The plan builds on the successes and addresses problems of the SGIP and
ERP in a way that puts our state on a firm, sustained, orderly development
path for solar commercialization. It will provide the stability and
confidence needed to attract the investment in new production, improved
system design and installation techniques, more effective delivery
infrastructure, and expansion of solar industry that will achieve the cost
reductions needed to bring us into the Solar century.
Many have looked at Japan's solar rebate program and concluded that
substantial "buy-down" incentives are key to success. Others conclude from
the German program that a high "feed-in" tariff is the key factor. It has
not been the specific incentive chosen that have made these programs
succeed. Rather, it has been how each program has been implemented and
sustained over time.
In order to accelerate the long-term cost reductions required for full
commercialization, the solar industry needs reliable, growing and
sustained domestic market volume. PV manufacturers require long-term,
reliable programs in order to invest the capital required to ramp up
production to meet that demand. Therefore, to be effective, any renewable
energy commercialization program must be based on the principles of
Sustained, Orderly Development. Any public policy aimed at accelerating
the commercialization of sustainable technology must itself be sustainable
and lead to sustainable changes. It must expand the sustainable market,
stimulate new production, and lower costs in ways that becomes embedded
and permanent. What is needed are sustained incentives that will expand
supply, help reduce transactional costs, and lower installed costs over
time -- and this is what the PUC has proposed.
Now that the fight for a long-term program appears won, it's critically
important to make sure the next year of final program development moves
ahead carefully in order to correctly address some issues. The few
suggestions to the proposed PUC plan that I have include:
- Be very careful in adopting a pay-for-performance or performance based
incentive (PBI) plan. The CEC PBI pilot clearly shows the weakness of this
approach in the real world. Even though, for commercial scale projects, it
was literally the only game in town, just 30 percent of the $10 million
PBI fund was used after nearly a year of the pilot program. If a PBI is
implemented it should be, as proposed, a split between PBI and upfront
buy-down. I strongly suggest that no more than 25 percent of the incentive
value be set as a PBI. That amount is clearly large enough to assure that
the steps needed to promote good design and installation are taken. Also
have the PBI pay out in three years or less. Any system performing well
for the first couple of years will continue to do so with a high level of
confidence.
- While keeping the downward pressure on PV prices by ramping down the
incentive levels, be sure to keep the flexibility for the incentive levels
to respond to the market and module costs. It will take some time to
translate improved investor confidence generated by sustained, reliable
programs like this into plant expansion and to resolve the current
supply/demand imbalances. Keep the ability to slow down or speed up the
ramping down of incentive levels in a market responsive way.
- Be sure that the implementation details lower, not increase,
transactional costs. Inch thick mounds of paperwork do not lower costs nor
improve performance. Also be sure that the incentive process is efficient
enough to avoid creating unsupportable cash flow problems for otherwise
cost-effective PV projects. Most California PV purveyors cannot afford
payment delays beyond 60 days after a project is completed and inspected.
It is also critical that the solar industry responds to the challenge and
quickly make the investments and improvements that will get PV costs again
on the downward path. To do otherwise will be to give credence to this
initiative's critics.
Given the program and policies the PUC is proposing, PV has the ability to
meet the aggressive penetration levels needed for it to play a significant
role in meeting the sustainable, clean energy targets that a wide variety
of pressing concerns require, and in the time frames needed. PV deployed
under sustainable energy policies that are themselves based on sustained,
orderly development and commercialization principles like the California
Solar Initiative can help transform our state and the very world we live
in.
About the author...
Donald Osborn is CEO of Spectrum Energy Inc. a solar photovoltaic systems
integrator. Osborn is also the former head of the Solar Program of the
Sacramento Municipal Utility District (SMUD) which was involved in the
installation of approximately 10 MW in over 1000 solar projects up until
2002. He is also the outgoing chair of the American Solar Energy Society (ASES)
Policy Committee. He received the 2001 Energy Globe award and the 2000
ASES Abbot Award for significant contributions over 25 years to the solar
energy field.
The information and views expressed in this article are those of the
author and not necessarily those of RenewableEnergyAccess.com or the
companies that advertise on its Web site and other publications.
