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California PUC Adopts $2.9 Billion Solar Energy Initiative

The California Public Utilities Commission today voted to adopt a $2.9-billion plan designed to add 3,000 MW of solar capacity to homes and buildings in California by 2017. This is the largest solar program of its kind in any state in the country.

Referred to as the California Solar Initiative (CSI), the package comes on top of a $300-million initiative passed last month, creating a total $3.2 billion package of incentives to accelerate the growth of solar energy.

This is the time to be bold. This is the time to strike out anew...the time to be as bold and dramatic as we can to ensure that California is again a world leader here. This is the right course for California.

—Michael Peevey, President CPUC (Comments right before the roll call vote.)

The target of 3,000 MW is roughly equivalent to the output of six large power plants, or enough to serve 2.3 million people. Currently, the entire US has about 397 MW of solar energy capacity in place, according to the EIA—the smallest amount of the major renewable sources of power generation.

The $2.9 billion comes in rebates that will decline steadily over the project’s 10-year lifetime. Funds for the $2.9 billion will come from electric and gas distribution customers of investor-owned utilities, and will go toward the installation of solar photovoltaics initially, with solar hot water heating and solar heating and cooling systems being added after workshops are conducted later this year.

Specifically, the CSI will:

  • Provide incentives to customer-side photovoltaics (PV) and solar thermal electric projects under 1 MW capacity. This encourages the development of distributed generation rather than large, centralized projects.

    San Diego Gas & Electric (SDG&E), for example, has contracted to buy 300MW of solar power for 20 years, with the potential to grow to 900 MW within 10 years, from Arizona-based Stirling Energy Systems (SES). Earlier post. CSI funding is not targeted at that scale of project.

  • Authorize a pilot solar water heater (SWH) incentive program for customers of San Diego Gas and Electric Company. If successful, the PUC could offer SWH incentives statewide.

  • Set initial PV incentive levels at $2.80 per watt effective Jan. 1, 2006, to be reduced by an average of approximately 10 percent annually. Incentive levels for solar thermal electric projects and solar heating and cooling will be determined in 2006.

  • Allocate 10 percent of program funds for low-income and affordable housing.

  • Develop a pay-for-performance incentive structure to reward high-performing solar projects.

Under the $2.80/watt subsidy, the program will pay $8,400 toward the cost of a 3 kW system, for example, which would currently cost about $27,000 to buy and to install.

The CPUC estimates the average incremental cost to a residential electric customer will be approximately $12 a year. However, the total impact on a residential customer’s monthly bill is expected to be minimal in most cases, because the cost of this program will be largely offset by the expiration, at the end of 2007, of a surcharge on utility bills to repay rate reduction bonds authorized in 1996 for electric sector restructuring.

The adoption of the proposal marks partial implementation of Governor Schwarzenegger’s original “Million Solar Roofs Initiative” which failed to make it through the Legislature last year.



hampden wireless

Why waste all of that money on clean solar power when we can buy a nice shiney new aircraft carrier instead??

Only kidding. This is great. Net program cost of $1 per watt added sounds good too.


but the sad thing is.... which other state/state(s) can afford this?

James White

Germany has 10 times more solar than California because German utilities pay a high price for solar generated electricity, called feed-in tariffs, not rebates. Rebates didn't transform the market for solar hot water heating systems, and they will not transform the market for solar electricity either. Rebates are bureaucratic to administer, don't drive prices down, don't reward performance, frequently pay for shaded or poorly installed systems, and send the wrong market signals. Americans fondness for rebates over production incentives is misguided.


I agree regarding production vs rebates. I'd like to see more direct R&D focus on creating more efficient PV technologies in the first place too.


I am a bit unsure why rebates are not a decent way to approach the issue. If Californians can get a rebate on the installation of PV units, obviously more people will buy them than otherwise. If more people buy the units, the price will drop and the efficiency will probably go up. I think that the problem with production incentives is that they are inherently inefficient, whereas the marketplace tends to be more efficient. I also like the idea of states that want the initially more expensive technologies, (i.e. low emission vehicles and PV units,) being the ones to pay for their development and production. After a few years of development in a large market like California, the technology frequently is adopted by other states after the bugs have been worked out and the costs inherent in the switchover reduced.

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