Bright horizons
Pasadena is pushing customer-generated solar power, but questions remain about how utilities will respond to threats to their business model
By Jake Armstrong 04/22/2010
With rumors swirling about soaring energy prices, Sharon and George Taylorson grew worried that the rising electricity costs might outstrip their income and force them out of their Pasadena home.
He’s retired and she still works as a teacher, and even with miserly consumption their monthly power bill reached $200 a month. So when an unexpected windfall recently came their way, they dove into what they say is one of the most solid investments under the sun: solar panels. Two months later, what used to be a bill is now a savings.
“Over the past two months, our bill has only been $1.85,” Sharon Taylorson said.
The Taylorsons represent a growing trend in California, one that could prompt many more people to harness the power of the Golden State’s most famous resource.
Pasadena is no exception.
As part of California’s ambitious $3.2 billion plan to add solar panels to 1 million roofs by 2017, the city faces a challenge of adding 14 megawatts of solar power to customers’ rooftops in that time. And it is going to take some work.
When the sun shines, the 200 solar installations in the Crown City produce about 1 megawatt, only enough to power several hundred homes for a year. Roughly 75 additional installations are in the works at businesses, schools and residences, and Pasadena Water and Power Department officials say they’ll have in hand about 3 megawatts of solar power later this year.
Yet, as the task mounts to install the remaining 11 megawatts, the city is scheduled to cut the amount it reimburses homeowners and businesses for installing solar panels by 25 percent on July 1.
It might seem counterintuitive, given that those very same incentives are what have fueled a dramatic increase in solar installations since the Pasadena Solar Initiative debuted in 2008. But PWP officials and clean energy experts say that reduction is exactly what is needed to spur the solar industry out of a costly niche market while prompting potential solar users to spring into action.
What’s not settled, however, is how utilities will react to this growing push for everyday electricity customers to provide their own solar energy, which seems almost anathema to the current business model.
“With solar, it does threaten the very purpose of a utility company, which is to generate electricity for us and to sell it to us,” said Bernadette Del Chiaro, clean energy advocate with the Los Angeles-based nonprofit Environment California.
For now, Pasadena appears up to the challenge.
Mauricio Mejia, who manages PWP’s solar program, said he expects a rush of customers to apply for the rebate before it drops in value, as has happened the past two times the city cut rebate amounts. Those reductions were included in the state’s plans for that very reason. “The logic wasn’t to rip off the consumer. Rather, it was to get the solar industry to decrease its prices,” Del Chiaro explained.
In fact, the cost of installing solar panels has fallen 10 percent in the past year, thanks in part to a down economy, and members of the solar industry said they might be able to cut their prices in half during the state’s 10-year push toward solar power, she added.
Dollars and sense
A typical solar installation that will produce 60 to 75 percent of a home’s power is capable of putting out roughly 3,000 watts and costs about $24,000, Mejia said. But with the city’s current incentives, and a 30 percent federal rebate that was part of the 2009 stimulus bill, a customer would typically only pay about $8,000 for the system, he said. Plus, the federal rebate has no cap on the reimbursement amount.
But come July, it will cost a little more in Pasadena. The city’s lump-sum solar rebate rates will drop 25 percent to $2.40 a watt for residential, $1.40 per watt for businesses, $2.15 a watt for nonprofits and $4 a watt for residents with qualifying incomes, the qualifications for which have not yet been set.
Additionally, customers will only be able to claim rebates on less powerful systems — up to 30 kilowatts, down from the 50-kilowatt cap under the current rates. The rebates are based on the estimates of how much a system will produce and are funded through a public benefits charge — roughly $3 a month on an average residential power bill, according to PWP officials — that all customers pay.
Sharon Taylorson, a Southern California Edison customer living in an unincorporated area, said the 8-kilowatt system atop her home came with a $60,000 price tag, but she paid just one-third of that after rebates and tax incentives.
While installation is not complicated, Mejia suggests anyone looking to capture the current rebate rates before they expire start the process now. He said customers should find an installer who has experience putting panels up on Pasadena roofs to speed up the roughly two-month installation and approval process, which requires inspections from an assortment of city departments.
‘Perverse incentive’
For years, excess energy that California’s solar users have generated has essentially gone to waste. That’s because the state has not required utilities — PWP included — to compensate solar users who produced more electricity than they needed in one year.
So, a number of solar users simply started using more power to offset the loss, rather than let their utility sell their solar-generated electricity to other customers, Del Chiaro said. This was especially true among customers of investor-owned utilities, some of whom bolstered their holiday light displays or turned the air conditioning higher to expend the extra electrons.
“What we had created was this perverse incentive for people to waste their solar electricity so as not to give it away to the electric company,” she said.
But in October, Gov. Arnold Schwarzenegger signed Assembly Bill 920, which requires utilities to cut a check at the end of the year or provide credit to customers who generate more energy than they need, a practice dubbed “net metering.”
Pasadena has yet to set compensation rates for net metering for solar and wind-power customers, who must apply with PWP to receive it, but the City Council is expected to settle on rates after a public hearing tentatively scheduled at the end of summer.
However, solar customers looking to cash in on sunrays shouldn’t quit their day jobs just yet, according to Mejia. The new law caps how much customers can receive based on the amount of their power bill before they add solar panels, which is why he recommends customers only take the costly step of installing solar panels to offset their own consumption.
“Offsetting 100 percent of their energy is a challenge to begin with,” Mejia said.
A looming promise
As sunny as the future of clean energy may be with the promise of solar power, clouds of uncertainty loom over how utilities will respond. So far, many solar proposals have been met with a general reluctance on the part of utilities. Two months ago, the governor signed legislation requiring investor-owned utilities such as Southern California Edison and Pacific Gas & Electric to take in up to 5 percent of their peak demand from solar users, doubling the cap that existed before. But that’s only after larger utilities in the state fought previous attempts to greatly increase or eliminate the cap.
“It does sort of get at the heart and soul of energy. Utilities do tend to embrace energy efficiency and conservation. Most of them have not embraced solar,” Del Chiaro said.
According to Mejia, solar power will account for about 5 percent of the city’s peak load in 2017, though the municipally owned PWP is not subject to the new law’s cap.
Residents interested in learning more about the city’s solar program can attend the “Going Solar” workshop for PWP’s residential customers on 9 to 11:30 a.m. May 1 at the La Casita del Arroyo Clubhouse, at 177 S. Arroyo Blvd., Pasadena. It will detail the rebate application process and how to choose a vendor, as well as permitting, financing options and potential energy savings.
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