This week - a month after the last time they considered it - the Commissioners of the Board of Water and Power voted to drop the incentives for rooftop solar starting in January. The initial incentive's $3.56 now for every installed watt of energy on a residential property, where the DWP gets to keep the Renewable Energy Credits. Next year, that'll go down to a max of $2.80. (Some factors can alter the incentive total; I'm leaving those out to avoid a bad headache.)
A drop was always supposed to happen. it's a new market. The idea of the incentives was to move people over, to get them to dip into the new market - then the incentives drop over time. Every utility is stepping the incentives down. S.B.1 allocated money to utilities around the state for exactly this purpose. LADWP got 318 million dollars to spend through 2016.
(Photo via Clownfish on Flickr)
It's just happening faster than they supposed it would. Last year, the federal government ended a cap on tax credits for installed solar - which had been 2 large - and replaced it with a credit for 30% of installation. I'm no economist. But I bet that contributed to a dramatic increase in demand - that's what DWP argues. DWP's worried the money's going to disappear before the program's purported end in 2016, and that's why the incentive's dropping early.
Solar advocates liken that drop to something cataclysmic for the industry. A solar aocalypse. Nat Kreamer, from Acro Energy Technologies; Ben Higgins from Mainstream Energy Corporation/REC Solar, Mark Davidson from NRG, James Brennan from Open Neighborhoods, John Schaeffer from Real Goods, David Hochschild from Solaria, Blair Swezey from SunPower, Ethan Sprague from SunRun, Polly Shaw from Suntech, Jim Stewart from the Sierra Club, Alexandra Kravetz from Vote Solar Initiative, and Ken Button from Verengo signed a letter together.
[T]he economics of going solar in LADWP are worse, even at the current rebate level, than they are in Southern California Edison, due to the lower cost of electricity. The existing rebate levels help to offset the rate discrepancy but cutting the rebates dramatically as staff is suggesting will immediately increase solar costs by thousands of dollars. Preserving the viability of the moderate income solar market should be a high priority as residential installs are labor intensive providing local jobs and much needed utility savings to homeowners.
This group argues that developers might be "squatting" on reservations for solar incentives - reservations that may not have been used in the alloted time. They also say that commercial properties are exceeding their intended share of incentives - which DWP confirms. Aram Benjamin said at the commision's November 2 meeting that about 70% of the incentives are going to commerical projects, 30% to residential ones, when they're supposed to be 50%/50%.
So, these guys argue, DWP should reform its program - tap the brakes, not slam them on. They want the DWP to purge the incentives allocation list of expired reservations. And they want the DWP to look at projects where the cost of solar sold to property owners is greater than $9.50 a watt - that would affect developers.
That still could happen: Commissioner Jonathan Parfrey suggested that DWP staff be directed to look at a price ceiling and see how it might affect the program going forward, and in approving the step-down, DWP commissioners decided to review the program and how it's working within 90 days, as well as price ceilings.
It does seem likely that the moderate-income homeowners who are among the intended beneficiaries of S.B.1's incentives aren't benefitting as much as the developers and commercial projects that now account for the vast majority of DWP's allocations. But it's hard to tell what DWP is supposed to have done about that so far. Federal rule changes seem to have spiked demand for rooftop solar. The kinds of people who've had money to jump on that - and who would benefit most from the federal rule change - aren't necessarily the moderate income homeowners. But this step-down is happening everywhere around the state - and has been for a while, since distributed generation has been adopted around the state faster in other places than in DWP territory.
Solar providers now want the City Council to intervene. SunRun, Verengo and others want the DWP to exercise authority under Charter section 245 to block the step-down in solar incentives - something Council would have to do soon if it's going to do it at all. In a letter sent to Council President Eric Garcetti and the rest of the council, these solar providers suggest the electeds ask:
• What level of job losses is expected?
• What level of job losses is acceptable?
• Will the addressable solar market shrink significantly if prices increase?
• What has caused the recent increase in application volume and will the run rate continue?
• What is the forecasted impact of the rebate reductions on the program run rate?
• Why are the residential solar rebates reduced by twice as much as the non-residential rebates when the recent program growth has been 70% non-residential?
• Are there less invasive methods for extending the program in duration and the number of applicants?
• How will the SIP be impacted by the LADWP Integrated Resource Plan (IRP), which we understand will be released within the next several weeks?
You think this would be going down differently if the DWP had a real, not an interim, general manager, 13 months after David Nahai stepped down? You think if DWP installed an independent ratepayer advocate - or the city council created one already - or they worked together to hammer out an oversight solution - that would have mattered? Or is this just, as my sister's former boss liked to say, the price you pay for living in society?