Solar subsidy program nears its limit

Lis Sines of Hermosa Beach loves watching her electric meter run backward.

When that happens, she knows that the 20 solar panels on her roof are producing more power than she needs to run her 3,800-square-foot home. The excess electricity flows to the electric company’s grid, and she gets its full retail value credited to her utility bill.

Sines’ electric bill has plunged since she and her husband, William, installed a photovoltaic system on their roof three months ago. In June the bill totaled just $1.26, compared to about $100 a year earlier.


But the Sineses’ subsidy may not be available to future solar-power users for long.

The state’s $3.3-billion solar subsidy program has become so popular that the state utilities are approaching the legal limit for how much power they can buy from customers.

The limit could be reached in parts of northern and central California served by Pacific Gas & Electric Co. by the end of this year. The state’s other two investor-owned utilities, Southern California Edison Co. and San Diego Gas & Electric Co., are proceeding somewhat more slowly.

Eager to keep the program growing, the solar industry is pushing for approval of legislation in Sacramento that would quadruple the amount allowed. The state’s for-profit utilities oppose the higher cap in the bill AB 560 by Assemblywoman Nancy Skinner (D-Berkeley).

A key Senate utilities committee vote on the measure is expected this week. Currently, utilities are limited by state law from buying from its customers more than 2.5% of a utility’s maximum generating capacity. Skinner’s bill would lift the cap to 10%.

All three companies oppose Skinner’s bill. They do not want lawmakers to raise the limit until next year at the earliest, after the California Public Utilities Commission tallies up the program’s costs and benefits.

Utilities say they strongly support solar power but want more information about whether it’s fair to further increase financial incentives for solar-panel ownership.

Such incentives, they point out, would come at the expense of most of the utilities’ other customers, who don’t want or can’t afford to invest in the costly panels.

“We want to make sure there isn’t an unfair level of cost-shifting,” said Jennifer Briscoe, a spokeswoman for San Diego Gas & Electric.

Fairness issues were also raised in a report on Skinner’s bill by the staff of the Senate Energy, Utilities and Communications Committee, which will review the bill this week.

The report pointed out that California solar-panel owners already benefit from a variety of subsidies approved in recent years -- even without this “net metering” program, which allows people to sell power to the utilities.

Solar power users get a state subsidy of about 20% of the purchase and installation cost and a federal income tax credit of 30%. Adding more incentives could be going too far, the committee staff analysis suggested.

The staff report also takes issue with the amount of credit that solar users get when they sell power to the utilities.

“By compensating the solar or wind customer at the full retail rate” for energy sold to the grid, “the utility is using ratepayer funds to pay the solar or wind customer at a rate well above the value of the generated power, which is about one-third of the total cost of a typical residential customer’s bill,” it said.

The other two-thirds of the bill covers utilities’ fixed expenses for building power plants and transmission lines, buying electricity from independent generators and meeting a variety of state mandates, including the cost of subsidizing low-income customers and solar-power system owners.

Supporters of solar-power systems say the net metering program and other subsidies are essential. And many would like to see no caps at all.

“Without net metering we’re not going to see a lot more people” buy expensive solar systems, said Adam Browning, executive director of the Vote Solar Initiative, a San Francisco advocacy group. “If we hit the net metering cap, the California solar industry grinds to a halt.”

Caps are an impediment to fully developing solar power’s potential and its ability to provide clean energy that can be tapped in urban areas, where it is most needed, during peak demand on hot summer afternoons, Browning said. Eighteen states allow net metering without any caps, he noted.

The appeal of lower electric bills appears to be persuading more people to go solar.

Legislation, approved in 2007 and known as the Million Solar Roofs program, has spurred the production of solar-generated electricity to rise 78%. That’s equivalent to the power generated by a modern power plant, the Public Utilities Commission reported last week.

Consumer demand continues to grow despite the recession. Applications for state subsidies hit a record high in May, the commission said.

The commission’s first solar program assessment recommends raising the net metering cap “to prevent a stall in the solar market,” and the commission endorses the Skinner bill.

One solar booster is Harry Pope, a retired Edison executive who bought a large system for his Long Beach home after the energy crisis of 2000-01. He said he needs the state’s incentives to make his investment pay off.

“I probably put in $30,000 and got half back. Maybe over 15 years I might achieve total payback,” he said.

Without people like him, Pope said, the state will have to build more power plants. “I’m preventing the utilities from having to build that next-generation power plant . . . the most expensive power plant you ever saw.”