Goal of new state legislation: one million sun-powered homes and businesses by 2018

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The San Diego Union-Tribune

For the second time in consecutive sessions, legislators are considering a measure supported by Gov. Arnold Schwarzenegger that would leapfrog the Golden State to preeminence in tapping the sun for electric power by building one million solar roofs over little more than a decade.

The proposal from the governor and a bipartisan duo of state senators would use subsidies to induce property owners to install the systems and to build a solar power industry that proponents hope will prosper without subsidies by 2018.

Though a measure with similar goals failed in the last session, hopes are higher for passage this year because of lessons Schwarzenegger appears to have learned from the earlier attempt.

The first is that tapping the sun for electricity is best considered at times other than when the sun is setting on a legislative session. This time the measure arrives with plenty of time for consideration and amendment.

The second is that homebuilders react to state-ordered requirements much as 2-year-olds react to parental suggestions: with rapid-fire exclamations of “No!”

The governor’s latest solar initiative is also largely stripped of what builders found to be objectionable last time, namely provisions that would have required them to build a growing percentage of homes with photovoltaic systems in place. The new proposal requires only that builders offer photovoltaic systems as an option to homebuyers.

But the program retains its target of one million solar roofs, a dramatic goal given the modest deployment of solar to this point.

California now has an estimated 11,000 photovoltaic roof systems — those making electricity from sunlight — including about 2,000 in San Diego County, the state’s leading solar county.

The million roofs proposed by the initiative would be capable of generating 3,000 megawatts, compared with roughly 100 megawatts generated from roof systems now.

With targets of this magnitude, the program is generating unprecedented hope in the photovoltaic industry, which has watched the United States lag behind Japan and Germany in solar development.

As opposed to requiring builders to construct a growing percentage of new homes with photovoltaics systems, the new proposal anticipates the same goal can be achieved by creating a stable subsidy fund, which would partly reimburse consumers who purchase photovoltaic systems for businesses and homes.

The reimbursements would decline annually until they disappear in a decade, in the expectation that as the sales of photovoltaic systems grow, their costs will decline and make them attractive enough to purchase without subsidy.

But the plan is also generating skepticism among some experts who think the goals can’t be reached without strict mandates for funding and builders. Consumer advocates also question whether the initiative is being used to “greenwash” other aspects of the governor’s energy program, which they consider environmentally unfriendly and potential costly to utility ratepayers.

Nonetheless, all sides agree that the governor has hoisted the heftiest solar plan yet into the Legislature.

“This plan would create the largest market for solar energy in the world,” said Rhone Resch, president of the Solar Energy Industries Association.

With its decade-plus horizon, Resch said, the program would give the solar industry the stability it needs to invest in manufacturing and drive down the cost of solar panels, which account for about half the cost of a typical home photovoltaic system.

The most aggressive deployment of photovoltaic systems, Resch said, would eliminate California’s need to build controversial liquefied natural gas terminals, which Sempra Energy and other companies say will be needed to fuel the state’s growing number of electricity facilities.

While removing requirements that builders construct a growing percentage of new homes with photovoltaic systems — included in the last-minute bill that failed in last year’s session — Senate Bills 1 and 1017 instead require builders simply to offer photovoltaic systems to new-home buyers beginning in 2010. The legislation hopes to entice consumers to buy the systems with the kind of rebates California has long used.

A key difference is that where the current rebate pool has at times become unavailable — either exhausted or lapsed — the new legislation requires the California Public Utilities Commission to fund a pool of subsidy money sufficient to reach the million-roof target in 13 years.

The subsidies would be paid to consumers who purchase the photovoltaic systems and would initially cut system costs by more than one-third. But the subsidies would decline over the course of a decade to zero, under the presumption that equipment manufacturers will drive down the cost as they increase production.

Although the so-called Million Solar Roofs Initiative would be administered by the California Energy Commission, it is the state’s Public Utilities Commission that would be charged with raising the money needed to provide the subsidies.

The bill directs the PUC to adopt a funding mechanism by January 2007 and says the money should be raised as part of the distribution fees utilities already charge for delivering electricity.

While this would probably result in a rate hike, the bill makes no mention of that possibility, except to say that any money raised for the solar roof program must be cost-effective by resulting in lower rates for electricity purchased at peak times, when solar roofs generate their maximum output.

There are varying estimates as to how money it will take to reach the targeted number of roofs and create a vibrant photovoltaic manufacturing industry functioning without consumer rebates.

California Deputy Secretary of Energy Joe Desmond said the administration’s best estimate is about $1 billion over a decade. But Desmond added that the funding of the program will be the responsibility of the PUC.

With a long-term program of declining subsidies, the proposed legislation responded to what manufacturers and builders told the administration was needed, Desmond said.

“The most significant thing is the certainty of the state’s commitment to make the program work,” he said. “This is consistent with the governor’s approach to do things that improve the environment and improve the economy.”

At least one manufacturer thinks far greater subsidies may be required to reach the million-roof goal.

“I have seen estimates in the $3 billion range,” said Tom Dyer, vice president of Kyocera Solar, which recently began manufacturing photovoltaic panels in Mexico.

Dyer applauded the program’s attempt to provide the industry with stability but said its annual reductions in subsidies might be too rigid. He said Japan reduced its subsidies to zero over a decade but did so by reducing subsidies as needed, rather than by schedule.

But Dyer added, “We’re generally very happy about the program. It sets out a good outline.”

Les Nelson, president of California Solar Energy Industry Association, is also supportive but said the program should be amended to include subsidies for solar hot water systems.

Nelson said he suspects solar water heaters were ignored in the legislation because no multinational corporation is involved in the business.

“But the legislation is headed in the right direction,” Nelson said.

However, The Utility Reform Network, a Bay Area consumer group, said that the solar initiative includes unnecessary subsidies and ratepayer bill hikes, while discarding important mandates needed in construction.

Matt Freedman, an attorney with TURN, said the best way to create more solar power in the state is through the mandated inclusion of photovoltaics in new homes. With that requirement, he said, the state wouldn’t need to raise money for solar subsidies.

“We think the governor caved in to the building industry,” Freedman said.

He added that the proposed program requires only that builders offer solar as an option to homebuyers beginning in 2010, meaning that the first homes with the systems in place won’t be occupied until sometime after that.

The consumer advocate also fears that the PUC will use its mandate to raise subsidy money for the solar program to break through the rate cap that has been in place for smaller electricity customers since the power crisis of 2000-2001.

That cap was instituted to protect smaller customers from the large rate hikes resulting from the meltdown of deregulation.

“The solar initiative is the first attempt to undo the (rate cap),” Freedman said. “It is clear to us that the Schwarzenegger administration sees the rate cap for residential customers as a problem, and they are seeking to undo it in under-the-radar fashion.”

State Sen. Kevin Murray, D-Los Angeles, co-author of the solar legislation, said builder mandates were politically impossible to pass in Legislature.

“I would love to have mandates, but this is a world where people don’t like to be told what to do,” Murray said.

Murray, who joined with Sen. John Campbell, R-Costa Mesa, to write the solar legislation, said subsidies might be in excess of $100 million each year during the program but will save billions in power plant and transmission construction, plus provide reductions in air pollution and the benefit of energy independence.

He expects the subsidies to accomplish much of what mandates would have done.

“One of the things you can bank on is that the sun will shine in California,” Murray said. “And the big benefit of solar is that it provides peak energy at the time of day when you have peak usage.”

That means solar deployment could eliminate the need for hundreds of polluting and expensive peaker power plants, which are designed to run only on days of highest electricity demand.

Builders make no bones about their opposition to mandates for including solar in new home construction. With more than 200,000 homes built in the state last year, a requirement even for a small percentage of homes to include solar might have overwhelmed the ability of the photovoltaic equipment industry to meet demand, said Bob Raymer, technical director for the Building Industry Association.

In addition, he said, the subsidies would have fallen short if builders were required to build a fixed percentage of solar homes.

“There would not have been enough rebate money to cover all of that,” Raymer said.

He added that the industry does not believe photovoltaic systems are cost-effective for home buyers — a point hotly disputed by solar advocates — and said there are still reliability problems with some components.

“Hopefully, over a five-to six-year period, we can work out the bugs,” Raymer said.

While he still worries that the PUC may fail to raise enough in subsidies to reach the million-roof goal, Raymer said, “We are feeling a whole lot better about where the governor’s proposal is.”

If the building industry prefers flexibility, energy planners say that may limit the effectiveness of the solar initiative to displace fossil fuels — a prime goal.

Bill Powers, an engineer and member of Ratepayers for Affordable Clean Energy, a group working to block the import of natural gas into the state by emphasizing renewable energy and conservation, said mandates are critical to planning and transitioning to cleaner energy sources.

Powers said voluntary solar programs will force utilities to consider the worst outcome of those programs and purchase conventional electricity to ensure the lights stay on.

With mandates, on the other hand, “We can count on the energy benefits and plan utility reserve margins for electricity and gas around a known quantity,” Powers said. “Otherwise, the utilities will continue to pass on the high costs of maintaining very conservative reserve margins of fossil-fired electric generation and natural gas because no one can be sure under a voluntarily program whether the goals will ever turn into reality.”

San Diego Gas & Electric Co. is “generally supportive” of photovoltaics but is still studying the proposed legislation, said Ed Van Herik, a spokesman for the utility.

Jerry Flanagan, an advocate with the Foundation for Taxpayer and Consumer Rights, said his organization believes Schwarzenegger is using the solar initiative to provide cover for the rest of his energy program, which includes building many new natural-gas-fired power plants, as well the expected import of liquefied natural gas from abroad and the partial deregulation of the power market.

“The governor’s energy plan would make California even more dependent on out-of-state gas suppliers with no protection to stop these companies from Enron-like price gouging,” Flanagan said. “The solar homes initiative is a green veneer on a dirty and costly energy policy.”

Bernadette Del Chiaro, of Environment California Research & Policy Center, which has pressed for a solar initiative, said she shares concerns about the state’s growing dependence on natural gas.

Del Chiaro said the proposals under consideration in the Legislature would reduce that dependence and drive down the price of photovoltaic systems. In new homes, she said, photovoltaic systems can save homeowners money starting with their first mortgage payment.

“We all know that solar power is good for our air and our environment and now we know it’s good for our economy, too,” Del Chiaro said.

A photovoltaic system installed as an add-on option on a new home can create a net savings of $111 in the first year, based on electricity bills, mortgage payments and tax savings, according to the California Energy Commission and estimated system costs. The result is based on the following:

— A 2.5 kilowatt system that meets 59 percent of the current electricity consumption

— An average yearly electric bill of $ 1,000

— A 30-year mortgage with a 6 percent interest rate

— A married couple filing taxes jointly with $ 80,000 in taxable income.

Note: Savings in subsequent years are not estimated because of the number of variables involved.

   The energy commission has a Web site that allows those considering rooftop
photovoltaic system to calculate costs and potential savings:

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