On Friday, February 26, the solar industry in California took a big leap forward. On the roof of a solar-powered Macy’s in Culver City, Governor Schwarzenegger signed AB 510, a bill to raise the cap on net metering in California from 2.5% to 5%.  Thanks, Governor, and thanks Assemblymember Skinner for carrying the bill over the finish line.  It was way harder than any of us thought it would be.

The bill establishes the right for customers to use solar to reduce utility purchases–at least until we get to about 3,000 MW of customer-sided installs statewide, enough to see us through the California Solar Initiative program.

As solar gets cheaper and utility bills get higher, net metering becomes increasingly valuable.  Right now, the clearing price for wholesale solar generation in the state seems to be somewhere between 10 and 16 cents/kWh.  Most customers’ retail electricity rates are higher than that, meaning that if you have load to serve, your solar generation is much more valuable offsetting utility bills than selling to the utility.

As the state secures a longer-term visibility for the customer-sided rooftop solar market, it is also establishing new programs for wholesale generation.   Both the SCE and PG&E DG PV programs are close to launch (500 MW each), and we expect a Proposed Decision out of the Administrative Law Judge overseeing the proposed 1 GW market-based feed-in tariff any day now.  This diversity of approach, I believe, makes for a more robust and resilient market.

The event itself was actually a lot of fun.  After the signing, the Governor took the 4 signed copies, looked at the 5 advocates on the podium, and handled a potentially awkward situation with grace.  Ladies first, he said, handing out copies to Assemblymember Skinner,  Sara Birmingham of the Solar Alliance, Julie Blunden of Sunpower, and Bernadette Del Chiaro of Environment California.  Bernadette graciously gave me her copy, which is now framed and hanging on the wall behind Rosalind’s desk (the real rainmaker in the campaign).

Celebrating the passage of California's new net metering law.

The 2009 California legislative session ended last fall with some important solar business left undone.  State law currently caps the amount of net metered solar systems at 2.5% of utility system peak load–a serious impediment to long-term solar growth.  Without net metering, solar customers won’t see their meter roll backwards, and California’s growing rooftop solar market grinds to a halt.  AB 560 (Skinner), which would have raised the cap to 5%, made it through the Assembly and all Senate policy committees before being derailed by a fight over a tangential licensing provision.  The session ended, painfully, with a cloud hanging over solar’s future growth in California.

Well, now is the time to finish the job.  AB 560 has now become AB 510, and it picks up where we left off in the fall: in the Senate.  The licensing issue has been resolved to the satisfaction of stakeholders.  Text of the new legislation here (pdf).

UPDATE: Legislation in print, here (pdf).

And if you want to get involved, action alert here.

Time to get this done, already.

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

HIGH GROWTH SCENARIO

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.

AB 560 (the bill to lift the net metering cap in California) passed a key hurdle today, passing out of the Senate Energy, Utilities, and Communications committee by a vote of 9-1. The bill was amended–instead of lifting the 2.5% cap on net metering to 10% of utility system peak load, the bill now lifts the cap to 5%. While that’s half of what we wanted, its still twice the status quo, and as a direct result, PG&E and SCE (though not Sempra) are now in support. I got to say, I found the hostility of some of the Senators to this program really surprising.  We’ll take the win.

The bill now goes to Senate Appropriations Committee, and then to the Senate floor (if all goes well, likely in August).

That, my friends, is the sound of the California solar market grinding to a halt–which is exactly what will happen if we don’t pass AB 560 and lift the cap on net metering.

Net metering, of course, is the policy that allows you to roll you meter backwards when you generate more solar electricity than you use.  By allowing you to reduce your utility bill commensurate with what you generate, it makes your solar system more economical.  And by maximizing the amount of electricity on the grid during peak periods–when the system needs it most and electricity is most expensive–net metering saves all ratepayers money.

In California, utilities’ obligation to offer net metering is currently capped at 2.5 % of system peak load–a limit we’ll likely reach in parts of the state within this legislative cycle.  If the Legislature does not act, California’s solar industry would take a serious hit.

We are in for a serious fight.  The state’s investor owned utilities…how to put it?…have yet to fully embrace a lifting of the cap.  Press is picking up on the issue (see article in The New York Times).  But we need to make sure that Sacramento hears you loud and clear.  AB 560 would raise the cap to 10%.  It’s passed the Assembly, and faces a key hurdle in the Senate Energy, Utilities, and Communications Committee on June 30.  Can you take action now?

http://salsa.democracyinaction.org/o/1179/campaign.jsp?campaign_KEY=27474

Take action now, or no complaining later.