Solar power producers hesitate to embrace new DWP program

Storm clouds hovered over the San Fernando Valley, but businessman Jack Engel was smiling as he pointed to a row of solar inverters at one of two commercial warehouses he owns in Sun Valley. Power was being generated despite the weather, no problem.

His problem, he said, has been the Los Angeles Department of Water and Power.

“I like the idea of solar, but unfortunately my experience is that the DWP doesn’t support it,” said Engel, who has run a small manufacturing firm on Pendleton Street for four decades. “The conversation is one thing, the reality is another.”

That’s why he is saying thanks but no thanks to the DWP’s long-awaited “feed-in-tariff” program. Approved by the City Council two weeks ago, the pilot program would allow solar producers like Engel to not only reduce power bills but also to sell back excess energy to the DWP.

Engel paid $300,000 to install his own system in 2010 and expects to eventually recoup much of that cost in lower power bills. But the DWP’s administration of its earlier solar program, known as “net-metering,” was frustrating. It was a year before he was given the green light to turn on his system, he said, and the DWP’s billings were so complex that it took several calls to track down the one woman — now retiring — who could explain them.

That sour taste is shared by other solar customers and installers who have similar tales of missteps, delays and poor customer service in connection with the net-metering program.

“The basic problem is there is no will to make this happen,” Engel said. “In fact the culture at the DWP is the exact opposite.”

Losing businessmen like Engel is not what the DWP wants to see.

Los Angeles uses 10% of the state’s energy, and harnessing solar energy makes the San Fernando Valley — abundant both in sunshine and warehouses with large, flat roofs — a key target. Other “solar hotspots” are in East Los Angeles and areas west and north of downtown, including Hollywood.

Ron Nichols, the DWP’s general manager, doesn’t deny there were long delays and poor customer service, but he says that’s in the past.

“That’s a myth. And it’s outdated,” Nichols said at a City Hall news conference that launched the feed-in-tariff program.

In the 15 months since he took over, a backlog of 800 solar projects waiting to go live has been substantially shortened, he said. Nichols also said it usually takes no longer than two months to get panels turned on. The utility did not respond to a request for the current backlog.

“As an organization, we’ve made a commitment to turn that around,” he said.

DWP was the first major utility to meet a 20% reduction in carbon-based energy, largely by building power-generating wind plants, according to Nichols. And there is a plan to hit a 32% reduction, as called for by Gov. Jerry Brown, by 2020. Solar will help the utility meet that mandate, he said.

Environmentalists, business leaders and city officials, led by L.A. Mayor Antonio Villaraigosa, have long pushed for a feed-in-tariff program and praised its launch. Backers say it will chip away at the utility’s dependence on electricity from coal-fired plants and create thousands of local jobs in the developing, but still fragile, solar market.

Under the program, owners of commercial warehouses and multifamily buildings are invited to sign 20-year-contracts with the DWP to sell back excess energy to the utility. Officials cautioned, however, that residential solar systems probably aren’t large enough for the 30-kilowatt minimum to qualify. This differs from the DWP’s net-metering incentives, which continue to provide rebates on installation to both residential and commercial customers and reduce their own power bills.

Feed-in-tariff programs have been used extensively in Spain and Germany to successfully create a robust solar market, researchers from UCLA and USC said in a report prepared for the Los Angeles Business Council. The U.S. has been slower to adopt them, although programs are underway in Florida and several California cities, including Sacramento and San Diego.

UCLA economist J.R. DeShazo said the DWP, the nation’s largest municipal utility, needs to prove it can be efficient and upfront for the program to succeed.

“It needs to be very careful about how it picks projects,” he said. “It should be open bids. They should announce scoring criteria in advance. Everything should be very transparent.”

In an April 3 presentation to the L.A. City Council, Nichols said the utility was authorized to pay solar generators up to 30 cents per kilowatt hour. That drew criticism from Councilman Richard Alarcon, who said the upper rate could result in higher DWP bills for regular customers.

“You need to focus on that pricing issue to make sure we don’t buy energy far beyond what the ratepayers would consider to be normal since they will be paying for it,” Alarcon said.

But Nichols said that although 30 cents is the most it would pay, in most cases the rates will be closer to market rates. Solar analysts say that rate hovers between 13 cents and 20 cents per kilowatt hour for medium-to-large projects.

DeShazo, however, sees the size of the program as a challenge. DWP lags behind every other major utility in the state in terms of solar capacity installed per customer, he said, and needs to help the project expand quickly.

DWP is contracting for only 10 megawatts of solar power to start, the equivalent of about 30 to 50 medium-to-large projects. But DeShazo said Sacramento’s utility started its feed-in-tariff with 100 megawatts and sold out in one day.

“A successful program will show it can be vastly expanded and still provide solar at very reasonable rates,” he said.

The DWP settled on 10 megawatts only so it can work out the kinks, Nichols said. “We want a really good experience for our customers,” he said. “That’s why we’re starting small.”

The utility intends to expand to 75 megawatts by 2014 and 150 megawatts by 2016. At 150 megawatts, the utility would create about 4,500 jobs, mostly involving installation, provide enough energy to power 34,000 homes and offset 2 million metric tons of carbon emissions, according to the Los Angeles Business Council report.

In selecting participants, the DWP will take into account low-income neighborhoods that would benefit from jobs and DWP contracts surrounding solar installation, officials said.

A map overlaying the DWP’s major criteria shows that prime areas include a cluster of apartment dwellings and commercial buildings along the 405 Freeway corridor in the San Fernando Valley.

Percy Vaz, president of Amcal Multi-Housing Inc., which operates 13 apartment houses in Los Angeles, said the DWP can be “unpredictable.” His company plans to install solar panels on the newly built Montecito Terraces in Panorama City, a few miles east of the 405. Another of Amcal’s projects, the Andalucia Heights apartment complex near MacArthur Park, already has solar panels.

Amcal was planning to participate in net-metering at the Andalucia complex, but it took DWP too long to get that system connected, Vaz said. Now the company will apply for the feed-in-tariff program.

“In the future, we will design our units from the get-go to make solar part of the building amenities,” he said.

DeShazo said that’s the kind of interest that the DWP must work to capture — and keep. “This project is a step in the right direction,” he said.