The sun may be setting on CPS Energy’s residential solar rebate program.
With CPS Energy’s energy efficiency and conservation program set to expire at the end of July, the utility’s board members are now deliberating its replacement.
Of both options shown to CPS Energy’s board members at their last monthly board meeting, however, neither included residential rooftop solar rebates.
This wasn’t an oversight, said Rick Luna, CPS Energy’s director of technology and product innovation, but a two-fold decision.
First, the price of solar has dropped substantially since CPS Energy first started offering rebates in 2007. Prices have dropped by 64% since 2010, according to the National Renewable Energy Laboratory, in large part thanks to an 85% drop in module cost.
“A decade ago, the module alone cost around $2.50 per watt, and now an entire utility-scale PV system costs around $1 per watt,” wrote analyst David Feldman in a report from last February documenting a decade of cost declines. “With similar reductions in hardware costs for storage systems, PV and storage have become vastly more affordable energy resources across the nation.”
Second, the utility wants to redirect that money to incentivize other conservation opportunities that can potentially benefit more customers, said Jonathan Tijerina, CPS Energy’s vice president of enterprise risk and development. That includes community solar projects that offer lower-cost options for those who can’t afford the upfront costs of an entire rooftop system, or whose house or property may not be ideal for solar.
“We want to be clear — the solar rebates expiring or sunsetting doesn’t mean that we’ve stopped supporting solar,” Tijerina said. “For us, solar is a product category, and there’s a lot of different initiatives and programs that we can do within that.”
The utility currently has two community solar projects which allow customers to buy a share of the project and reap a concurrent amount of bill savings. Another program, SolarHost, allows participants to host third-party systems on their rooftops at no cost to them in exchange for a bill credit.
But both the community solar and SolarHost are fully subscribed, meaning no new customers can join.
San Antonio, a “Solar Superstar”
Back in 2007, when CPS Energy first launched its rooftop solar rebates, doing so made sense. The industry was in its infancy, and rebates helped get it off the ground.
Since then, CPS Energy has paid out roughly $166 million in solar rebates, Luna said, which has subsidized the installation of about 27,000 solar panel systems.
Those subsidies have helped make San Antonio one of the top cities in the country for solar power. An Environment Texas study published in April showed San Antonio continues to rank first in Texas and fifth in the nation for total solar photovoltaic capacity. The study, which measures cities’ rooftop solar in direct current, reports 355 megawatts in San Antonio. CPS Energy, which measures in alternating current, reports 245 megawatts of rooftop solar, plus another 552 megawatts of utility-scale solar.
But the rebates have largely gone to the utility’s more affluent customers, who have the ability to pay or borrow the upfront cost, which CPS Energy said averages $32,000.
In 2018, the utility switched from paying $0.60 per watt to a flat rate of $2,500 per project for residential systems; the idea was to offer larger incentives to smaller projects and serve more customers. Before that change, the rebate, which takes the form of a bill credit, averaged about $6,150 per customer, CPS Energy said.
Incentives remain available at the federal level, for now.
Solar systems installed through this year are eligible for a 26% federal tax credit; that drops to 22% for systems installed in 2023, and expires in 2024 unless Congress renews it, according to the U.S. Department of Energy.
The costs of net metering
It’s not just that local rooftop solar rebates need to go, said Tuan Pham, president of PowerFin, a solar development firm located in Austin and San Antonio. PowerFin is a partner with CPS Energy, developing and running its SolarHost program.
He believes the utility also needs to end its net metering program, which he said reduces the amount that solar owners pay to below what it costs for the utility to service homes during all the times the sun isn’t shining.
After publishing a commentary on the San Antonio Report last month about why CPS Energy needs to stop subsidizing solar for individuals, Pham also visited the CPS Energy board meeting last month to reiterate his point in person.
Under CPS Energy’s net metering program, the utility purchases any solar power a customer’s panels produce in excess of what is needed to power the home, at the full retail rate.
“Whereas [the solar rebates have] been trailing off over the years, [CPS Energy] has not slowed down this other part, which is actually worse for the utility and its customers,” Pham said. “That’s net metering. That’s the billion-dollar number.”
The “billion-dollar number” is his calculation of the overall revenue loss CPS Energy will see from these customers from 2007 through 2046.
CPS Energy’s Luna said he and his team are “familiar with [Pham’s] logic and his perspective,” and have been discussing the issue internally.
Because utilities recover a portion of its fixed costs through the per-kilowatt-hour energy charges on solar customers’ rates, those on a net-metered rate “may not fully contribute to the fixed cost of serving them,” CPS Energy spokeswoman Dana Sotoodeh said in an emailed statement.
Net metering has long been a hot-button issue, with advocates touting its ability to make rooftop solar pencil out more quickly, critical for early adoption when technology costs are higher, while utilities say solar customers are not paying to cover their remaining costs.
“All utilities with net metering have this problem and it is a commonly discussed issue,” she said. “CPS Energy is aware and is working on options to address this issue.”
In 2013, CPS Energy tried to reduce payments to solar customers from the full retail rate of 9.9 cents per kilowatt-hour down to 5.6 cents per kilowatt-hour, but opposition from local solar installers and environmentalists scuttled the effort.
It’s unclear if those groups will lobby the utility to keep the rooftop solar rebate, as they have also done successfully in the past.
Don Dickey, owner of Advanced Solar, said he doesn’t think it’s time to pull the solar rebates just yet. They’ve been helpful to local solar businesses, Dickey said.
“It’s money well spent by CPS Energy,” he said.
CPS Energy is the financial supporter of the San Antonio Report. For a full list of members, click here.
Correction: an earlier version of this story misspelled Jonathan Tijerina’s name.