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Declining CSI Solar Rebates Offset Price Reductions

The California Solar Initiative (CSI) is now in its fourth year and is nearly half way through the 1,750 Megawatt goal. Earlier this month, the CSI released the 2009 Impact Evaluation Report, which provides a program update and analysis. According to the report, from 2007 to 2009, the cost of residential solar power systems have declined 5% annually. In the same period, rebates paid under the CSI program have declined at an average annual rate of 20%.

For those who are unfamiliar with the CSI rebate program, it is administered by Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and California Center for Sustainable Energy (CCSE). The program is divided into ten rebate levels or steps as shown in the table below. Once each step is fully subscribed, the rebate level moves to the next step, ending at step 10.

Step Statewide MW in Step Rebate
1 50 NA
2 70 $2.50
3 100 $2.20
4 130 $1.90
5 160 $1.55
6 190 $1.10
7 215 $0.65
8 250 $0.35
9 285 $0.25
10 350 $0.20

With the CSI rebate and the cost of solar continuing to decline, we ran an analysis to see what the projected price of residential solar power systems will be over the next three years. The graph below highlights the results of our analysis and is calculated using averaged data for 2007 to 2009 from all CSI administrators (PG&E, SCE, and CCSE).

CSI solar rebates

In this scenario, if the cost of solar continues to decline at an an average rate of 5% a year and solar rebates decline at an average annual rate of 31%, in 2013, the total average cost of solar after all rebates and incentives will be $4.52/Watt. This would represent a 3.4% decrease from 2009 numbers. When we spoke to a CSI representative at the recent Intersolar conference in San Francisco, they indicated that the cost of solar had not decreased as fast as anticipated and that applications for solar rebates have not declined but have increased. This is evidenced by the fact that in the 4th year of this 10-year program, PG&E and CCSE are currently at step 7 and SCE is about to reach step 5.

So what does all this mean for Californian homeowners who are considering solar? Based on our analysis, should the historic data trends continue, there will be a gradual decline in the total cost of solar over the next three years. Of course, if solar adoption rates continue to increase in California, the rebate levels may decrease faster than the cost of solar, which would lead to a slight price increase.