A Shift in Solar Power

A new law could spur the development of small solar power stations in urban areas.

For solar power to become a truly dominant energy source, it may
require a paradigm shift. Currently, when people think of expanding
solar energy, they may envision giant solar arrays spread across the
Mojave Desert. But massive solar farms often present serious
environmental challenges. They can threaten wildlife habitat and
require new transmission lines in ecologically sensitive areas.

However, a new law sponsored by California’s solar power industry
and signed by Governor Arnold Schwarzenegger earlier this month could
change the way we think about solar power. If the law works as
intended, it could spur solar power generation in urban centers, and
not in some remote desert where it could harm the environment.

The law, which was carried by state Democratic state Senator Gloria
Negrete McLeod, is designed to provide financial incentives for urban
developers to construct small solar power plants on their buildings,
warehouses, and vacant property. Utilities such as Pacific Gas &
Electric would then be required to buy the solar power at above-market
rates. “It opens a whole new market that hasn’t been available in
California,” explained Sue Kateley of the California Solar Energy
Industries Association, which wrote the law. Kateley said similar
programs have proven successful in seventeen countries.

Under old California law, many financial barriers blocked the
expansion of solar power construction in urban areas. For example, if a
business wanted to construct a solar array in Oakland, then it would be
forced to compete for contracts with large companies that have access
to much more land, and thus can produce power more cheaply. Moreover,
if the solar panels on a building generate more energy than the
building used, then the old law allowed PG&E to take the excess for
free. Not surprisingly, the number of California buildings with solar
panels has remained relatively low even though solar has boomed during
the past decade.

But under the new law, businesses will be able to build solar
stations on rooftops or vacant land with a guarantee that the power
will be purchased by utilities. The law allows urban solar stations
that can generate up to three megawatts of electricity —
potentially enough energy to power about 1,800 households. Kateley said
a recent report estimated that 5,000 megawatts of energy could be
produced by such installations. The new law caps the total megawatts
produced under the program at 750, but Kateley expressed confidence
that the cap will be raised if the new law is successful.

The key to whether the law will work as envisioned will be the price
utilities must pay for the power. Under the law, the California Public
Utilities Commission will set the rate with the stipulation that it
must be above market price. How high above market price will be up to
the PUC to decide, and finding the right price will be pivotal. It has
to be high enough to spur growth without being too high that it prompts
a significant spike in consumer energy bills. “If the PUC sets the
price right, it has huge potential,” Kateley said.

According to Kateley and the Legislative Analyst’s Office, the bill
did not face much opposition from utilities. PG&E, for instance,
neither supported nor opposed it. She said utility representatives told
her that their existing transmission capability could handle urban
solar power stations of up to three megawatts in size. Anything bigger
than that would pose problems. Nonetheless, a three-megawatt solar
power plant could cover twelve to 24 acres of land.

Kateley also said that a few solar power companies expressed
opposition to the bill at the last minute because they were worried
that the PUC won’t set a high enough price. But Kateley said that
supporters of the bill ultimately decided that the PUC would be the
best arbiter because it monitors the rates that utilities pay existing
solar energy producers.

A similar law signed by the governor that could also help spur solar
power growth was known as Assembly Bill 920. Sponsored by Democratic
Assemblyman Jared Huffman of San Rafael, the new law requires utilities
such as PG&E to pay homeowners for the extra power that their solar
rooftop panels produce.

According to Bernadette Del Chiaro, of Environment California, which
sponsored the new law, state public utilities may receive at least
5,000 megawatt-hours of electricity free each year from homeowners.
Under the new law, utilities must pay a rate set by the PUC or offer
homeowners the option to roll over the surplus energy they produce into
the next year.

Some utilities, including PG&E, opposed the law because they
argued that home-generated solar power is unreliable. That is, a solar
house may produce extra energy one day but not the next, depending on
whether the sun was shining or whether people at home were using
appliances. As a result, the utilities said they would be forced to buy
energy they might not need.

However, under the new law, utilities will be able to count the
solar power they buy from homeowners as “renewable energy credits” when
trying to reach their state-mandated greenhouse-gas-reduction
requirements. Moreover, for supporters of the bill, requiring utilities
to pay for the energy they receive is a fairness issue for homeowners.
“They have to invest a lot of money and it takes years to pay off the
solar systems — and they have to give away energy to utilities
for free,” explained Lawrence Cooper, Assemblyman Huffman’s legislative

Under the new law, the amount of energy that PG&E and others
will have to buy is capped at 2.5 percent of their total peak demand. A
separate bill by Assemblywoman Nancy Skinner of Berkeley would have
raised the cap to 5 percent, but it stalled in the Legislature. She
plans to reintroduce it next year.

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