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Council approves new Austin Energy solar incentive plan

Friday, February 5, 2010 by Jacob Cottingham

Austin City Council on Thursday unanimously approved changes to Austin Energy’s solar rebate program that will reward businesses for installing solar devices by paying for power production over a 10-year span.


Instead of paying for rebates on the installation of solar systems, Austin Energy will pay for each kilowatt-hour of electricity produced over a 10-year period. Called a fixed performance-based incentive, it achieves two goals. It provides a fixed payment flow to a system owner by which payback can be calculated and it encourages proper design and maintenance of systems to maximize energy production.


Over the next five years, the program is expected to pay an average of 8 cents per kWh of solar energy produced with program funding sufficient for almost 260 solar systems, each up to 20 kW in size. Total incentive payments over the next 14 years under the plan are projected at $4.8 million.


Council Member Chris Riley was the only one on the dais with questions for AE’s Vice President of Distributed Energy Services, Karl Rabago. Riley praised the new efforts, saying the utility was doing a “good job of reassigning our solar program… we are moving away from offering rebates up front and moving toward a system where we have a production-based incentive.” However, he was concerned about the impact it would have on non-profits.


Because the businesses were also benefiting from a federal tax rebate, they were able to offset some of the initial capital costs that would go into paying for a solar array up front. Riley wanted assurances that non-profits would not be shut out of this new program.


Rabago pointed out that non-profits were already exempt from taxes, making a federal rebate for non-profits unlikely. He did say that a non-profit, One House at a Time, was assisting low-income homeowners install solar panels using donations from others.


Rabago also said that four percent of the rebates and installed solar energy, 230 kilowatts, came from low income housing, churches and other non-profit entities. He also said the utility had a grant pending from the federal government for millions of dollars which would set up a sort of “community solar installation,” project.


Rabago did acknowledge that although non-profits could qualify for the incentive program, they would have to come up with the money up front, which may prove difficult. That said, he noted “I don’t want, in an effort to serve that small community, to do something that upsets our efforts with the rest of the program,” saying that budget challenges were behind the logic leading to a reconfigured rebate program.


Rabago told In Fact Daily that the plan would save ratepayers $2.5 million over the course of the 14-year program. Furthermore, he said the program was designed to take into account the rapidly decreasing price of solar panels, by evaluating the cost three times a year, and allowing AE to be more flexible with its purchasing price. Additionally, because the incentive is performance based, it rewards electrical output not simply the effort to install the array. This flexible structuring spurs efficiency and aligns the business interests of the solar energy provider with creating more renewable power.


Austin Energy’s residential solar incentive program was changed on Nov. 1 as its growing popularity, coupled with falling solar prices, caused a relative stampede, which would have drained its budget. The utility subsequently decreased incentives from $3.50 to $2.50 per watt with an annual rebate cap at $15,000 and a property lifetime rebate cap of $50,000.

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