California Solar Initiative (CSI), the groundbreaking solar incentive program for consumers that began in 2007, is coming to a successful conclusion. Most of its nearly $2.2 billion budget has been subscribed for photovoltaic (PV) rebates to be paid between 2007 and 2016, and its goal of bringing new solar generation capacity to the state has unquestionably been met. The program has already installed 86% of its 1.94 gigawatt (GW) target for new solar installations, supporting 44,000 solar jobs statewide, and creating a PV market that can thrive with very low or no state rebates. Even the program’s early skeptics now acknowledge that CSI’s 1.94GW target will likely be exceeded.
As of this writing, CSI has received more than 114,000 applications, resulting in 1.66GW of PV installed — with residential programs in all three of California’s major investor-owned utility regions now either in their final phases or completed. And while the program is concluding, sales and leases of solar electric systems continue to grow. We know this because the CSI program publishes the most transparent data available. Its website at www.gosolarcalifornia.org was designed to let everyone see PV market growth in the residential, commercial, government and non-profit segments. This has made it easier for California residents to monitor the program’s impact, obtain information on solar installers and incentive levels, and even calculate their installation costs and projected return on investment.
Transparency, certainty and performance-based incentives have helped CSI attract millions of dollars in investment ― from average home and business owners to local banks and Wall Street. CSI was designed to bring certainty to the market by establishing a 10-step declining incentive program based on performance or kilowatt-hour (kWh) production. Transparency was added in the tools that provide market data, including an online incentive and interconnection application. The CSI program created further certainty in the market through smart design: it was based on the most successful models at the time, namely Japan’s model of upfront rebates for small systems and Germany’s feed-in-tariff model.
Under CSI, incentives for systems of 30kW to 1MW in size are based on actual production (in kWh), rather than on capacity or expected performance. Incentives were set at levels visible and acceptable to the industry and market. The incentives, approved after a series of meetings where stakeholders provided ample input, were designed to decline to zero over a period of up to 10 years. The incentive reduction was phased through a system of MW-based subscription “blocks,” in which a relatively small initial block received the largest incentive, and each subsequent, larger block received a successively smaller incentive. This system served to maximize incentive budgets while keeping pressure on the industry to reduce costs — and providing confidence to the finance community by clarifying future incentive levels.
As a result of CSI, California has maintained its number-one position in the U.S. solar market, enticing more PV manufacturers and installers into making significant investments that will help grow the solar market and reduce costs. For example, Kyocera built a second PV module plant in Tijuana, Baja California ― just minutes away from its North American headquarters in San Diego ― in response to the innovative and relatively secure market CSI helped to create.
While CSI attracted new financing products to the market, such as power purchase agreements (PPAs) and leasing, it did not attract local banks until very recently. Unfortunately, the highly desired Property Assessed Clean Energy (PACE) program, whereby homeowners could take out a loan for efficiency upgrades or renewable energy installations and repay it through their property taxes, was unable to gain traction statewide. However, some institutions such as the San Diego Municipal Credit Union and other conventional banks are either already providing loans or looking into designing loan programs for customers who want to purchase PV systems. In addition, PACE programs for commercial projects seem to be taking off in California and other states. This is very encouraging as the process of financing PV systems becomes increasingly important without CSI incentives.
Where do we go from here?
Maintaining transparency and certainty in the PV market is crucial to keeping market momentum going. There is no question that solar power is popular: so how do we keep the market growing? How do we protect customers? How do we continue to grow and create new jobs statewide? Some suggestions:
- Continue CSI’s data collection and publication through interconnection applications for new projects. This is crucial to help educate and protect solar customers and encourage high-quality products and installation. In addition, data collection will help utilities and regulators keep track of solar megawatt hours (MWh) for planning purposes.
- Reduce costs and streamline permitting and interconnection. It is encouraging to see that the federal government is helping on this front through its Sunshot program.
- Encourage local banks to finance solar projects. Also, the creation of a green bank from the state may help in lieu of a workable PACE program. When the German feed-in-tariff was promoted in the early 2000s, the German government offered loans for solar projects for a couple of years until local banks took over. The same could happen in California, post-CSI.
- Find ways to settle the net metering dispute that is growing in California and other states. Utilities, policy makers, the solar industry, and solar customers need to work together to keep the PV market growing sustainably. A stalemate or never-ending legislative and regulatory wars will help neither the utilities nor the solar industry. For the sake of our local economies and ratepayers, we must find win-win solutions where utilities, industry, and consumers can participate and benefit from locally produced solar energy.
Solar electricity is shifting the energy paradigm worldwide as electricity is produced and sold from rooftops, not just power plants. California leads the U.S. solar market, and a growing number of states are also experiencing growth. This is challenging the status quo and providing an opportunity for California to increase the production of clean electricity within cities and counties, continue to grow cleantech jobs, reduce dependence on imported electricity and fossil fuels, and attract investment.
While the CSI program has been successful, its mission continues. A lot of work must still be done to keep the market sustainable. The CSI program has taught us a lot about the California solar market. Perhaps the biggest lesson learned is that citizens want solar power, and are eager for effective ways to access and finance it. Now it is up to utilities, government and industry to increase the momentum behind solar power and other renewable solutions. The tools are available and the viability of solar energy is beyond question. Let’s ensure that our will remains strong.
The opinions expressed in this article are solely those of the author Cecilia Aguillon, Kyocera Solar, Inc. Cecilia Aguillon is director of market development and government policy for Kyocera Solar, Inc., recognized as a world-leading supplier of solar electric energy products since 1975.