Many homeowners quickly decided that it might not be worth going solar under the new requirements. The costs would be burdensome for those who couldn’t afford or lacked the roof space to buy systems that would supply all of their electricity needs.
The unintended glitch was created in December, when the PUC moved to implement the law by requiring that solar users switch to the higher “time of use” rates for their supplemental electricity.
Industry experts say that with the higher rates, solar power offers less savings on electricity bills and may not justify the investment of more than $10,000 in solar panels -- even with a rebate of as much as 50% of the cost and a federal tax credit.
What’s worse, some people in the Inland Empire and the desert might see their bills rise after putting solar panels on their roofs, the experts add.
“The solar industry in the desert in the Southern California Edison territory is dead until this thing is fixed,” said Pat Conlon, an energy-efficiency expert with the city of Palm Desert. “As of Jan. 1, there have been no new installs.”
He said a YMCA in Palm Desert decided against a solar system after managers concluded that future savings on electricity would not cover the cost of installing the rooftop panels.
Under the new program, homeowners filed rebate applications for systems generating 1,415 kilowatts of solar power statewide in the first three months of this year. A year earlier under the previous program, the state approved applications totaling 6,417 kilowatts.
Embarrassed state officials are scrambling to fix the problem.
“The fact that some customers may find themselves paying higher electricity bills if they decide to install solar ... is unfortunate and indeed perverse,” California PUC President Michael R. Peevey said in a recent letter to legislators.
“It’s sort of a screw-up,” said solar advocate V. John White, executive director of the Center for Energy Efficiency and Renewable Technology in Sacramento.
On the hot seat is Schwarzenegger, who in August signed legislation that sought to provide $3 billion in rebates over 10 years to boost the use of nonpolluting solar power.
Only last month, he bragged about his California Solar Initiative in an Earth Day radio address -- with no mention of its lack of early success.
Bill Maile, a spokesman for the governor, conceded that the solar program was flawed. The administration is considering asking the Legislature to quickly pass a law that would make solar power more affordable, he said.
The governor also asked the PUC to work with the state’s three investor-owned utilities to come up with “a properly designed rate structure” that doesn’t penalize solar owners, Maile said.
Time-of-use electricity rates are higher during hours of peak demand, such as hot summer afternoons, and much lower in the early morning, late evening and at night.
The difference between peak and off-peak rates is particularly large in the 11 counties of Central, coastal and Southern California, where Edison provides electricity service to 13 million customers.
Edison charges summer time-of-use rates that range from 29.7 to 35.9 cents per kilowatt-hour between 10 a.m. and 6 p.m. on weekdays. It drops to a range of 16.3 to 18.6 cents per kilowatt-hour from 10 p.m. to 6 a.m. weekdays and all weekend days and holidays, according to documents filed with the PUC.
Edison’s time-of-use rates are a problem for solar households that can’t produce enough energy to make them self-sufficient, industry experts say.
“We’ve come to the conclusion that we can no longer sell to a good percentage of potential clients because they don’t have a roof that is big enough,” said Patrick Redgate, owner of Ameco, a Long Beach solar installation company with 33 years in the business. “This is kind of a punishment for people going solar.”
Another installer, Gordon Bloom, executive vice president of GenSelf Corp. in Irvine, said he had been forced to lay off two employees after doubling his workforce in 2006. “Residential sales in the Edison territory are down 75%, and I’ve only gotten eight new jobs this year,” he said.
The solar industry in March petitioned the PUC to reverse its decision on rates.
Action can’t come soon enough for the already strapped solar installation industry, said consultant Glenn Harris. Harris says that the residential market in California could collapse in 100 days if high electricity rates scare potential customers away from buying rooftop solar systems.
“If they don’t make sales in the next two or three months, they’ll have to lay their guys off and say, ‘I’m sorry,’ ” he said.
For its part, Southern California Edison says a short-term fix would require that the Legislature and PUC abandon current time-of-use rates. “The only way that this can be resolved so that nobody gets a higher rate than would otherwise be the case would be to make time-of-use rates optional,” said Akbar Jazayeri, Edison’s vice president for revenue and tariffs.
Time-of-use rates are constraining solar sales but are less of a problem in the areas served by California’s other investor-owned utilities, Pacific Gas & Electric and San Diego Gas & Electric, analysts say. Ratepayers at publicly owned utilities, such as the Los Angeles Department of Water and Power, are not affected by the PUC rate ruling and operate their own solar installation incentive programs.
Solar installation firms, environmentalists and government officials are dumbfounded that the much-lauded solar program has had such a rough start.
“These are very real problems,” said Bernadette Del Chiaro, a lobbyist for Environment California. “Nobody foresaw the outcome would be a whole set of consumers basically priced out of the market.”