AB920: Incentivizing Efficiency

solar_lawOn Monday, October 12, Governor Arnold Schwarzeneggar signed into law Assembly Bill 920, which requires that utilities pay solar customers for excess electricity produced and returned to the grid.  Whereas in the past, the financial benefit to solar customers has only gone so far as to cancel out their electricity costs, with this new bill they will be able to make profit from the energy they produce and do not use.

This represents an important step for solar (and energy consciousness at large) in California because, previously, there has been little financial incentive to pursue efficiency in solar structures.  Customers with the space and ability to install solar systems capable of supplying more energy than they personally need have not been monetarily encouraged to do so; and existing solar households have had no economic inducement to improve energy efficiency beyond the point of electricity bill neutrality.  Indeed, as Bernadette Del Chiaro of Environment California puts it, “The current system instills a perverse incentive for people to waste their solar electricity just so they don’t give it away for free to the utilities.”

This issue of efficiency incentives has been raised time and again in the solar industry, as seen, for example, in the previously posted San Jose Mercury piece on the Levine household, for whom RPS installed a large-scale residential solar system; at the time of that installation, in spring 2009, reporter Tracy Seipel remarked that “Levine hoped to be able to sell surplus power back to PG&E.  But PG&E spokeswoman Jennifer Zerwer said that while customers whose solar systems produce excess energy receive credits to apply against charges on their bill if they consume more energy than they produce, they currently can’t sell power back to the utility.”

Well, no longer!  With the passing of AB920, solar customers will finally be able to sell back excess energy to the utilities at rates set by the California Public Utilities Commission.  And while these rates are likely to be close to wholesale so as not to shift a financial burden onto non-solar customers, the hope is that AB920 will not only encourage more customers to go solar, but also reward existing solar customers for increasing their energy efficiency.

In the absence of this kind of financial incentive, though, other programs were created in California to help residents and businesses go solar, programs like the California Solar Initiative, which offers rebates to solar customers based on the size and performance of their systems.  However, the CSI subsidy is only available for solar systems no bigger than estimated peak demand, essentially pitting the CSI’s financial incentive against that offered by AB920, because the AB920 incentive applies to excess energy, which, if your system is capable of producing, may disqualify you for the CSI rebate.  Thus, it is probably households with existing solar systems (who’ve already received their CSI rebate) who will be most eligible to benefit from AB920, and most encouraged to increase energy efficiency, using less power than they did when their panels were installed.

Over time, it is hoped that the anticipated decrease in solar panel cost and in CSI rebate levels will position the payments mandated by AB920 as important encouraging factors in the decision to go solar, and to use even renewable energy more efficiently.

Along with AB920, Governor Schwarzeneggar signed SB32, which we write about here.

It is certainly a developing story…  Read more here at Ted Ko of the FIT Coalition’s blog, here in the San Jose Mercury News, and here in the LA Times piece.

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