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CA net metering bill fails, impacts and next steps

The 2009 California legislative session ended on Friday without passing AB 560 (Skinner), a bill that would have raised the current cap on net metering in the state from 2.5% to 5%.  As usual, the 11th hour brought out the shenanigans.  First, a hostile amendment knocked the bill down to 3.5%.  After grassroots outrage (thanks Vote Solar members), the culprit changed position, and the bill returned to 5%.  Then the IBEW, with friends in high places, forced an amendment on a tangential licensing requirement.  While the bill enjoyed the support of over 50 organizations, including retailers, major cities, and 2 of the 3 largest utilities in the state, the IBEW amendment drew substantial opposition–including fierce resistance from other unions.  The bill got sucked into the Senate Business and Professionals Committee…and the clock ran out.

What does this mean going forward?  Well, it means that the rooftop solar market in PG+E territory–the country’s largest solar market, by far–is in danger of distruption, as soon as the first half of next year, unless we get this right.

The charts below project the growth rate for California Solar Initiative applications under two scenarios: average growth and high growth.  Applications are the key metric for measuring when we’ll hit the wall, because once the applications queue reaches the 2.5% cap (around 500 MW for PG+E), a solar installer is no longer able to assure a potential customer that going solar will allow them to offset their energy bills.  If you can’t quantify the savings, there is no sale.  Period.

AVERAGE GROWTH SCENARIO

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HIGH GROWTH SCENARIO

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There’s a lot of reason to believe that the high growth rate is a more likely scenario. First, solar is getting cheap, and as these news stories in the Sacramento Bee and San Jose Mercury News indicate, lower prices is driving increasing demand.  Secondly, the Treasury has just started taking applications for their cash-in-lieu-of-ITC program, which will free up financing for commercial systems considerably. In order to claim that cash, project construction must begin by end of 2010 – so you can bet there are a lot of developers focused like a laser on getting these projects out the door. I expect that all the pent-up project development from recent finance-related market stagnation in the commercial sector will hit the CSI application queue very soon.  Thirdly, public agencies have another financing mechanism that’s looking pretty attractive these days – Clean Renewable Energy Bonds or CREBs. Applications were due in July, allocations will be dispersed in the begining of October, and the bookings will hit at least by Q1 of 2010.  A quick, non-scientific survey of some developers suggests at least 100 MW of CREBS apps in the state, and I would imagine a substantial portion in PG+E territory.  Finally, several cities–including San Francisco and a state-wide joint powers authority–will be debuting their municipal property tax financing programs in the fall and winter, further driving residential demand.

This quick survey of all the positive developments makes the failure of the bill–putting all this hard-won momentum in jeopardy–all the more infuriating.

We’ve said it before and we’ll say it again: with the state facing both an economic crisis and a climate crisis, it’s unclear why policymakers are talking about capping the state’s best source of green jobs at all.  But that’s politics for you.

The real victims here are potential solar customers, and smaller installers that can’t move their operations to Southern California.

Going forward, we are working on plans b and c.  A special session of the legislature this fall may be forthcoming.  And we are working on another solution that we’d rather not talk about in case it falls on its face.  Stay tuned.