Solar PV in California could be rebate-free by 2016

SACRAMENTO, California, US, May 4, 2005 (Refocus Weekly)

If the state of California would commit to long-term market development of solar, the upfront cost of solar could drop to the point where rebates are no longer needed by 2016.

“The biggest roadblock to solar power becoming as mainstream as McDonald's is its price tag," says Bernadette Del Chiaro of Environment California Research & Policy Center and co-author of ‘Bringing Solar to Scale: California’s Opportunity to Create a Thriving, Self-Sustaining Residential Solar Market.’ “By driving up demand, California can catapult solar power from the backwoods boutique of the 70's to having its own aisle at Home Depot.”

The report examines how California can make solar power affordable for average homeowners and businesses within ten years, and details how development of a thriving and self-sufficient solar market would benefit the state through reduced air pollution, protection from volatile power prices, and less need for expensive upgrades to electricity transmission and distribution systems.

The best way to ensure that the state sees a future expansion in capacity of solar PV is to commit to long-term market development programs that include financial incentives and new construction design policies. Experience has shown that such programs can lead to increased demand, lowered prices and, ultimately, a “robust, self-sufficient solar market in which government incentives are no longer necessary.”

It is unlikely that the goal of governor Arnold Schwarzenegger to install one million solar roofs (3,000 MWp) of new solar PV capacity and half of all new homes built with PV within the next decade, can be achieved without “a sustained, guaranteed program that combines incentives for both residential and commercial systems, as well as policies that encourage the inclusion of solar power systems into the construction of new buildings.”

The most important factor in reducing costs is from increased production, it explains, and the solar industry “has learned how to improve production methods, improve the efficiency and life of various components, and operate more efficiently,” it notes. Increased production resulting from solar incentives offered by the California Energy Commission have spurred increased installed PV capacity and decreased price, with the price of retrofitted residential PV systems dropping by 36% from 1998 to 2004, down to US$8.98 per watt.

Prices will need to drop to $4 for homeowners to break even on their solar investment without financial incentives, the report estimates. If no residential incentive program were offered after this year, California would install 53 MW of residential PV systems by 2015, with a system price by then of $5.69 per watt, “not yet within the range of being economically self-sufficient for the consumer.” With a ten-year incentive program that scales down $0.20 per watt each year from its current level of $2.80, California would install 1,278 MW of residential PV by 2015, when the system price reaches $4.40, “a price that would put solar within the range of cost-effectiveness for California homeowners without financial incentives.”

Getting to this point would require an average annual budget of $180 million for incentives to create the demand for residential installations, it adds. Under a more optimistic estimate, the residential incentive could be scaled down even more quickly, with installation prices reaching the break-even point in 2012 or sooner.

Since Japan launched a residential incentive program in 1994, average system costs have fallen 75% and that country is approaching a point where government rebates will no longer be needed, it adds. Japan’s average annual investment of $115 million over the last ten years has led to a 35-fold increase in PV capacity, despite reductions in the incentive from 50% of costs to 10%. It achieved its goal of equipping 70,000 homes with solar PV by 2000, and is on track to meeting its goal of installing building-integrated PV systems on half of all new homes by 2010.

“A strong commitment to solar PV now can create long-lasting results,” the report concludes. “California already has the third-largest PV market in the world, after Japan and Germany, and has great potential for solar generation given its high sunlight exposure. Pursuing the right policies can develop this market and the industries that serve it.”

The state should commit to a sustained incentive program for residential and other small systems, with a new dedicated solar fund of $180 million per year to be paid through a surcharge on electric bills. It should also commit to a sustained incentive program for commercial systems, incorporate solar into new home design and construction, and raise the net metering cap.


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