California Solar Initiative Subsidies are Going Fast!

California Solar Initiative Subsidies are Going Fast!

Here's the latest numbers:

January 2008 Opens with High Solar MW Reservations

TRIGGER TRACKER SNAPSHOT FOR JANUARY 15, 2008
Administrator	Customer	Current Step	MW in Step	MW Under Review
PG&E	Residential	3	14.40	2.08
	Non-Res	4	38.10	17.85
SCE	Residential	2	10.60	1.31
	Non-Res	4	40.10	21.09
CCSE	Residential	3	3.40	0.28
	Non-Res	4	9.00	1.86

As you can see, Tier 2 is mostly gone throughout the state, and Tier 3 for commercial is only available in PG&E administrated areas. The question now is whether installed prices will drop fast enough to make up for the lowered subsidy, or will we see a "bust" - lack of new solar projects now that the high subsidies are all reserved?

Also at issue is the 30% federal tax credit that expires at the end of 2008. There was no extension of the credit in the energy bill enacted in December 2007.

The first quarter of 2008 should be very interesting for observing announcements of new projects (or lack thereof).

California Energy Commission Report on Solar Potential

The California Energy Commission (CEC) through the Public Interest Energy Research Program (PIER) commissioned a report from Navigant Consulting that has quite a bit of useful data (as of September 2007) for solar market sizing. The report is titled "California Rooftop Photovoltaic (PV) Resource Assessment and Growth Potential by County, and can be downloaded here.

The report focuses on the potential for PV installations by county for the state of California, and takes into account such factors as roof tilt, shading, declining installations costs, tax credits, etc. in order to arrive at a total possible installed generating capacity.

One thing that really jumps out is that Navigant estimates a max of 500MW in installed panels by 2016 without subsidies, but that the use of subsidies will increase the total installed base to 800MW.

Then Navigant makes another assumption that "new business models" such as power purchase agreements (PPA's) come into play. Using PPA's plus all available subsidies, the total installed market jumps to 1,700 MW by 2016. So in effect the PPA's could have more impact than the subsidy.

Finally, the goal expressed by the state of California is to reach 3,000 MW. The report states that only way to reach this goal is to assume that technological breakthroughs (like thin film or advanced crystalline silicon) lead to a large price reductions in installed cost.

Solar Power in California - Disruptive Opportunity?

For the last couple months I have spent some time learning about the solar power opportunities here in California. The market is being fed by two financial engines - (1) The California Solar Initiative (CSI) which is a subsidy program from the state of California and (2) the Federal tax credit (30% for commercial installations) which is scheduled to expire at year end 2008, but many are working to extend this in Congress.

There are currently a number of companies that are taking advantage of these programs by offering the consumer what amounts to a fully financed installation by using a power purchase agreement (PPA). The customer pays the vendor (instead of or in addition to to the local utility) and gets a solar power array in return.

The interesting dynamic here is that installation and materials costs are widely expected to fall, in a fashion similar to the semiconductor industry. With tech companies like Google jumping into the fray with funding and the stated intention of driving the cost of solar below that of coal, there is almost an incentive for many consumers to wait and see rather than jump in with a commitment to a PPA that could last many years. Maybe a new type of PPA will have to be crafted that takes into account the falling costs (of course, once the array is installed it is a fixed sunk cost, but what if pricing and installation costs fall so quickly and sharply that it is worth removing and replacing the array? What about "upgradeable" arrays? Will companies that can offer this type of technology or agreement have a competitive advantage?).

I also wonder if there is an analogy to the PC industry of a few years ago, when prices were falling rapidly and power was increasing rapidly. There the hardware makers had the friendly software makers who were able to give consumers a reason to upgrade to faster machines to run more complex software. Is there an analogy in the PV industry? Rising power costs could be one motivator, I suppose.