California Utilities Commission Approves Costly Solar Plan

Published February 1, 2006

California citizens will pay at least $3.2 billion over the next 11 years to finance a costly solar energy initiative rejected by the state’s legislature in fall 2005 but implemented by the California Public Utilities Commission (CPUC) on December 13.

Observers quickly derided CPUC’s decision, the California Solar Initiative, as demonstrating deliberate disregard for the state’s democratic processes.

Initiative Mirrors Failed Bill

CPUC’s California Solar Initiative is virtually identical to S.B. 1, the Million Solar Roofs proposal that was supported by Gov. Arnold Schwarzenegger (R) but died in the state assembly in September 2005.

S.B. 1 aimed to place solar power systems on the roofs of half of all new homes built in the state. In a bid to boost the appeal of solar power, the bill contained a patchwork of electricity price hikes, subsidies, and installation mandates designed to increase solar power, despite its prohibitive cost, to a 5 percent share of electric power generation in the state.

The program’s costs sealed its doom in the California assembly. Each rooftop solar power system would have cost approximately $27,000 and would have provided only about half of a home’s power needs.

Rebuffed by the state legislature, Schwarzenegger took the plan directly to CPUC, a regulatory body under the state’s executive branch. CPUC adopted the Million Solar Roofs proposal virtually intact, leaving out minor portions of the bill that it did not have the power to implement.

Cost May Climb Further

Even the estimated $3.2 billion price tag for the California Solar Initiative may be overly optimistic. CPUC provided the estimate based in part on the assumption that the cost of solar equipment will decline significantly over the next decade. San Francisco voters were promised the same thing prior to a 2001 ballot initiative seeking $100 million to finance solar power equipment on city buildings. After voters approved the initiative, the price of solar equipment has not declined as promised. The city is stuck with a solar power proposal it cannot afford.

Economists are not expecting a solar power price turnaround. According to the September 20, 2005 Greenwire, solar industry officials expect prices to climb in the near future because of a shortage of silicon necessary for the systems.

Severin Borenstain, director of the University of California Energy Institute in Berkeley, told the Los Angeles Times for a December 14 story that solar power is “three or four times more expensive than [electricity] from gas-fired plants.” He said,”The problem is solar panels are very sexy, and it’s much easier to get people excited about them than energy efficiency or wind power.”

“The [CPUC’s] proposed Solar Initiative is striking in its ambitions,” noted the December 14 Greenwire, “adding nearly $1 billion in utility ratepayer funding to what Schwarzenegger had envisioned for the cost of his legislation, S.B. 1. Critics had doubted that the governor’s initially proposed ‘Million Dollar Roofs’ budget would be enough.”

Markets Shun Solar

Admitting solar power is more costly than other forms of energy production, CPUC defended its Solar Initiative as the only way to force Californians to build and utilize solar power equipment. “We are convinced that a cost-effective and sustainable solar market is unlikely to develop without a commitment for market support,” stated CPUC’s interim order on the initiative.

“Many of the parties to this proceeding observe that solar technologies are not yet cost-effective,” CPUC added. “We share this concern and adopt the CSI with the objective of supporting the development of an industry that can compete with more conventional technologies and that is robust without government subsidies. We have not addressed here a specific strategy to effect that objective but intend to pursue it in the near future.”

“Solar power is substantially more expensive than other sources of power,” said Tom Tanton, senior fellow at the Institute for Energy Research. “This is why solar power accounts for less than 1 percent of power generation in the U.S. If solar power made any economic sense, governments would not have to mandate or heavily subsidize its use.

“Renewable power mandates, including solar power mandates, are big winners for government bureaucrats’ budgets, but big losers for consumers’ wallets,” Tanton said.

James M. Taylor ([email protected]) is managing editor of Environment & Climate News.

For more information …

The CPUC’s December 13 Interim Order Adopting Policies and Funding For the California Solar Initiative is available online at