California Solar Series: Los Angeles, Part One

A swath of land with enormous solar potential, it’s no wonder that Los Angeles County offers a wealth of opportunities to go solar. The California Solar Initiative (CSI) mandated four years ago that all investor-owned utilities in the state must offer a solar rebate, and in 2008  began requiring municipal utilities to do so as well.  As a result, Los Angeles County residents have numerous solar rebates and incentives available, depending on electric utility. In the third installment of our California Solar Series, GetSolar guides you through them.

Because the Los Angeles Department of Water & Power (LADWP) offers a particularly complex incentive, we’ll be dividing our Los Angeles solar coverage into two parts. Part one will focus on the Southern California Edison (SCE) and LADWP incentives, while part two—which will be posted 1/26/10—will discuss the incentives put forth by the city utilities of Vernon, Azusa, Pasadena, Glendale and Burbank.

EPBB vs. PBI

To start, it’s crucial to understand the difference between the two standard types of rebates utilities in California typically offer: Expected Performance-Based-Buy-down (EPBB) and Performance-Based Incentive (PBI). An EPBB is issued in the form of a one-time, lump-sum payment. A PBI is paid out monthly over five years: though the rate at which it pays out is locked in at the time of application approval, the actual amount you receive will vary as your solar array’s electrical output varies over time. Systems under 30 kw may apply for either the PBI or the EPBB, but systems greater than 30 kw can only choose the PBI. Refer to our guide to the CSI for a thorough breakdown of these incentives.

Southern California Edison

SCE is one of the three public utilities in the California Solar Initiative. Along with Pacific Gas & Electric (PG&E) and San Diego Gas & Electric (SDG&E), SCE offers steadily declining EPBB and PBI rebates that are based on the projected output of your solar energy system as well as on the cumulative amount of solar plugged into the utility’s electrical grid at the time of your application. At the time of writing, the EPBB rate for SCE is $1.90/watt for residential customers and $1.55/watt for commercial customers; the PBI rate is $0.26/kWh for residential and $0.22/kWh for commercial.

Los Angeles Department of Water & Power

Whether it’s an attempt to atone for its smog-inducing days of yore or a belief in the ultimate profitability of solar, the LADWP boasts one of the most ambitious Renewable Portfolio Standards in the state, gunning for a lofty 35% by 2020. This target includes the LADWP’s objective of generating 10% of its energy through solar, a plan it calls Solar LA. The key to realizing such a goal lies in the LADWP Solar Photovoltaic Incentive Program, which is roughly modeled after the CSI, and even more complex—although boasting equal, if not higher, rewards.

The program is composed of ten declining “steps”, in which the rebate rate available to a customer falls as the number of MW of solar PV connected to the LADWP grid rises by certain increments. Only solar photovoltaic systems between 1 kW and 1 MW in installed capacity are eligible for the rebate, which will cover up to 75 percent of residential solar installation costs and up to 50 percent of commercial solar installation costs. The rebate will be delivered to you in a one-time payment after your solar system has been installed, inspected and approved, and is calculated in the following manner:

Incentive amount = estimated first-year energy production x 20 years* x 0.9 (system degradation factor) x current incentive rate (in $/kWh)

*or term of solar equipment lease

Basically, the incentive amount is based on the expected electrical output of the system for the first twenty years of its life. LADWP prefers predicted output to be calculated with the National Renewable Energy Lab’s PVWatts program. It’s a tool that requires some experience and training to use properly, so you may want to find a solar installer before doing anything else.

Here’s an example we’ve directly taken from the LADWP Solar Program guidelines booklet, although we’ve updated the incentive rate, federal tax credit amount—which is no longer capped at $2,000 for residential solar installations—and per-watt cost of solar, which in California now averages out at $8/watt or lower rather than $8.50/watt.

• System size: 3.64 kW
• Calculated PV Watts first-year output: 5,536 kWh
• LADWP rebate: 5,536 kWh/year x 20 years (x 0.9 de-rate factor/year) x $0.12/kWh= $11,957.76
• Assumed installed cost (gross): 3,640 watts x $8/watt = $29,120
• Federal tax credit: $29,120 x 30% = $8,736

Thus, your net cost would be $8,426.24.

• $29,120 – $11,957.76 LADWP rebate – $8,736 federal tax credit= $8,426.24

This amounts to a savings of $20,384, or 71 percent, on your solar installation! However, because the LADWP solar program drops its incentive rate down to $0.11/kWh after it meets its Step 3 volume target, you don’t want to wait too long if you’re considering solar.

Questions? Clarifications? Don’t hesitate to post them here.