Golden Gate Bridge, San Francisco
Solar Legislator Score: 
2012 Update
With a nation-sized land area and population and global-sized economy, California is virtually a country unto itself. While it’s easy to get lost in all those people and all that GDP, California may also have more natural places to protect than anywhere else in the country. From Yosemite to Tahoe, the Sierra-Nevadas to the Joshua Trees, California is beautiful indeed. Heck, Woody Guthrie even sung about your Redwood Forests.
What’s the point? Well … only that you have a whole lot to protect by getting off of fossil fuels! So, how’s California doing with that whole “encourage people to use renewable energy” thing? Let’s see!
California’s Renewable Portfolio Standard
California has one heck of a Renewable Portfolio Standard (“RPS”); 33% of electricity production must come from renewable energy by 2020. We’ve seen some higher numbers floating around, but we’ve never seen one so high, so soon. Interim targets set goals of 20% renewable energy by Dec 31, 2013 and 25% by Dec 31, 2106. How are California’s big utilities doing meeting those goals?
|
Utility Company
|
Renewables % Met
|
|
PGE
|
15.9%
|
|
SCE
|
19.3%
|
|
SDGE
|
11.9%
|
That’s not too bad overall, though we are a bit worried about SDGE. Looks like ya’ll are slipping behind. SDGE better get off it’s butt and get some renewable energy going, or it’s going to face penalties for falling short. How big those penalties will be is unclear. Under California’s original 20% RPS (passed 2002), the penalties were 5 cents per kilowatt-hour (“kwh”) that a utility was short, up to a total fine of $25 million. The California Public Utilities Commission is currently developing the full rules and procedures for the current 33% RPS.
Performance Payments
California has a Feed-in Tariff (“FIT”) program that will pay you for every hour of electricity you produce, if you opt into it. All investor-owned utilities and publicly-owned utilities with 75,000 or more customers must make the FIT available to their customers.
Careful though; any customer-generator who sells power to the utility under FIT may not participate in other state incentive programs. That includes receiving payment for your yearly surplus through net metering. Given those limitations, the FIT program probably only makes sense if you’re planning a big ole’ solar farm. For a single-home solar power system, you are going to be better off planning a system that tried to zero out your electric bill, and taking the net metering credits explained below for any small amounts of surplus you generate. If you do want to get a check for all those kilowatt-hours (“kwh’) of electricity your producing, entering into a contract in 2012 will get you between 7.68 cents (10-year contract) and 9.27 cents (25-year contract) for every kwh, depending on how long you lock in your purchase price for.
State Rebates
California has an extensive state rebate program – the California Solar Initiative (“CSI”) — to encourage the development of solar power. The Initiative’s goal is to help create 3000MW of new solar power by 2017. To urge Californians to purchase solar systems the legislature enacted a tiered rebate program that offers cash back on the installation of a solar system. How much cash you get depends on how far along your utility is toward accomplishing its share of the Initiative’s 3000MW target. Here is the current breakdown.
| Utility Company |
Current Step |
| PGE |
9 |
| SCE |
7 |
| CCSE |
9 |
| Step |
EPBB Payment Per kW |
| 7 |
$650 |
| 8 |
$350 |
| 9 |
$250 |
| 10 |
$200 |
Many of California’s small utilities offer rebates as well.
| Utility Company |
Rebate amount |
Cap |
| Alameda Municipal Power |
$2,090/kw |
50 kw |
| Azusa Light and Power |
$1,850/kw |
50% of costs |
| City of Healdsburg Utilities |
$820/kw |
$3,280 |
| City of Lompoc Utilities |
$3,000/kw |
50% of costs |
| City of Palo Alto Utilities |
$1,200/kw |
None |
| Corona Department of Power and Water |
$1,530/kw |
$4,590 |
| Hercules Municipal Utility |
$2,250/kw |
$10,000 |
| Lassen Municipal Utility District |
$3,220/kw |
Lesser of 50% of costs or $6,000 |
| Lodi Electric Utility |
$2,090/kw |
$8,400 |
| Merced Irrigation District |
$2,800/kw |
$7,000 |
| Modesto Irrigation District |
$1,500/kw |
50% of costs |
| Pacific Power |
$1,130/kw |
5 MW |
| Pasadena Water and Power |
$2,000/kw |
1 MW |
| Plumas-Sierra REC |
$2,250/kw |
$6,000 |
| Roseville Electric |
$1,360/kw |
10 kw |
| Silicon Valley Power |
$2,500/kw |
$25,000 |
SMUD |
$1,100/kw |
None |
Truckee-Donner PUD |
$3,280/kw |
$9,840 |
Turlock Irrigation District |
$1,870/kw |
50% of costs |
Ukiah Utilities |
$1,680/kw |
$7,000 |
State Tax Credits
California used to have a tax credit for solar power systems. Sadly that tax credit went the way of the Dodo Bird in 2005. To be fair, the tax credits were probably allowed to expire because of the implementation of the huge CSI program, and all those rebates we just talked about. But we’d gladly take a tax credit and a rebate (nudge, nudge).
Tax Exemptions
If California isn’t giving you a tax credit anymore, it’s at least giving you some tax exemptions, right? Right! When you install a solar system you get a big ole’ increase in home value (because of the energy savings, not because it’s cool, though the awesomeness of a new solar polar system is, admittedly, undisputed). Normally an increase in home value means an increase in property taxes, but not with your solar power system. 100% exemption baby! Give me an E; give me an X … OK, you get the point.
What you don’t get, much to our chagrin, is a sales tax exemption. This is an unfortunate trend in a lot of states, forgetting about that pesky sales tax exemption for renewable energy systems. But we really thought you were better than that California. You’ve set aside all this money for the CSI, do you really need that extra few percent when we buy our solar panels?
Utility Prices
Californians currently pay an average 15.5 cents/kwh for electricity – one of the ten highest rates in the nation. We know you hate your electric bill. Really, we do. So please excuse us when we say that even at 15.5 cents, energy is way, way too cheap. Fossil fuel burning kinda cheap. As you’re seeing, however, energy is not staying cheap. Electricity costs have been going up, especially in California. Last year at this time you paid 14.43 cents on average. Barely more than one cent may not seem like a big increase, but in this case one cent is about 7% of your total electric bill. 7% is a lot; for comparison, our 5kw solar system example below, assume that electric rates will rise at an average of only 1.5% per year. The higher electricity rates go, the more money you save by producing your own electricity with solar power. With prices going up at the rate they have been, that’s a whole lot of cash!
Net Metering and Interconnection
We’ve gotta say, with the exception of the missing sales tax exemption, California is really coming through on renewable energy policy. Net Metering is another strong area for California, with the policy hitting all the money saving sweet spots. Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume. Any surplus you generate one month is carried over as a credit to bills the next month. At the end of 12 months any net surplus you’ve accumulated can either can held as a credit towards bills indefinitely, or the utility will cut you a check at the 12-month average price for electricity between 7am and 5pm. Just make sure you tell the utility which option you want! If you forget to make an affirmative choice your credit reverts back to the utility without compensation.
All those savings are great, but we’ve seen too many states where it’s difficult to get connected to the grid and take advantage of net metering. Luckily California isn’t one of them. Interconnection standards are simple and strong for residential solar power systems. The Public Utilities Commission’s “Rule 21″ set up simplified procedures for small renewables that makes it easy to get on the grid –no supplemental review or interconnection studies are necessary– and prohibits the utility company from charging you any additional charges or fees. Significantly, small renewable are exempt from paying the high costs associated with the interconnection studies, distribution system modifications or application review fees that we’ve seen be a problem in other states.
Only two areas remain utility companies aren’t adequately restrained from overcharging you for interconnection: requiring a redundant external disconnect switch; and requiring you to carry separate liability insurance. While such safeguards make sense for very large energy systems, both of them are just a waste of money for small residential setups like yours. Whether or not you’ll be required to pay for either depends on your utility company and its policies. One of our local partners can tell you for sure when you get one of your free quotes.
5kW Example Return on Investment
California is so large that sunlight and energy prices can vary pretty widely. That’s why we’re going to be doing individual breakdowns of all the major metropolitan areas. For the moment, let’s take a nice middle ground of both sunlight and energy prices and look at the Sacramento area.
Installing a typical 5kW solar system should start at about $25,000. Don’t freak – that’s gonna drop fast!
- SMUD offers you a choice between an up-front rebate or performance payments over the first five years of your system. For a 5 kilowatt system, the savings are probably close either way. Our local partner that helps you plan your perfect system can go over both options with you in detail. For now we’ll assume you take the cash at the beginning and subtract $5,500, for a new starting price of $19,500.
- We calculate the 30% federal rebate from the total after the SMUD rebate. That means another $5,850 off your bill, for a new cost of $13,650
- Finally we subtract your first year’s energy savings, which we estimate to be about $1,088. That brings your final cost after the first year to $12,562, about half of where we started!
- With a conservative estimate for the future rise of electricity prices, you can expect your new solar power system to pay for itself in about 10 years.
- It can be easy to forget because the money doesn’t go straight to your wallet, but you just significantly increased the value of your home as well – by almost $22,000 in fact. Like we said earlier, that’s $22,000 of value that is 100% exempt from property taxes.
- On top from all that green in your wallet, your new solar power system is also like a bunch of green for mother earth! Tree green that is. The fossil-fuel produced electricity you’re not buying from big power plants is the same as planting 124 trees this year!
These figures are estimates of course. Your home is unique, and how much you can expect to save depends on lots of little details. Thankfully we know some experts in your area. Just fill out the form below and one of then will be more than happy to go over all those details and help you craft a plan to get the absolute most out of a solar power system in your home. Your quote is 100% free (yes free) and you can get as many as you like.
Consensus
Not too shabby California, not too shabby at all. We’re giving you a solid B for your overall solar policy. A few years ago you would’ve gotten highest marks, and we do love that RPS of yours oh so much, but the average state rebate just isn’t high enough anymore for payback timeframes to get to our hallowed A rating. Don’t feel too bad – you’re still doing a lot of great stuff, but we’re going to need to see rebate payments go back up, and probably a sales tax exemption to join its property tax counterpart for you to get top marks again.
