California Solar Initiative (CSI)

The State of California has the largest state solar program in the U.S. and has established many program innovations. California has set an aggressive solar goal to create 3,000 megawatts of new, solar-produced electricity by 2017 - moving the state toward a cleaner energy future and helping lower the cost of solar systems for consumers. As of January 1, 2007, the $3.3 billion program consists of three components: 

  • The California Public Utilities Commission, through its California Solar Initiative, provides incentives over the next decade for existing residential homes and existing and new commercial, industrial, and agricultural properties. The program is funded through revenues and collected from electric utility distribution rates.
  • The California Energy Commission manages a 10-year, $400 million program to encourage solar in new home construction through its New Solar Homes Partnership.
  • Local publicly-owned electric utilities will adopt, implement, and finance a solar initiative program by January 2008.

Support of Low-Income Solar Deployment

Ten percent of program funds are allocated for solar installations in low-income and affordable housing. The PUC is currently considering program design options toward a decision in 2007.

Performance-based Incentives

PV rebates given through the CPUC California Solar Initiative have changed from capacity-based payments to performance-based incentives that reward properly installed and maintained solar systems. The incentives are determined according to the system size, as follows:

  • For photovoltaic systems greater than or equal to 100 kilowatts in size, incentives are paid monthly based on the actual energy produced for a period of five years. This incentive path is called Performance Based Incentives (PBI). Systems of any size may elect to opt into the PBI program.
  • Incentives for all systems less than 100 kilowatts are paid a one-time, up-front incentive based on expected system performance. Expected performance is calculated based on equipment ratings and installation factors, such as geographic location, tilt, orientation and shading. This type of incentive is called Expected Performance-Based Buydown (EPBB). Residential and commercial incentives receive up to $2.50 per watt, depending on their location, tilt, orientation, and other installation factors. Government and non-profit organizations will receive a higher incentive (up to $3.25 per watt) to compensate for their lack of access to the federal tax credit.

The incentive payment levels will automatically be reduced over the duration of the CSI program in 10 steps, based on the volume of MW of confirmed reservations issued within each utility service territory. On average, the CSI incentives are projected to decline at a rate of 7 percent each year following the start of implementation in 2007. The incentives will gradually phase out over the 10 steps.

New Solar Homes Partnership: A focus on New Home Construction, Solar & Energy Efficiency

The New Solar Homes Partnership (NSHP) is part of the California Solar Initiative (CSI). The NSHP merges the goals of energy efficiency and solar production to accomplish the installation of 400 megawatts (MW) of solar electric systems on energy efficient new homes in California over the next ten years. The California Energy Commission is partnering with builders and developers to create a self-sustaining market for solar homes that incorporate high levels of energy efficiency and high-performing systems on 50 percent of new homes by the end of that period. The NSHP program targets new residential construction, both single family and multi-family, including affordable housing. The NSHP provides incentives based on the system’s expected performance plus technical and market support for builders participating in the program. The program officially began on January 2, 2007.

Eligible applicants are builders and developers who install qualifying solar electric systems on new, highly energy efficient residential buildings.

The program places great emphasis on energy efficiency because it is the most cost effective means to meet California’s energy and environmental needs. In establishing the NSHP, the Energy Commission aims to ensure that new residential buildings that are granted an incentive under the NSHP are significantly more energy efficient than required by the California Building Energy Efficiency Standards (Title 24, Part 6). This helps the combined energy efficiency and solar project to be as affordable as possible over the life of the home.

Residential buildings must achieve an Energy Commission specified level of energy efficiency beyond the Title 24 Standards to be eligible for incentives for solar systems. Participating residential buildings are required to meet one of the tiers of energy efficiency shown below:

Tier I - 15 percent reduction in the residential building’s combined space heating, space cooling and water heating energy compared to the current Title 24 Standards.

Tier II - 35 percent reduction in the residential building’s combined space heating, space cooling and water heating energy and 40 percent reduction in the residential building’s air conditioning energy compared to current Title 24 Standards.

The Tier I level is a minimum condition for participation in the NSHP. The Tier II level is intended to differentiate builders who make greater commitment to energy efficiency, aiming for immediate positive cash flow to homeowners and to encourage builders to move toward zero energy new homes. The Tier II level is consistent with what is being accomplished by California builders participating in the national Building America program.

In addition, for either Tier I or II, each appliance provided by the builder must be ENERGY STAR if an ENERGY STAR designation is applicable for that appliance.

There are two incentive levels available for new homes:

  1. Base incentive: the Expected Performance-Based Incentive (EPBI) amount is $2.50/watt. The base incentive applies to custom homes, small developments (less than six homes), reservations where solar is identified as an option, and all residential applications where solar will be installed on less than 50 percent of the homes in a development. The actual incentive for a particular system and installation is dependent on the EPBI calculation of the system’s performance compared to the reference system.
  2. Production housing with solar as a standard feature incentive: the EPBI amount for new homes offering solar as a standard feature is $2.60/watt. To qualify, the builder must commit at the reservation stage that a minimum of 50 percent of the homes/dwelling units in the subdivision or multi-family housing development with 6 or more homes/dwelling units will have solar systems that meet or exceed the California Flexible Installation criteria (see below for more info). The actual incentive for a particular system and installation is dependent on the EPBI calculation of the system’s performance compared to the reference system.

The NSHP is a ten-year program designed to increase the demand for solar and to ultimately lower the cost of solar as production is increased. Legislation requires the incentives to decline over time, as program participation increases, and eventually decline to zero by the end of the program. A ten percent decline in the incentive rates will occur each time a capacity goal has been achieved (in MW). The Energy Commission provides a public notice when there will be a change in the incentive levels.

Warranty Requirements

All systems must have a minimum ten-year warranty provided in combination by the manufacturer and installer to protect against defective workmanship, system or component breakdown, or degradation in electrical output of more than fifteen percent from their originally rated electrical output during the ten-year period.

Installed systems also must be third-party field-verified to ensure the installation of high performance PV systems that are consistent with the information used to determine the estimated performance, reservations, and ultimately the final rebate.

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