Preliminary CSI-Thermal Program Overview

March 6, 2010

When the public thinks of how you can “solarfy” your home and create renewable energy from our most reliable resource, the sun, people usually correlate household solar generation with standard photovoltaic (PV) panels.  Small PV systems of less than 500kW are usually installed on residential or commercial rooftops.  This type of solar generating systems takes solar radiation onto the PV panels, typically on a south facing rooftop, and converts the solar energy directly into electricity that is sent directly to the electrical grid.  The lesser known available solar generating systems are solar water heater (SWH) systems that receives the sun’s heat on flat plate collectors or evacuated absorber tubes.  These collection elements are either filled with water or a liquid transfer medium that absorbs the solar energy to pass onto water inside a solar hot water tank that stores the solar heated water until the residential customers can use the hot water.  This is unlike PV systems which cannot efficiently store the energy and wait until when customers arrive home from work at the end of an arbitrary business day.  Solar water heaters will absorb the solar energy distributed during the day, when the sun is available, and allows for hot showers, dish washing, heated pools, and clothes washing when people arrive home from work and late into the night.

On January 21, 2010, the CPUC approved $305.8 million program to incentivize the rapid expansion and installation of these solar water heaters for customers of PG&E, SCE, and SDG&E.    Starting May 1, homes and businesses will be able to install solar water heater systems and receive an instant rebate under the CSI – Thermal program that will couple with ongoing production based incentives in the program until available funds in the program get exhausted.  These California state incentives add onto the federal 30% incentive tax credits that have been available for renewable energy systems bound to expire in 2016.   With all the talk about new local incentive programs, existing federal programs, and understanding the benefit of a SWH system, the average customer can be in uncharted educational territory when it comes down to making a reasonable and economical decision to implement a SWH system.  From a reasonable point of view, it makes complete sense to install a SWH system because the displacement of therms, via natural gas generation, with solar thermal generation.  Lessening our dependence on natural gas reduces our country’s dependence on conventional fossil fuels and reduces our yearly CO2 emissions.  I hope I can assist in California utility customers understand the economic benefit so they do not go blindly into a  new investment.

What is the incentive?

Simply, the CSI – Thermal program for natural gas displacement units are simply stated as:

Step Incentive for Average Residential Solar Water Heating System Incentive per
Therm Displaced
1 $1,500 $12.82
2 $1,200 $10.26
3 $900 $7.69
4 $550 $4.70

The 4 tiers represent levels that the program will decrease as more SWH systems are installed and as the program budget gets exhausted.  $50 million, $45 million, $45 million, and $40 million are the various funding ceilings for each of the four steps so assuming that systems will cost the same today compared to sometime later in the program, it makes the most economical sense to get the $1,500 up front incentive and start at the highest incentive level per therm displaced.  Even though this program runs for 8 years until December 31, 2017 or until the program budget is exhausted, be aware that people will more likely rush to get the highest upfront incentives.   So even though the entire program will not end anytime soon, the first tier will run out at a faster rate that the lower ones.

Regardless of the upfront incentive, someone deciding to make a major investment in one of these SWH systems has to make sure if it is a good investment for their financial and gas usage lifestyle.  So let’s look at an arbitrary case:

Average residential system cost (this is going to very +/- 15% depending on the size of your house): ~$6500
Note: this active closed loop cost is taken from the Itron evaluation on page 15
CSI-Thermal Upfront Incentive: $1500
30% Investment Tax Credit: $1500 (taken from $6500 system cost – $1500 CSI-Thermal Incentive)
Average Yearly Natural Gas Displacement: 117 therms
1st year Savings: 117 therms x $12.82/therm displaced = $1499.94

Capital cost after year 1: $6500-$1500-$150-$1499.94 =  $2006.06

Variables

– Remember while the CPUC staff assumes that the average residential SWH system will displace 117 therms per year, a generation statistic that will vary depending on where you reside.  Systems installed in San Diego, San Ramon, Bakersfield, and Blythe will vary considerably and further analysis should be consulted with your certified installer.  The CPUC should also be coming out with a simple generation calculator before the program is formally initiated on May 1.

– System cost will also vary depending on the complexity of the SWH system and the type of system.  For example, whether you decide on a passive or active SWH system is best for your residence, the associated cost will fluctuate as well.  I recommend to get at least two bids from qualified and experienced installers to ensure that the system meets the “lowest cost, best fit” match for your needs.

– Incentive caps.  Be aware that the extraordinary production incentives for displacement of natural gas does not qualify for the entire life of your system.  Instead (see page 48)

Soon a formal handbook will be released to see the more complete details of the CSI Thermal program.  My biggest question has to do with the displacement of therms and scenarios where the monthly production based incentive for displacing therms is larger than the actual total monthly gas bill.  Will PG&E, SDG&E, or SCE give you an ongoing credit applicable for future months?  I doubt it but we’ll find out for sure when the handbook is released.   If your monthly bill is $21  and your usage is 23 therms while displacing 4 therms via a SWH system (at a step 1 rate of $12.82/therm displaced), you should receive a production based incentive for ~$51.  There are two scenarios that could happen:

a) The gas company zeros out your gas part of your bill
b) The gas company zeros out your gas part of the bill AND gives you a credit for $30 toward future billing statements

Option B would be amazingly generous and I can imagine the utilities and CPUC would make sure that customers would not get those kind of ongoing residual benefits.

The next analysis of the CSI – Thermal program (after the handbook is released) will go more into the typical payback of one of these SWH systems.

Step Incentive for Average Residential Solar Water Heating System Incentive per
Therm Displaced
1 $1,500 $12.82
2 $1,200 $10.26
3 $900 $7.69
4 $550 $4.70
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