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A few weeks ago, SolarTEK Energy, which claims to be the largest U.S. commercial and residential solar installer, applied for rebates under CPS Energy’s solar commercial solar rebate program – business as usual for both the company and the CPS. But not for everyone else in the market. CPS, Solar San Antonio and other local solar installers were startled by the size of the company’s application for rebates on 21 projects and about 40 others pending.
The company’s projects were enough to exhaust the rebate fund even before the halfway point of 2013, leaving no available funds for other installers. The still-developing solar market relies on federal subsidies and locale rebates to make installations economical for customers interested in renewable energy sources.
Yet the rebate for SolarTEK’s first contracted 21 projects, installing solar arrays on various San Antonio gas stations and mini-marts, is estimated at $1.9 million. If these and other pending applications for rebates are granted, this year’s remaining budgeted rebate, will be spent. Next year’s $4.49 million rebate fund won’t be available until January, six months from now.
“We’re treating this as an outlier,” said Lanny Sinkin, executive director of the non-profit Solar San Antonio. “I believe we’ve arrived at a good compromise to stretch out commercial project funding for this year.”
To compensate, CPS worked with local stakeholders to make several changes to the budget: carry over $1.67 million remaining from last year’s rebate fund, lower the maximum rebate per commercial project from $100,000 to $80,000, lower the rebate per AC watt up to 25kW from $2 to $1.60, and allow CPS to use next year’s commercial rebate budget if needed. Both CPS and Solar SA anticipate using some of next year’s funds this year to compensate for the project increase.
SolarTEK, a national solar installation company with an office in San Antonio, has agreed to space out the rest of its projects throughout this year and next to avoid draining the rebate fund for other company’s commercial projects. SolarTEK’s remaining projects will qualify for an estimated $4 million in rebates. The company might partner with other local installation companies to complete those projects, said John Wright, SolarTEK general manager.
“When I proposed these projects to CPS they were concerned, because it’s one of the largest they’ve seen,” Wright said. “They wanted to protect the public’s money and interest so they had (SolarTEK) write-up a business plan to prove to them that we could handle a project of this magnitude.”
A part of that plan included hiring and training 35 more employees in San Antonio, Wright said. “It costs more money, but it’s a better decision.”
Customers of SolarTEK saw a golden opportunity in San Antonio because of local, state, and federal incentives to install solar as well as SolarTEK’s ability to buy in large quantities, lowering the cost of equipment. They saw the rebates being depleted and decided to invest now. Construction on the first batch of projects, mostly on convenience store roofs, will begin in a few weeks just after the rebates are expected to be approved by the utility and will generate a combined 1.5MW – enough power for about 200 homes.
A possible reason for the recent increase in rebate applications is the recent stir-up over CPS’ proposed SunCredit to replace its current net metering rebate – which would have reduced customer credit by half and lengthened pay-back periods. After objections from the local solar industry, CPS put the SunCredit program on hold for one year, pending efforts by a public-private Solar Working Group to work out a mutually acceptable plan. It’s possible that in the wake of this development, people accelerated plans to install solar at their businesses or homes, Sinkin said.
For fiscal year 2013, CPS has received 343 solar rebate applications, including 292 residential, 51 commercial and 11 schools. Only 12 of SolarTEK’s 21 commercial projects have been received by CPS so far.
“One of the reasons we did not (lower) the rebate (earlier) this year was because of the (anticipated) SunCredit,” CPS Executive Vice President and Chief Strategy and Technology Officer Cris Eugster said. “We wanted to make sure there was enough support with a robust upfront rebate … solar prices came down and became very attractive to customers, but now those rebate dollars are in the process of running out.”
Rebates for both commercial and solar installations come from CPS’ $850 million Save for Tomorrow Energy Plan (STEP). About $40 million is allocated toward solar rebates, the rest for other energy conservation efforts such as purchase of more energy-efficient appliances, air conditioning upgrades, home weatherization, load curtailment and demand response efficiencies. As of February, more than half, $20 million, of rebates have been paid out. While the residential rebate program appears to be on track to last until the end of next year, that does not seem likely for commercial rebates, Eugster said. “With success you get challenges.”
The Solar Working Group meets monthly to discuss long-term plans for the solar industry – to find out “what the right model is for rebates and net metering,” Eugster said. “And how does CPS support that transition … from a subsidized to a market-based technology?”
Some local solar installation companies have concerns over current and future large projects using up the rebate, but in general, said Margo Robertson of Freedom Solar Power, “The More solar, the better. We’ll be just fine … It’s ‘bad’ that the rebate will run out, of course,” she said. “But it’s good in the fact that San Antonio is on the map and so is solar.”
Freedom Solar has recently signed and will sign contracts for several large installations this year, Robertson said. While the lower rebate will delay customer payback rates on their arrays from the anticipated 3-4 year average, Robertson said, “Anything under five years is well ahead of the national average … $1.60(kW) is still a killer deal.”
SolarTEK anticipates a payback of less than five years for its customers.
The $2 rebate was perhaps higher than needed, Roberts said. “When things are too good to be true, they are. It was great while it lasted.”
And when the rebate runs out?
“There’s legislation coming down the pipe that may help, but that’s all politics,” Robertson said. “It’s not good to build a business model around subsidies, so we’ve prepared for it” by diversifying location and services.
Solar SA’s Sinkin is confident the Solar Working Group will lead to a compromise solution.
“We’re on the cusp of the unfolding of a new, independent solar industry,” Sinkin said. “It’s not ready to go on its own (without rebates) yet – but it’s taking off … the struggle isn’t over by any means. In the long run, it’s going to cost us less for solar and energy conservation measures than it is to build another power plant. In the short run, we need to manage and facilitate these measures (to fruition).”
“We came to this agreement over a very short time – it shows how the utility and solar industry can work together very efficiently to resolve a real-time challenge,” Eugster said of the Solar Working Group and the dialogue between CPS and Solar SA. “San Antonio will continue to be a leader in utility solar.”
Full disclosure: The Arsenal Group conducted a four-month review of CPS Energy communications for the utility starting in June 2012. Monika Maeckle, a former member of the The Arsenal Group and wife of Robert Rivard, now works at CPS as its Director of Integrated Communications. This disclosure was published Sept. 26, 2013 in response to an Express-News inquiry.