Rebate for New Solar Reduced as Installation Costs Decline
The Austin Energy rebate on residential solar installations has been adjusted from $2 to $1.50 per Watt. The change is designed to keep Austin Energy solar incentives right-sized with the continuing decline in the cost of solar installations.
Installation costs for residential solar have dropped by almost half since 2004, including about 10 percent this year. A $1.50 per Watt rebate plus federal tax incentives on average will cover about 62 percent of the cost of a residential solar installation. This results, on average, in about a seven-year payback on customer out-of-pocket expense for solar systems that traditionally produce for 20 to 30 years.
“Lack of balance between solar incentives and the rapidly changing costs of solar installation results in a run on funding that does not provide equity across customers and also complicates business operations for solar installers,” said Debbie Kimberly, Austin Energy vice president over the utility’s energy efficiency and renewables programs. “After almost doubling our solar incentives budget this year to $7.5 million, we want to ensure programs that are attractive and cost-effective with the goal of reaching as many customers as possible.”
Austin Energy is developing plans to expand its solar offerings to even more customers through what is called community solar. Under that approach, homeowners or apartment-dwellers could purchase a share of a community-sized solar system to help deliver clean energy to the community while earning the credits that help reduce their annual energy costs.
The rebate change was effective at 1 p.m., May 7, 2013. Austin area solar installers had been told in recent weeks that solar rebates were under review and that a change was likely.
Value of Solar Credit
The reduction in the residential solar rebate does not affect the Value of Solar credit paid to residential solar owners for each kilowatt-hour of electricity produced by their solar system. For the current fiscal year that credit will remain at 12.8 cents per kWh produced. The Value of Solar Credit will be reviewed in the coming months to determine what the Value will be for the fiscal year that begins October 1, 2013.
Austin Energy’s Value of Solar credit is an innovative approach for properly compensating solar owners for the value of solar-produced energy. Austin Energy is one of the only utilities in the nation compensating solar owners in this manner.
Austin Energy has likewise lowered the Performance Based Incentive (PBI) provided to commercial customers that install solar systems. The PBI has been adjusted from the current 14 cents per kWh to 12 cents per kWh for new projects. Under the commercial solar program, customers install their solar systems without installation rebates. Austin Energy then pays a Performance-Based Incentive for 10 years on each kWh produced by the systems.
The performance-based approach incentivizes commercial solar operators to maximize the operation of their systems through proactive maintenance and other measures. If all currently approved PBI projects are installed in FY13, the PBI budget requirement for FY14 will be in excess of $1 million. Austin Energy PBI payments to customers for the current fiscal year (FY13) are projected to total about $100,000.
One final change effective May 7 is to discontinue higher rebates for solar panels or equipment substantially manufactured within the Austin Energy service area. The higher rebate of up to $2.50 per Watt had been offered in an effort to promote area economic growth in the solar technology sector. The prospective higher rebate, which has been available since 2004, has not succeeded in attracting solar manufacturing to the Austin area and results in confusion for customers installing solar systems who are interested in using locally manufactured solar equipment.
Successful Solar Program
The Austin Energy solar rebate program has stimulated the development of a strong solar installation industry in Austin with the number of solar installers increasing from 4 to 40 over eight years. To date, the program has assisted the solar installations for 2,250 homes, 127 commercial solar projects of which 24 built under the PBI program. Solar systems have also been installed at 44 schools and 45 public facilities such as libraries, the Austin Convention Center and City Hall. All together, 11 MW of solar generation has been installed throughout the Austin Energy service area since the utility began its solar program in 2004.
Austin Energy has a goal to install 200 MW of solar capacity by 2020. The utility has a 25-year contract to purchase all of the energy produced by a 30 MW solar system at Webberville that began operating in 2011. Webberville is one of the largest solar farms in the country.