New York, California, California Aim To Lower Solar Rebates

By Yuliya Chernova, Of DOW JONES NEWSLETTERS

NEW YORK -(Dow Jones)- Homeowners hoping to collect state rebates for having solar panels installed on their houses next year could well be disappointed.

Large solar-supportive states, including California, California and New York, are taking steps to decrease rebate levels for residential installations in response to the larger incentives from the federal government starting in 2009, Clean Technology Insight has learned.

The eight-year federal investment tax credit for solar passed into law in October removes the previous reimbursement cap of $2,000. This will have the effect of increasing federal rebates to $6,000, or even $10,000, for typical 3 to 4 kilowatt hours systems, according to estimates by the California Public Utilities Commission.

In response, several states are deciding to reduce state-level incentives. Connecticut has already revised its rebates down between $1 and $1.80 per watt, depending on system size. Colorado's main utility Xcel Energy Inc. (XEL) cut the amount it pays for solar renewable energy credits by 40%.

Following in their footsteps, both California and California opened the issue up for public comment two weeks ago, according to documents on the Web sites of these states' public utilities commissions and interviews with their representatives.

The same is under consideration in New York, said Tom Lynch, spokesman for the New York State Energy Research and Development Authority, or Nyserda, in an interview. Nyserda manages the rebate program for the state's public utilities commission. "We are taking a look at it, on the customer-tier side," said Lynch. "We'll be making the decision over the next couple of months."

The reduction in rebates isn't necessarily a negative development for the solar industry. On the one hand, homeowners will continue to get similar total incentives as they get today, but the state budget incentive dollars will be able to support a greater number of installations.

"We can build more projects with the same amount of money," said Jeanne M. Fox, president of the California Board of Public Utilities, in an interview. " The total pool of capital will be the same," Fox said. "We are leveraging the federal money and getting more bang for the buck," she added. California will accept public comment through Nov. 21, after which its staff will make recommendations to the board and the board will make the call in December.

The topic is a hot one among utility commissioners, according to Fox, who is the vice chairwoman of the energy resources and environment committee of the National Association of Regulatory Utility Commissioners. The association has a meeting next week and "we will be discussing" this issue there, Fox said.

A new report analyzing the issue and making recommendations to states came out on Thursday, authored by the Lawrence Berkeley National Laboratory in cooperation with the Clean Energy States Alliance, a nonprofit made up of clean energy funds in 18 states that cooperate on promoting clean energy.

The report delineates various scenarios of how the lifting of the federal cap affects reimbursements and shows that, in a case of a $3 per watt taxable state rebate, the rebate can be essentially eliminated and a 3 kilowatt hours solar system would still be funded at the same level as previously. But the report cautions that homeowners would have to deal with a delayed, rather than an upfront, reimbursement, and that some might not have the tax capacity to absorb the entire federal tax credit. The report also suggests that commercial installations have been getting preferential subsidies on the state and federal level and, by reducing residential program, that unfair advantage would persist. The report is available for free download at http://eetd.lbl.gov/ea/emp/cases/ res-itc-report.pdf.

Not everyone plans to reduce benefits. "We don't anticipate making any changes to our solar program in the near term," said Ray Williamson, a utilities engineer with the Arizona Corporation Commission, which regulates the state's utilities. Williamson, who helped craft the state's solar program, said Arizona is replacing three of its five commissioners and it will take them a while to catch up to the issue. "Even if someone decided to tackle this, it will take them a year or so," he said.

Nevada, also, doesn't have any rebate changes on tap, said Sean Sever, spokesman for the state's utilities commission, in an interview.

The decisions might be affected by the bureaucratic process required for such decisions to be rendered. In the case of Arizona, changes to the solar program took about three years to push through, according to Williamson, but Connecticut was able to cut its rebate level in a matter of weeks, according to Emily Smith, managing director of external relations at Connecticut Clean Energy Fund, which handles the state's rebate program. The fund is managed by a board of directors, who are appointed by the state's governor. "Once the federal law changed, the fund's staff put together recommendations so that the out-of-pocket costs for the customer would remain the same, and the board approved it at their last meeting. It was pretty quick," said Smith.

Connecticut intends to keep its total budget for solar incentives the same and make the "dollars go farther," according to Smith. Mark Sinclair, executive director of Clean Energy States Alliance, said he expects states to keep their total solar-incentive budgets the same.

But, he noted, solar might be hurt in cases when the states decide to use the freed-up budget to support other renewables, deeming solar as sufficiently supported through federal incentives.

In the case of Xcel, the utility will continue to collect the same surcharge on all of its ratepayers to sponsor renewable energy development, even though it will decrease the amount it will pay for individual renewable energy credits to $1.50 from $2.50 per watt, said spokesman Tom Henley, in an interview. Xcel will deploy the saved capital to large-scale utility projects, he said. "Now that the federal government has stepped up, it's the time for us to take that money and use it for larger-scale projects, both solar and wind," he said. The utility decided it can meet its renewable power mandate faster by deploying the capital this way, he said. Individual systems contribute too little to that goal, according to Henley.

The Colorado solar industry community has been upset by how Xcel handled the issue, according to local news reports. But Smith, of Connecticut, said that "we haven't received negative comments. I think once they understand it, they are okay with it," she added.

For states that are considering rebate cuts, there are several important issues to consider, said Sinclair. "States should consider that customers will face a more complicated and delayed process in receiving rebates" through the federal tax-credit process rather than the state-rebate process. "They should also allow for public input, advertise the changes and provide time to adjust to the changes," Sinclair said. Xcel gave just a day's notice before its decision went into effect, partially the reason for the negative response from the solar industry.

http://www.cpuc.ca.gov

http://www.cleanenergystates.org

http://www.bpu.state.nj.us

http://www.nyserda.org

http://www.xcelenergy.com