On February 16, 2011, Xcel Energy petitioned the Colorado Public Utilities Commission (PUC) to change the structure of the Solar*RewardsTM rebate program, significantly reducing the funds available to its customers who install solar energy systems. The Solar*Rewards program rebate includes two components for residential customers. One is a straight rebate of $2.00 per Watt. If you install a 4kW system (4,000 Watts) you would receive a rebate of $8,000. The other component is the Renewable Energy Credit or REC as it is more commonly known. Under the current structure (until February 16th) the REC was on a scheduled decline as more solar energy systems were installed. For example, at the beginning of 2010, the REC was $0.70 per Watt, and remained at that level for 1 megawatt of installations. If you installed a 4kW system during that REC level, you received an additional $2,800 for the REC. Add that to the $8,000 rebate and you have a total of $10,800 in incentives toward the cost of your system. Once the $0.70/Watt tranche was used up, the REC was reduced to $0.55/Watt for another 1 megawatt of installations, then to $0.45 for another 3 megawatts, then to $0.35 for another 4 megawatts. It was then scheduled to drop to $0.25 for another 4 megawatts, then to $0.15 for another 4 megawatts, and so on – until it reached $0.05 per Watt. In fact, the current program actually began with a REC level of $1.50 per Watt back in October of 2009, and the previous program had a REC level of $2.50 per Watt in 2008.
Xcel Energy’s Solar*Rewards program was initiated in response to Renewable Energy Standards that require them to attain a certain percentage of their energy portfolio from renewable energy sources by a certain date. The program was helping to achieve that goal for Xcel and helped to develop the solar industry in Colorado. In fact, more than 5,000 jobs were created, schools were built to train renewable energy workers, 400 new renewable energy companies were established, and thousands of people throughout the State have been able to offset a portion of their energy usage with solar energy systems. Xcel rate payers fund this program with a 2% surcharge every month (this funding was not halted when the program was halted!). Xcel, along with the PUC, structured the rebate program with a planned, tiered declining approach that was based on the amount of solar energy systems installed rather than a program based on time, which enabled Xcel to align the cost with their objective. The reason for the planned decline was so that solar energy companies (and their customers) could plan their businesses and client installations around a scheduled rebate decrease rather than have an immediate halt to the rebate program. On February 16th, when Xcel petitioned the PUC and effectively halted the Solar*Rewards program, the program had consumed about 1.85 megawatts out of the target of 4 MW set aside for the $0.35/Watt REC price tier.
Xcel has applied to reduce the $2.00 per Watt rebate to $0.25 per Watt, with the “intent” that the REC would be raised to $1.00 per Watt. The PUC determines the rebate rate, and Xcel has full autonomy and flexibility to make adjustments within the REC portion of the incentive. This proposed change would give Xcel Energy the flexibility to decrease the combined incentive to $0.26 per Watt at any time, without notice.
In Xcel Energy’s petition to the PUC they state that their “intent” and their “plan” is to offer a $1.00 per Watt REC. However, in their 2011 budget for the Solar*Rewards program, they state that after the PUC decision, they will acquire 10 more megawatts of customer-owned solar for $6.7 million. This comes to $0.67 per Watt, or nearly half the “intended” rate as stated in their letter to the PUC. If their budget figure is correct, then it’s not possible for Xcel to maintain the $1.00/Watt REC payments that they’re proposing – they would need to drop that to less than $0.67/Watt fairly quickly to stay within the stated budget. Thus, what Xcel is saying they’ll do and what it appears they’re prepared to do are two very different things.
As an industry, we would like to see the PUC respond in a number of ways. First, we would like the PUC to reinstate the Solar*Rewards program as it was prior to February 16th until a decision is made regarding the change in rebate structure. This would allow the solar energy industry to continue operating while the proposed changes are ironed out, keeping the more than 5,000 solar workers in Colorado employed. Second, we would like to see the total incentive amount back above $2.00 per Watt because the decline in equipment pricing has not occurred as fast as the decline in the incentive. Third, we would like to see the PUC structure the incentives so that the larger portion is contained within the rebate portion, rather than the REC component. This will help create stability and predictability as we scale down the rebates. Lastly, we would like the PUC to appoint an independent third party to administer the program. This will help to keep the program objective, stable/predictable, and transparent.
At Arise Energy Solutions, we believe that solar energy in Colorado makes sense. Colorado voters proved that they believe solar energy in Colorado makes sense when they passed amendment 37 back in 2004. Let’s get the program that we (all Xcel Energy rate payers) are funding back on line, so we can continue toward making Colorado the Solar Capital of the US and so that we can continue to grow our State’s economy leveraging clean, renewable energy.
Tim Meisinger, Co-Founder & CFO
Jim Bartlett, Co-Founder & CEO
Arise Energy Solutions, LLC
** Solar*Rewards is a trademark of Xcel Energy.