Should California adopt the German solar model?

by Paul Gipe.

When it comes to certain things—luxury cars, beer, chocolate—we should just acknowledge that the Germans did it better than us first. This teutonic skill extends to solar power, where a tariff system ensures Germans pay less for solar energy than we do. But that doesn’t mean we can’t copy them, and if we do, comparatively sunny places like California stand to gain even more than cloudy Deutschland.

Newly installed solar photovoltaic (PV) projects in California were paid an average of approximately $0.34 per kilowatt-hour (kWh) last year, according to a privately commissioned study. Germans paid substantially less, taking into consideration the amount of solar
energy their country receives.

Germans paid an average of $0.38/kWh for the first six months of 2011, according to data from
the country’s grid manager, the .

If the Golden State applied
German feed-in tariffs to solar PV under its bright, clear sky, Californians
would only pay the equivalent of $0.24/kWh.

Data on the cost of German
feed-in tariffs is from publicly available sources and is adjusted for
California’s sunnier climate relative to cloudy Germany.

Unfortunately, data on the
total cost of solar PV in California is more difficult to analyze, as it
derives from numerous sources.

The study on California’s
solar program, by private consultant Robert Freehling, examined the cost of the
California Solar Initiative, federal tax credits, depreciation deductions, and
the value of electricity offset from net-metering. Freehling is an expert in
the arcane world of California renewable energy policy.

Solar Initiative

The California Solar
Initiative (CSI) is one of the state’s premier renewable energy programs, even
though it only governs solar PV. CSI issues an up-front payment, or
“rebate,” for residential solar systems and a payment per kWh for
commercial systems, from a pool of money collected from ratepayers. The CSI
funds are being rapidly depleted and in 2011, most of the funds for the program
will be exhausted.

Because payments under the
CSI, federal tax credits, and depreciation deductions necessary for investments
in solar PV in the U.S. are all of short duration, it was necessary for Freehling
to prorate these benefits over the typical 20-year life of a solar system.
Only by prorating these benefits over 20 years and including the value of the
electricity offset from net-metering was he able to estimate the total cost of
electricity per kWh.

The average value of rebates
under the CSI program in 2010 was $0.058/kWh. Residential customers were paid
the least. They received $0.05/kWh while non-governmental and governmental
organizations received as much as $0.09/kWh.

One unique feature of the CSI
program, unlike many other such programs in the U.S., is that it makes special
provisions for nonprofits and governmental agencies.

Nontaxable entities cannot
use the 30 percent federal tax credits. Accordingly, the CSI issues a higher payment
for nonprofits and governmental agencies to compensate for their inability to
use the federal tax credits.

However, Freehling concluded
that “in 2010 the benefit of this higher rebate was lost due to the higher
price paid for solar projects by government and nonprofit entities.”

Federal subsidies

In addition to the CSI, a
state program, residential and commercial solar projects in California qualify
for federal tax credits and depreciation deductions. The costs of these
subsidies are borne by all U.S. taxpayers, not just those living in California.

Last year, the value of the
30 percent federal tax credit was as high as $0.096/kWh for residential customers and
$0.071/kWh for commercial customers, according to Freehling’s study.
Nonprofits and other nontaxable entities received no benefit from the federal
tax credit.

Freehling estimated that
commercial projects received an additional benefit worth $0.07/kWh from
accelerated depreciati…

Source: Should California adopt the German solar model?.