Tuesday, May 4, 2010

Solar is HOT in California

The residential and commercial solar markets are smoking hot in California this Spring. As you may know, State incentives decline whenever sales of solar PV systems reach certain trigger points. There are separate incentive programs for residential and non-residential systems purchased in each of the state's 3 investor-owned utility territories: PG&E, SDG&E and SCE.

Between March 26 and April 26 all six of these programs reached the end of an incentive step and lowered their rebates. This was caused by a huge surge of demand, most of which occurred the six weeks after Valentine's Day. The solar market usually pauses to catch its breath after rebate drops, but it also traditionally has its strongest selling season from June to August. I predict that the strength we've seen recently will continue and that at least 4 of the 6 programs will record another rebate drop by the end of 2010.

You can keep track of California rebate levels and reservation levels here: http://www.csi-trigger.com/

PG&E's Rate Reduction Request

In March, 2010, PG&E filed its General Rate Case with the California Public Utility Commission (CPUC). In it, it asked for significant reductions in its top residential rates on June 1. PG&E requested permission to merge Tiers 3, 4 and 5 into a single tier and charge $.298/kWh. The graph shows 4 years of history, including the proposed reduction (which the CPUC has not yet ruled on.


The CPUC allowed PG&E to merge Tiers 4 and 5 and price them both at $.40/kWh. Tier 3 is priced at $.29/kWh.

There are many ways to look at this proposal, and I take a relatively optimistic view of the effect it would have on the solar industry if it were adopted. It's certainly true that the proposed rates would take a lot of financial pressure off homeowners with very large electric bills. The amount they could save by adding a PV system would fall dramatically. But, in my experience, it's not actually people with a $800/month electric bill who are driving the residential solar market. It's people with bills in the $200-$350 range, and the proposed rates would create a lot more ratepayers like this.

If you look back at 2001 when the 5 tier scheme was first adopted, the ratio between the highest priced kWh and the lowest was 3:1. Today it is 4.5:1. Under PG&E's proposal it would go 2.6:1. This is still a steeply tiered rate structure. I can't easily imagine people wasting electricity because it costs only $.30/kWh instead of $.50.

My top reason for feeling OK about the proposal is that the proposed rates are very similar to what is charged by San Diego Gas and Electric, and that part of the state has adopted solar at an even faster rate than PG&E customers over the last year.

The CPUC will probably rule on PG&E's request in very late May. When they do, I'll update this posting.