In the early morning hours of July 1, 2017, the Washington State Legislature finally passed a bill that makes changes to the solar incentive program. There is good news here both for existing solar system owners and owners-to-be! But it’s not all good news, unfortunately.
The bill that passed creates a new incentive program that started, July 1, 2017. It declares that the existing program ended June 30, but anyone who has recently installed a solar system can still apply for the existing program through September 30th.
The New Program
The goal of the new program was to provide a method by which the solar industry in Washington could be weaned off of incentives, and survive on its own. It does this by offering less incentives over time, although there’s still a rather large drop at the end of the program, which is now June 30, 2021.
First, the new program creates a distinction between two different types of systems: residential and commercial. A commercial system is one that is capable of generating more than 12 kW. Only 25% of the program’s funds, per utility, are allowed to go to these commercial-scale system, and they have much lower incentive rates. I personally argued about this arbitrary limit, as I have a 12 kW system at my residence and it does not meet all of my needs, despite being clearly residential in nature. I know someone else who has a 17 kW system on his house.
The bill also contains text about community-solar systems and utility-owned shared-commercial-scale systems, but I won’t cover them here other than to say that community solar systems use the same rate as residential-scale systems.
The incentive rates are listed by the state’s fiscal year; FY 2018 starts July 1, 2017, and ends June 30, 2018. The rate you get depends on the year you install & certify your system. The rate won’t go down; you would get paid that rate for 8 years unless the individual limit is met, described below.
|Fiscal Year||Base Rate
As you can see, rates decrease gradually over time. There’s a pretty stiff punishment for having a system 12 kW or larger. The incentive for having in-state-made panels is quite small. Previously if an array was made in Washington, it got a 260% bonus, and now it would be 31% bonus. This is at odds with this bill’s stated purpose of promoting Washington jobs. An 8 kW system installed in FY 2018 will get an additional $3,200 over its lifetime for using made-in-Washington panels. I don’t know for certain, but I suspect this will be a tough sell, and we may see a lot of imported panels being installed instead.
The program still includes a $5,000 annual payment limit for residential systems, but a $25,000 limit for commercial-scale systems. The $5,000 limit for residential-scale is a bit odd because with the given rates, there’s no way a residential-scale system can get anywhere near that amount. It’s just a leftover from earlier versions of the bill which had higher rates.
Incentive payments are fixed at either 8 years or until 50% of the total cost of the system has been paid, whichever happens first. This is different from the old program which ended on a specific date, June 30, 2020, regardless of when it was installed or what its cost was. I can see why it makes sense to only cover a portion of the cost, but 50% may be too low of a bar. Since electricity is so cheap in Washington, it takes a lot for the rest of the cost to get paid for, depending on federal incentives.
Each utility can now pay out up to 1.5% of their 2014 power sales in incentives. This is a change from 0.5% and fixes it to 2014 rather than the most recent year. This limit applies to both the old and new programs combined. The legislature has an option in 2019 to increase this to 2% based on data from Washington State University, who will be administering the program.
To examine whether this limit is reasonable, we can examine Puget Sound Energy, who has provided historical information on their incentives. Their 2014 power sales were $2.08 billion, which makes their 1.5% limit $31.2 million.
In the following figure, I estimated the growth for 2017 and beyond. Because the new incentive rates are much lower, the growth in incentive payouts is much less, even though the number of systems being installed might be about the same.
As you can see, the annual limit is most likely not in danger of being reached by PSE.
Yet another limit applied to this program, however, is that the total payout from all utilities cannot exceed $110 million for the life of the new program. In my estimation used above, the total payout from PSE alone of this new program would be $93.3 million. Since PSE represents only a portion of the solar installations under the program, it appears to be highly likely that this total payout limit will be reached before the end of the program. According to the new law, WSU must stop accepting new applications to the program when they predict that adding a new system will result in this happening.
I don’t have all the data right now that I would need to estimate when this might happen. I would need to know numbers from more utilities, or at least what portion of the solar installs in the program are with PSE. If you have a source for that information, please let me know and I can update this post with my prediction. My gut feeling is that some time in late 2019, they will have to stop accepting new applications to the program, thus defeating the ramping-down plan.
The Old Program
Participants under the old program will continue to get incentive payments for production through June 30, 2020. The rate that will be paid will be the same rate that was paid for the year ending June 30, 2016, rather than the original expected rate. For customers of Puget Sound Energy, like myself, this means a reduction of just 6.66% from the originally published incentive rates. Other utilities had reduced incentives more, so their payouts will be less, and some had not yet reduced incentives at all.
The 1.5%-of-utility’s-power-sales limit includes incentives paid from this program, but there is no option to reduce incentives more — the only option is to stop accepting new applicants to the new program. In addition, the $110 million total limit applies only to the new program, not the old program. As a result, it’s basically guaranteed that participants in the old program will get at least most of what they expected when they installed their systems.
EDIT (7/5/2017): Note that participants in the old program will need to send an application to the WSU energy extension program by April 30, 2018, to continue to get payments. This is just because WSU is taking over management of the program. I assume the utilities will communicate with their participants once this application is available.
The bill does include provisions regarding mixing the two programs. If you have an existing system under the existing program, you can install a second system and put it under the new program. But you cannot change your existing system from the old program to the new program.
I’m not super satisfied with this solution. It’s better than doing nothing, but there are definitely some changes. I would have changed the 12 kW cutoff to maybe 20 kW. I don’t think this would substantially change the cost of the program, if at all. I would have ramped down the base rate more quickly so that it was closer to zero at the end of the program, making for a cleaner transition off the program in 2021. Additionally, of course, I would have either lowered the rates or increased the overall limit to make it less likely that the program would hit its limit half way through.
What do you think? Feel free to leave a comment below!