California heats up incentives for solar power

LOS ANGELES, USA: California is heating up its push for clean energy, as Governor Arnold Schwarzenegger approved a new subsidy for solar power on Monday and joined forces with the federal government to fast-track renewable energy projects.

California has the most aggressive renewable energy goals in the United States, which Schwarzenegger increased last month when he ordered that the state get a third of its electricity from renewable resources by 2020.

FBR Capital Markets analyst Mehdi Hosseini said the new subsidy for solar generation could be "explosive" on top of the existing investment tax credit for installing solar systems.

"This is above and beyond the subsidies that are already in place," Hosseini said.

Feed-in tariffs set a higher price for renewables, and in Germany, such tariffs have pushed the country to be the world's market leader in solar power.

New Programs

California's new solar program guarantees that utilities will pay owners of commercial solar systems -- up to 3 megawatts in size -- a higher price for solar electricity, a subsidy meant to spur development of solar rooftop systems.

Currently, if utilities want to charge more than the retail price for such systems they have to ask for permission from regulators. Now the California Public Utilities Commission will set the price.

Hosseini estimates the tariff could be between 15 and 17 cents per kilowatt hour and could help drive as much as 500 MW worth of new commercial rooftop systems in 2010.

Schwarzenegger also signed an agreement with the U.S. Department of the Interior on Monday to speed development of up to 7,000 megawatts of large-scale renewable energy projects.

Large-scale renewable energy projects have raised environmental, permitting and transmission issues across the United States and the governor cited "mountains of red tape" as a major roadblock.

"We have to build now renewable energy plants in the desert and we have to at the same time make sure we protect our environment," Schwarzenegger said in webcast remarks.

The new agreement aims to push along projects -- such as Chevron Corp's (CVX.N) plans for a 500-MW solar power facility in Riverside County -- that can break ground by the end of 2010 and thus qualify for more than $15 billion in stimulus funds available for green projects.

Winner from new subsidy

Under the new feed-in tariff for solar projects, California-based SunPower Corp (SPWRA.O) could win big, said Hosseini, citing its extensive dealer network across California and its own system business.

Hosseini said that some Chinese solar players such as Suntech Power Holdings Co Ltd (STP.N) could gain from the subsidy as well, but that First Solar Inc's (FSLR.O) panels are not likely to benefit as much since they are less efficient at converting sunlight to electricity.

Schwarzenegger also approved a measure on Sunday that will require utility companies to pay customers for surplus solar electricity generated on an annual basis. Previously under the state's net-metering law, utilities could receive that extra electricity from their customers for free.