December 27, 2006
California
California
California property owners are poised to gain yet another reason to go green.
In a decision closely watched by the solar industry, the California Public Utilities Commission recently signaled its intent to award the ownership of credits earned from renewable energy sources to the residential and commercial owners of such systems – and not to the utility companies.
If this preliminary decision by the PUC becomes final during its Jan. 11 meeting, it will allow the state to establish a market where these renewable energy credits can be bought and sold.
The PUC has wrestled with the question of who owns the credits for the past two years.
Unlikely alliances were formed when environmentalists united with builders and solar companies to fight the state’s investor-owned utility companies over who gets the credit for energy produced by sources such as solar panels and wind turbines.
Ultimately, experts say that the ability to sell the credits will reduce the cost of installing renewable energy systems to property owners by allowing them to sell the credits.
“This ruling is critical,” said David Hochschild, executive director of PV Now, a consortium of solar companies based in San Francisco. “It really will help grow the market for solar power in California because it says that it’s worth investing in these systems.”
Bob Raymer of the California Building Industry Association said he was relieved to hear about the PUC’s decision. There’s no doubt, he said, that awarding ownership of these credits will “help market these emerging technologies to the home builder and in turn to the home buyer.”
“It did not make sense for the utility companies to get 100 percent ownership of the renewable energy credits,” Raymer said. “We’re looking at this for the long haul – eventually, the financial incentives are going to disappear.”
Until the PUC signaled its decision on the question of ownership, the credits could not be sold because their ownership was in doubt.
Currently, there is no formal market to buy and sell a credit, which equals one megawatt-hour of electricity. Each credit’s value will be determined by the marketplace, much like stock in a company. PUC spokesman Tom Hall said he expects the Western Renewable Energy Generation Information System that will verify and track credits to be established after June.
According to Hall, the utility companies cannot count these energy credits toward their mandated goals to obtain 20 percent of the state’s energy from renewable sources by 2010.
Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison – all investor-owned utilities – had argued that they should be awarded ownership of the credits because it was the ratepayers who subsidized the installation of renewable energy systems through rebates.
“In the past, PG&E has been encouraging the commission that ratepayers should not have to pay twice for environmental credits from renewable sources,” said Bruce Bowen, PG&E’s director of regulatory policy. “Our customers paid subsidies to install renewables like photovoltaic.”
But developers of renewable energy sources said that if the utilities got to claim the credits, it would actually discourage the development of more green power.
Despite financial incentives and rebates, installing renewable energy systems is still expensive. Photovoltaic panels on the roof of an average-size house cost about $30,000, according to Barry Cinnamon, founder of Akeena Solar in Los Gatos and president of the California Solar Energy Industries Association. Even with rebates worth $10,000, the homeowner still pays $20,000.
“That’s why there’s been such a hullabaloo. Customers are paying two-thirds of the cost of that system,” he said.
The credits will reduce the cost even further by providing a trading mechanism for owners who are willing to sell them to companies that want clean power.
“There are some entities in the country, such as Whole Foods, who pride themselves on using green energy. They are buying these so they can say they are green and they are,” Cinnamon said about the credits.
In New Jersey, where Cinnamon said his company has installed solar systems, the credits have been sold for $180 each. The state’s market was established in 2004.
“When this renewable energy credit market went into effect in New Jersey, it was like free money fell from the skies to our customers,” Cinnamon said. “When the law goes into effect here, it will be just like it’s raining more money.”
For that reason, PG&E’s Bowen said the utility company is leaning toward not fighting the PUC’s proposed decision. He noted that if the ability to buy and sell credits helps more people decide to install solar panels, perhaps PG&E can reduce its rebate package.
“We don’t know if the renewable energy credits will have value,” he said. “But it’s clear if we come down on the side of the individual customer rather than customers as a whole, it will help the solar initiative.”
Gary Gerber, founder of Berkeley’s Sun Light & Power, called the ruling “another arrow in the quiver” for customers considering whether to install a renewable energy system. “Anyone with a roof should be looking at solar. If you have area on a roof, you have a significant use of power,” Gerber said.
As Hochschild put it, “these projects are a real stretch for many customers. The economics are very borderline, having that additional revenue from the RECs (renewable energy certificates) can tip the balance in favor of installing a system for either residential or commercial customers.”
Reach Katherine Conrad of the San Jose Mercury News at kconrad@mercurynews.com or 408-920-5073.