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California's solar installers know that the California Solar Initiative (CSI) - considered the most successful solar incentive program in U.S. history - will not last forever. But as the CSI, which is designed to gradually fade in step with solar installation growth, reaches its last stages, the industry has received a surprise reprieve.

Last fall, CSI administrators and the state's investor-owned utilities quietly informed stakeholders that incentives would not, in fact, be eliminated once solar project capacity limits were met. Installers will still be able to take advantage of CSI rebates until allotted funding is depleted.

This procedural change will allow the U.S.' largest solar market to enjoy a longer incentive runway than was previously assumed, says Ben Higgins, director of government affairs at Mainstream Energy. In some utility territories, the decision makes several additional months of incentivized solar installations possible, giving manufacturers and installers more time to bring down system costs before the CSI disappears.

"Over the course of last summer, there was significant industry concern that in certain parts of the state, incentives would be reduced to zero," Higgins recalls.

The concern was most acute in San Diego Gas & Electric's (SDG&E) territory, which had seen rapid installation growth, especially in residential solar, and was expected to reach the end of its CSI life at some point in late 2012. Pacific Gas & Electric (PG&E), meanwhile, risked losing its commercial solar incentives as early as mid-2013.

Now, thanks to the new treatment of capacity limits, SDG&E will have approximately 2.1 MW and $445,000 in incentives remaining, according to Higgins. (Because of the new treatment of capacity limits, the online Trigger Tracker, commonly used in the industry to keep tabs on incentive availability, no longer accurately reflects remaining incentives for the CSI's Step 10 category.)

Funding is now available for nearly 100 MW of commercial solar in PG&E's territory. "Given run rates in recent months, it appears very plausible that the incentive could last through 2013," Higgins adds.

SDG&E's residential funding could run out more quickly. However, the California Public Utilities Commission is currently considering an application from the California Center for Sustainable Energy (CCSE) - the SDG&E program's administrator - to combine the residential solar and commercial solar funding pools.

If approved, this change would give SDG&E's residential solar program another last-minute boost. It would also ensure that SDG&E meets an overall megawatt goal that has been put in placed for the San Diego region, the CCSE told industry partners in an email.

Overall, although the CSI extension provides a welcome buffer to the solar sector, the end of incentives still lurks just around the corner.

"We are still in a situation - just as we were in mid-2012 - where SDG&E is the first that is likely to be incentive-free," Higgins points out. "Our lease on life, in terms of incentives, has been extended already."

Once CSI funds are exhausted, other solar policy issues in California will become even more important. Net metering, a provision that has led to pushback from some of the state's major utilities in recent years, ranks among the top concerns.

Right now, California's solar advocates are awaiting the results of an extensive cost-benefit study on net metering. This study will inform future policy discussion, says Higgins.

"Net metering and rate design will continue to be hot-button issues for utilities and the industry," he predicts, adding that utilities have started to focus less on net metering specifically and more on general residential rate design reconfiguration.

All of these discussions will take place under the legacy of the CSI, which Higgins says both helped bring solar systems to "unthinkable" affordability levels and built out California's clean energy corporate infrastructure. Thanks to the $3 billion CSI investment and the solar business environment it helped create, the industry can also learn to function without the program.

"There are systems being sold here and there that are already incentive-free," he notes. "I am confident that when incentives are reduced to zero, we will continue to build and sell solar, and the industry will continue to grow."


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