Sunrise from the West: How the California Solar Initiative Points the Way for States

The following is a guest post from David Hochschild, a commissioner on the California Energy Commission, and Steve Chadima, a senior vice president at Advanced Energy Economy, a clean energy trade group.

With President Trump in the White House and the makeup of Congress being what it is, continued gridlock on federal climate change legislation is probably the best we can expect from Washington. But those who want America to build a clean energy future should not lose hope. States can lead the way.

This year marks the tenth anniversary of what may be the single most successful state energy policy in the United States: the California Solar Initiative. Passed by a Democratic legislature and signed by a Republican governor in 2006, this landmark state law helped bring the solar industry in America to maturity.

A decade ago, California’s solar industry was a collection of small companies serving only early adopters and off-the-grid homes. Costs were high and state incentives for solar energy in California were small and funded erratically.

The California Solar Initiative changed everything by creating a sweeping $3.35 billion solar incentive program with two critical characteristics: 1) an up-front commitment to fully fund the ten-year effort; and 2) customer rebates that declined over time, eventually falling to zero as the price of solar energy went down. The goal was to provide a stable, long-term runway to let the solar industry gain enough momentum to take off and then fly on its own.

The experiment worked.

The cost of solar energy has been reduced by 80% since 2006. More cleantech venture capital is invested in California today than in all of Europe and China combined, helping to accelerate solar innovation. More than 500,000 rooftop solar energy systems in California now generate clean electricity and have made the U.S. solar industry a beacon in our nation’s economic recovery. Today, the solar industry in California, the largest in the nation, employs 100,000 people, more people than all of the state’s utilities combined. Nationwide, America now employs three times more solar industry workers than coal miners.

Now that the funding for the California Solar Initiative has been exhausted and the program has run its course, the solar industry continues to grow. Since 2006, the solar industry has grown by an average of 65% annually. This year solar power will be the single largest source of new electric generation capacity added to America’s electric grid. This transformation provides proof that a well-designed incentive program can help a new technology move from an obscure niche in our nation’s energy portfolio to outpacing the growth of coal and gas in a single decade.

However, even as California’s solar subsidy has ended, the federal subsidy regime for fossil fuels continues unabated. The oil depletion allowance, for example, a cornerstone federal subsidy for oil that was established in 1926, continues in perpetuity, even though the oil industry is fully mature and has been one of the most profitable industries in the world.

On the other hand, the federal investment tax credit for residential solar, taking a page from the California Solar Initiative, ramps down in 2018 and expires in 2021. This uneven treatment of fossil fuels and renewables at the federal level makes the role of states in accelerating a clean energy future more important than ever.

So how can states best continue to promote innovation in clean energy technologies? As the nations of the world affirmed in Paris, and state policymakers and regulators increasingly realize, the world is headed toward a clean energy future. Two renewable technologies – solar and wind – have seen their costs plummet and, as a result, are growing faster than any other energy source. However, both of these clean resources are variable. In order to complete the transition to a carbon-free energy system, complementary technologies such as energy storage, demand management systems for homes and businesses, and a transition to electric vehicles will be needed.

These technologies can follow the solar industry’s rapid growth trajectory if the same core principles of the California Solar Initiative are applied: an up-front, long-term financial commitment that leverages private investment, with an incentive system designed to decline steadily over time as prices inevitably drop. Electric vehicles and energy storage are where solar was ten years ago, and prices can be driven down through innovation and scale.

In the end, the transition from a society powered by fossil fuels to one powered by clean energy technologies reduces more than pollution. It also protects us from the risk of increasing prices. While finite resources become more expensive as they are depleted, technologies tend to get cheaper as they are scaled up. The time has come for states to seize the moment and build on the lessons learned from the California Solar Initiative to bring the next wave of clean energy technologies into the mainstream.

This commentary was originally published in Utility Dive on February 9, 2017.