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Cashing in on Rays Off to Good Start With Solar Rebate Program

Considering the California Solar Initiative’s lofty goal to “put solar on a million roofs in the state” over a 10-year period that began in January, the business of cashing in on the rays is getting off to a decent start, at least in San Diego.

The San Diego Regional Energy Office, in charge of administering the rebate incentive program for San Diego Gas & Electric Co., is processing 46 applications for solar installations. SDG & E;’s aim is to have 180 megawatts of additional electrical capacity from solar photovoltaic systems.

The expectation is that one-third of that amount would come from residential properties and two-thirds from nonresidential, said Tom Geldner, director of marketing for the San Diego Regional Energy Office.

A typical 1 kilowatt residential photovoltaic system produces 1,550 kilowatt hours per month in San Diego. However, the amount of electricity a typical household uses in a year is 6,500 kilowatt hours, so residential installations are usually larger than 1 kilowatt. A megawatt is 1 million watts. A kilowatt is 1,000 watts.

Approved by the state Public Utilities Commission in 2006, the $3.3 billion initiative includes a rebate offer of $2.50 per watt for eligible photovoltaic systems, a factor determined by measuring energy output performance.


There’s Green In Going Green

Kirk Mulligan, president and chief executive officer of San Diego-based Clean Power Systems Inc., said that a homeowner installing a 4 kilowatt solar system could expect to pay $38,000 and get a state rebate of $10,000. In addition, the purchaser is eligible for a federal 30 percent tax credit, or $2,000, whichever is less. So in the case of the $38,000 unit, taking off another $2,000 would reduce the overall price to $26,000.

Through the course of the program, the state’s rebates will be lowered as solar capacity increases, according to the state Public Utilities Commission.

But don’t expect rooftops to sprout solar systems like wildflowers in spring. Not yet, anyway.

Basically, there has been a shift in how the solar installation rebate applications were handled since the beginning of the year. Under the Self-Generation Incentive program launched in 2001, the PUC dealt with larger commercial solar installations and the state Energy Commission handled smaller installations , residential retrofits and new homes.

Now the Energy Commission’s bailiwick is installations in new home developments and the PUC handles residential retrofits and large commercial installations.

Did this result in more bureaucratic red tape?

“Yes, there’s more paperwork and more calculation that needs to be done and that’s a lot more confusing for (rebate) applicants, because it gets down to what do you base certain numbers on,” Mulligan said.

At the same time, companies like his have the opportunity to make hay in the new era of solar incentives.

“Before, any electrician could do this, but now you really need to have a solar education,” Mulligan said. “This basically means the solar installer has to become an expert in his field.”

In the past, rebates were established on “an expected performance base,” said Amy Morgan, a spokeswoman with the Energy Commission. Now the rate of solar energy output must be calculated.

Additionally, the new program dictates that residential developers build properties that are 15 percent more energy efficient than current building standards, Morgan said.

The two state agencies are working with different rebate calculators. The calculations for residential developers take into account the entire subdivision, the type of systems installed, the number, their locale and shading issues. Those for single properties are based on the performance of the individual systems.


The Solar Learning Curve

“It’s more difficult right now because we are immersing ourselves in due diligence to learn the ins and outs of the new program, as well as the pros and cons of each (solar) solution because we don’t want to give the wrong advice to our customers,” Mulligan said.

In 2003, its first year in business, Clean Power Systems had sales of $400,000. Last year, the company installed 125 solar units, and generated sales of $5 million. The firm employs a staff of 25.

Between January and March, sales have totaled $1 million, roughly what the company generated each month last year.

Nevertheless, Mulligan projects $10 million in sales this year. He has $5 million worth of back orders, he added.

Solar might become an easier sell within the county if SDG & E;’s tiered rate structure is eliminated, as has been proposed. Under the new rebate program, all who install photovoltaic systems incur time-of-use rates, meaning they are subject to peak and off-peak rates.

Since most residential utility consumers leave their homes during the day, thereby using more electricity at night during off-peak hours, the advantage to those generating solar is their units are still producing electricity during peak times. But they use more capacity in off-peak times, when rates are lower.

The rub is the tiered structure, which was originally designed to penalize “energy hogs.” The purpose was to promote energy conservation. But homeowners living in the inland desert areas considering installing solar might have to adjust their anticipated investment returns in the event of severe hot or cold spells.

Mulligan says there’s parity between a homeowner living close to the beach who uses solar and one who lives inland, because the beach marine layer reduces solar production, while there are more hours of sunshine inland.

Some might assume that eliminating the tiered structure has the potential of reducing rates and put a little more money in solar investors’ pockets. But Geldner pointed out that SDG & E; “is in the business of making money from electricity and natural gas sales and that California tries to build into their rate structure the appropriate tariffs to also encourage energy efficiency and the adoption of renewable energy.

“So it will depend on what the CPUC does on any final rate decisions as to how that impacts individual customers’ bills.

“The one thing about solar is that we are seeing more and more customers installing it because they want to go green,” Geldner said. “They’re concerned about climate change, they’re concerned about fossil fuel use and pricing becomes secondary.”

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