Los Angeles Council plan to withdraw, solar incentives Cutback

About 44 percent of the electricity that lights Los Angeles is generated by coal-fired power plants in Arizona and Utah. The Solar Incentive Program run by the city’s Department of Water and Power has seen a surge of applications this year. Above, part of the downtown L.A. Live development.

In Los Angeles, the city council has voted to set aside a decision by the Board of Water and Power Commissioners to sharply reduce payout amounts in the city’s Solar Incentive Program.

The utility board had voted to trim the incentives to help keep the program from running out of money much sooner than planned.

The city council’s veto was sought by solar installers, who feared that lower incentives would stifle a growing solar market in Los Angeles, the economic fulcrum of a region that has suddenly become the world’s solar hotspot.

Since August, the state and federal governments have approved the construction of nearly a dozen massive solar power plants in Southern California that will feed thousands of megawatts of electricity to the cities surrounding Los Angeles and to the rest of the state. Until recently, the city trailed in looking to the sun for energy. Out-of-state coal-fired power plants have long been Los Angeles’ mainstay electricity source.  

“L.A. has lagged in solar for years and is finally getting momentum on this critical issue,” Randy Bishop, chief executive of the installation company Verengo Solar, told the council at a meeting Nov. 24. “Please do not tear down what we are just starting to build up.”

The Board of Water and Power Commissioners, which oversees the Department of Water and Power, the nation’s largest municipal utility, voted Nov. 2 to reduce attractive incentives that have prompted a surge of solar installations this year.

Saying that jobs were at stake, installers and others banded together to try to retain the payouts, which can make solar the cheapest source of electricity for many property owners with ample sunshine exposure.

The city council, which has the authority to veto certain actions by other city boards, agreed Nov. 12 to take up the issue. At this week’s meeting the council voted unanimously to veto the Board of Water and Power Commissioners’ decision to cut back its Solar Incentive Program, which would have chopped the incentive for new residential systems as much as 32 percent, adding thousands of dollars to the cost of a typical residential solar system.

LADWP plaza
Los Angeles City Hall, in background at right,
as seen from the Department of Water and

The council motion also called for a 90-day moratorium on the acceptance of new applications for solar incentives, to begin Jan. 1, 2011 – setting up a potential year-end run on solar by consumers seeking to lock in what could be decades-long bargain rates for electricity.

The council action also stipulated that the Department of Water and Power pursue the rapid adoption of a software program that streamlines the solar application process, and it ordered the department to investigate ways to more equitably distribute solar installations throughout the city. They have been concentrated thus far in upscale neighborhoods.

 “We have a robust solar installation program right now,” said council member Paul Koretz, who represents the higher-income 5th district that encircles Beverly Hills (a separate city served by Southern California Edison) and includes the southern San Fernando Valley. “DWP has gone a little too far and is under-incentivizing it, and I believe that will devastate the industry.”

He said there is a need to “look for some nuanced middle ground that substantially decreases the incentives but not enough to devastate the response from the community.” An appropriate incentive program, he said, would be one that is “not undersubscribed, not oversubscribed, not running out of money too soon, but done right.”

Council member Bill Rosendahl, who also represents an upper-income district in which solar has recently become popular, said, “The bottom line is this: We should go solar; we’re sunny Southern California, and the DWP’s got to figure out how to incent us to make it work.” He said it’s “absolutely a no-brainer” for the city to move toward solar and away from fossil fuels as an energy source.

Richard Alarcon, who represents a lower-income district, said he was disappointed to learn that only 40 solar photovoltaic systems have been installed in his district under the Solar Incentive Program.

“That to me means the DWP isn’t doing an adequate job of marketing this across the board in the city of Los Angeles,” he said.

Mr. Alarcon said that solar installations in “all the poorer council districts, if you combine all of them, they would add up to less than the 5th Council District, and that’s an abomination.”

“If we’re going to grow support for solar – use of solar energy – everyone in the world has to do it, not just select communities who are rich,” he said.

A department official sought to explain that solar leases allow property owners to install photovoltaic systems with little or no upfront payment, while in many cases yielding immediate overall savings on electricity bills, but Mr. Alarcon interrupted.

“Don’t answer a question when it’s not asked,” he said.

Mr. Koretz agreed that not all residents are benefiting from the solar program, saying, “I think it’s too skewed to my district. We need to find some way to change that.”

Solar installers and others urged the council to veto the incentive reductions approved by the Board of Water and Power Commissioners.

James Brennan of the organization Open Neighborhoods said a recent group purchase of residential solar energy in the Mar Vista neighborhood was successful, with 30 of the 32 new solar customers agreeing to lease their systems rather than buy them outright. He also said the Department of Water and Power needs to adopt strategies such as virtual net metering that make it easier for owners of multifamily dwellings to install solar electric systems.

  LADWP from city hall
The Los Angeles Department of Water and
Power headquarters, as seen from city hall.  

Jim Cahill, a regional director for the multistate installation company SolarCity, said that his company is the largest solar installer in Los Angeles. He urged officials to reach a compromise with solar industry representatives, and said even a 90-day moratorium on applications could pose problems.

Ken Button, president of Verengo Solar, said, “My company alone has hired 100 people in the last year. Those jobs are at risk if these rebate cuts go into effect.”

The council’s decision means the question of what to do about funding solar incentives goes back to the Board of Water and Power Commissioners. The board has been told that at the current depletion rate, the incentive program will run out of money long before its scheduled termination at the end of 2016.

Not every speaker was in favor of continuing to provide attractive incentives for solar.

One citizen who addressed the council asked why Los Angeles should provide incentives for solar when other nations are using fossil fuels prodigiously. He mentioned that there are billions of people in India, China, Asia and Europe and asked whether they are putting up solar panels.

Indeed they are – at a pace that threatens to leave the United States far behind. While California, the leading U.S. solar market, has a goal of adding 3,000 megawatts of new solar photovoltaic capacity by 2017, both India and China plan to install at least 20,000 megawatts of solar power capacity over the next decade or so. Europe is far and away the leader in solar adoption. Germany has added about 5,000 megawatts of photovoltaic capacity in 2010 alone, while France recently had a queue of applications for 3,700 megawatts awaiting interconnection to the grid. Italy added much more solar power capacity than the entire United States did last year, and Japan and Spain ended 2009 with more solar generating capacity than the United States.

Throughout the world,  the development of solar, as with fossil and nuclear fuels,  has been aided by governments and utility ratepayers because of the critical importance of energy in global economic competition.

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