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Solar Sector Expects Rush for Installations as Incentive Ends

The looming expiration of California’s incentive program for installing solar energy systems may inspire a boom in solar business as consumers rush to install new projects. Industry experts warn that those who wait until this summer to go solar likely will miss their chance to cash in on 20 years of savings on their utility bills.

The current billing arrangement, called net energy metering, provides solar owners full retail credit for the energy they put on the grid. The arrangement was designed by the state as part of a 10-step incentive program to encourage solar adoption and drive the cost of solar down through increased industry competition.

According to Daniel Sullivan, president and CEO of Sullivan Solar Power Inc., the incentive program worked.

“The California Solar Initiative was designed to decrease in value over time,” Sullivan said. “(Solar) costs have come down; it’s an incentive policy that’s been successful. But it’s important for the consumer to know that while these programs have worked, this year is the best it’s going to get.”

Cap Clock

Net energy metering currently allows consumers to get full retail credit for the energy they put on the grid.

“So if you’re getting charged 30 cents per kilowatt hour, you would also get 30 cents per kilowatt hour if you supply that energy to the grid with your solar power system,” Sullivan said.

That incentive is designed to end by July 1, 2017, or whenever the net metering cap is hit in a given territory. According to the California Solar Energy Industries Association, the cap will likely be reached around December of this year for San Diego Gas & Electric’s territory in Southern California.

Anyone who installs solar before the cap is hit will receive full retail credit for energy they produce for the next 20 years, slowly being grandfathered in to the new billing arrangements.

In order for property owners to get grandfathered in under the current rules, the projects must be completely installed when the cap is hit.

A signed contract will not reserve a property’s space in the queue. Under normal market conditions, it takes an average of 120 days for a project to be delivered from the time paperwork is signed to installation completion, according to Sullivan.

The industry is anticipating a bottleneck for installations, city permitting and utility inspections.

Labor Shortages Expected

Sullivan said the company expects labor shortages across the industry, but Sullivan Solar Power has been developing proprietary plans to prepare for the boom in business for the last six months. In short, the company will strategically plan jobs so that they can execute installations faster, get inspections quicker, and stack the workload in a manner that they can get projects finished faster than before.

Sullivan said the company brought in $27.4 million in revenue in 2013, $32 million in 2014 and saw a 40 percent growth in total megawatts installed year-over-year. With projections of the boom in mind, Sullivan estimated the company would bring in $50 million in 2015.

Amy Stice, director of sales operations for San Diego-based Borrego Solar Systems Inc. said the commercial solar industry is also expecting a surge in business.

“Borrego is actually expecting two booms this year,” Stice said. “I think we’ll see customers scrambling to get their solar projects installed as soon as possible. But I also think we’ll see developers who’ve put a lot of money into solar projects — who are uncertain if they’re going to be able to finish by the deadline — turn towards well-established companies like Borrego to help them get their projects to completion.”

Stice said Borrego is heavily recruiting to prepare for the surge. Borrego saw 40 percent growth year-over-year in total megawatts installed for the past two years, Stice said. This year, Borrego is on track to double megawatts installed over last year.

The Post-Incentive Picture

While Stice and Sullivan both expect business to boom and then taper off after the incentive expires, both feel confident that the industry won’t suffer from the rule change.

“While all this incentive is going away, the solar industry’s efficiency and our ability to be cost competitive has substantially improved, Sullivan said. “I’m confident that the solar industry, through financing mechanisms, will be able to make the value proposition for solar. It just won’t be as nice as it is today.

“We’re going to be fine,” Stice said. “It will be the markets that don’t have a mature solar industry that will be hit the hardest.”

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