Distributed Energy Resources Guide: Economics

Incentives in the form of public or private subsidies can significantly improve the economics of a DER project by lowering the capital costs and accelerating the payback period. Some incentives that are presently available in the state of California are discussed below.

Emerging Renewables Rebate Program

The California Energy Commission offers cash rebates on installations of renewable-energy electric generating systems. Eligible technologies include solar photovoltaics (PV), solar thermal electricity systems, small wind turbines and fuel cells that use renewable fuels.

On Jan. 12, 2006, The California Public Utilities Commission (CPUC) approved the California Solar Initiative (CSI), a 10-year, $2.8 billion program that provides incentives developing a self-sustaining solar market.

The goal of the program is to increase the amount of installed solar capacity on rooftops in the state by 3,000 MW by 2017.

Rebates from the CSI will decline steadily over the 10-year period. Funds will come from electric and gas distribution customers of investor-owned utilities, and will go toward the installation of photovoltaics (PV) under 5 MW capacity initially, with solar hot water heating, and solar heating and cooling systems being added at a later date.

The Energy Commission will oversee the program component that focuses on solar installations in the residential new construction market. The CPUC will oversee the remainder of the CSI, which will cover existing residential housing, as well as existing and new commercial and industrial properties.

Prior to 2007, applicants interested in receiving funding for renewable energy installations should consider the Energy Commission's Emerging Renewables Program (for systems under 30 kilowatts, or kW) or the CPUC Self-Generation Incentive Program (30kW or greater) .

Customers in the utility service territories below can contact the following administrators for application forms, program handbooks, and eligibility information about the Self-Generation Incentive Program:

SMUD launched its PV Pioneer I program in 1993, which used bulk purchasing to drive down the price of photovoltaic (PV) systems for its customers. The Pioneer I program required participating customers to pay a monthly charge to have SMUD install a 2-4 kilowatt rooftop solar array. This monthly charge covered only a portion of the cost of the PV systems. The remaining costs were spread across the utility's entire customer base.

SMUD's Pioneer II program, enacted in 1999, provides customers with a reduced-cost PV system and allows participants to receive the retail electricity price for net metering (e.g., selling excess electricity back to the utility).

In 2004/2005, PV Pioneers II adopted a contractor-driven approach, with SMUD providing an upfront subsidy and some program promotion. Private contractors are responsible for marketing, designing, and installing systems.

Other Programs and Incentives

For more information about these incentives, or to find other incentives applicable to the installation of renewable DER systems, please visit the links below:

California Solar Center - Includes financial incentive programs for solar energy in the state of California

The Database of State Incentives for Renewable Energy (DSIRE) - Includes incentive programs available in California and other states, as well as information on zoning, rules and regulations, and net metering.