CSI: Examining California's Ambitious Solar Program

As the California Solar Initiative (CSI) moves into its fourth month, solar businesses in the state are still figuring out how to maneuver through the changing industry landscape and handle some of the issues that have arisen from the state-wide program.

"Any time you start a new program, you're always going to have some issues...I think it's a pretty well designed program, but there are always hiccups when you start a new program."

-- Jan McFarland, Executive Director, Americans for Solar Power
The goal of the CSI is to install 3,000 megawatts (MW) of commercial and residential solar systems in California within a decade. But many in the solar business community are worried that issues such as Time-of-Use (TOU) rates reducing the financial payback of solar systems and the accuracy of the Expected Performance Based Buydown (EPBB) rebate calculator will hinder the industry's ability to sell and install that much capacity.

Glenn Harris, Managing Director for SunPower Consulting, LLC, has monitored the program closely and worked on educating the industry about how the CSI will impact businesses. SunPower Consulting has already hosted a few workshops on the CSI and will be hosting a webinar series titled "CSI Business Perspectives" at the end of March.

"It's been interesting to watch the first three months of the program and see how the residential and non-residential segments are coming to life," said Harris. "Commercial sized systems are in hyper-application mode and residential systems have basically come to a halt."

Because the large system performance-based incentive program is in "hyper-application mode," Pacific Gas and Electric (PG&E) has gone through its second rebate step, is now in its third step and will soon be in its fourth step for the commercial sector. This will mean a reduction in incentives by about 30 percent early in the first program year.

The steps represent incentive levels that lower based upon the number of megawatts reserved, not installed. For example, Step 2 starts at $0.39 per kilowatt-hour (kWh). Once 70 MW have been applied for, the program moves to Step 3, with a lowered rebate of $0.34 per kWh. Step 4 is $0.26 per kWh and the rest of the steps move accordingly until the rebate is just $0.03 per kWh at Step 10.

Already, PG&E has issued reservation letters for about 27 MW and has about 43 MW of reservations under review. No one expected that number to be reached so quickly said Harris.

"It's causing some issues in the field because people don't know what incentive rate their application will be approved at," said Harris. "It's difficult to imagine that we can install all the megawatts being reserved across the state in the one year that we have to complete the job after the application is approved."

According to Harris, the megawatts assigned to each step may not be installed at the intended incentive level based on the current implementation of the program. Also, many people wonder whether some projects were submitted hastly by applicants hoping to avoid another reduction in rebate levels.

"With the large commercial systems and megawatt triggers, a lot of people are seeing that this unknown trigger point is coming and the incentives are going down at a rapid pace. So everybody's trying to put in an application -- there may be some in there that might not even be realistic projects," said Joelene Monestier, Manager of Commercial Project Development at SPG Solar, a residential and commercial design and installation company.

Another major problem facing the solar industry is Time-of-Use, which is when a utility sets higher prices for electricity during peak times. TOU rates are important for encouraging energy conservation, especially during the summer months.

But according to Sue Kateley, Executive Director of the California Solar Energy Industries Association (CALSEIA), TOU rates will reduce the financial payback for some solar customers who use energy from their systems during peak times; and that has caused many people to forgo investing in solar until TOU rates can be modified. The industry is deeply concerned about this issue, she said.

"Time-of-Use is my life right now," said Kateley. "We hope companies are informing customers about TOU, because we don't want customers to be surprised when they get their summertime energy bill -- if the system cannot cover all their peak use -- and it's very high."

Customers in Southern California Edison territory are impacted most by TOU because the utility simply changes their rate schedule to "on-peak" or "off-peak." Other utilities have varied levels based upon the time of day and season. Because of TOU problems, "the residential market has practically come to a halt, causing major issues for businesses," said Kateley.

"[TOU] definitely can impact our sales. We've had several customers actually put jobs on hold," said Jonah Liebes, Director of Operations at Heliopower, a California solar design and installation company.

The sales team at Heliopower is educating customers as much as they can, said Liebes, but it's difficult without detailed information on the customer's electricity usage. Most installations are based upon average monthly energy bills, so the installers can get a good idea of the home load profile. But when a customer switches to an hourly rate under TOU, it can be difficult to determine if the system will meet energy usage during peak times.

Southern California Edison and the CPUC said recently that they are willing to work with the industry to solve the problem. In a March 6th letter to Assemblyman John Benoit, CPUC Commissioner Michael Peevey acknowledged the industry's concerns about TOU rates.

"This Commission is 100 percent committed to creating a solar program that drives solar installations and moves this industry forward. To the extent the TOU requirement as implemented by this commission impedes our ability to realize these goals, we will endeavor to identify a solution that mitigates the adverse impacts while at the same time preserves the program's consistency with SB1," stated Peevey.

Another issue is the cost of advanced system monitoring. The CSI requires advanced monitoring for all newly installed solar systems under both the EPBB and PBI. The monitoring is most important for systems under the PBI because the system owners are getting rebates for actual performance. Utilities want advanced monitoring so they can make accurate payments to customers who are generating solar power.

In theory there should be a cost-cap for monitoring systems of 1 percent for solar systems up to 30 kW and a cap of one half percent for solar systems above 30 kW. But in reality, there is no cost-cap for the PBI, according to Ronnie Pettersson, Chief Technical Officer of Energy Recommerce, a company that facilitates data monitoring for renewable energy systems.

"Because the utilities require certain accuracy and certain features [on the monitoring devices], it is impossible to have a real cost-cap," said Pettersson, who is also a member of the CSI Metering Subcommittee. "The utilities are adding more requirements because they are the ones writing the checks."

Lastly, many installation businesses are still frustrated by the EPBB calculator, which lowers or raises rebate levels based upon geography. For example, someone in northern California might get a lower rebate than someone in southern California, even if their system is designed and oriented the same way. Some installers are encouraging customers to apply for a system under the PBI as a result.

"We do encourage customers to apply under the PBI," said SPG's Monestier. "SPG Solar supported performance-based incentives from the beginning. Any time you are paid for performance, that's a positive."

"The EPBB calculator is still in the developmental stages," Monestier said. "It's a great concept, but there are still many things that need to be worked out. Some customers are feeling that it's unfair that they're receiving lower incentives based on their location."

Three months into the CSI, the solar industry is both excited and nervous about the prospects for California solar businesses. And while there are still many issues to deal with, people are careful not to play the blame game.

"I look at all of these issues as start-up issues," said Jan McFarland, Executive Director of Americans for Solar Power (ASPV), a California-based solar advocacy group. "Any time you start a new program, you're always going to have some issues. One thing that was built in SB1 was a statute for program adjustment. I think it's a pretty well designed program, but there are always hiccups when you start a new program."

The CPUC will hold a CSI program forum on April 2nd to review the CSI handbook, rebate calculators, TOU rates and metering requirements. The forum will be held at the PG&E Auditorium on 77 Beale Street in San Francisco. The CPUC and CALSEIA encourage anyone with an interest in the CSI to attend. The program forum will not focus on the CEC New Solar Homes Partnership program.