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California PUC introduces solar water heating incentives

The California Public Utilities Commission (CPUC) has established a California Solar Initiative (CSI) Thermal Program to promote the installation of solar water heating systems in new and existing homes and businesses in the territories of Pacific Gas and Electric Company (PG&E), Southern California Edison, San Diego Gas and Electric Company (SDG&E), and Southern California Gas Company (SoCalGas).

The goals of the CSI Thermal Program are to:

  • Significantly increase the size of the solar water heating market in California by increasing the adoption rate of solar water heating technologies, including achieving:
  1. Installation of natural gas-displacing systems that displace 585 million therms, equivalent to placing a solar water heater on 200,000 single-family homes;
  2. Installation of electric-displacing solar water heating systems that displace 275.7 GWh per year of electricity by the end of 2017; and
  3. Expansion of the market for other solar thermal technologies that displace natural gas and electricity use, in addition to solar water heating.
  • Support reductions in the cost of solar water heating systems of at least 16% through a programme that increases market size and encourages cost reductions through market efficiency and innovation.
  • Engage in market facilitation activities to reduce market barriers to solar water heating adoption, such as high permitting costs, lack of access to information, and lack of trained installers.

The solar water heating incentives are as follows:

Natural gas displacing incentives:


Incentive for Average Residential Solar Water Heating System
Incentive per
Therm Displaced
  • Incentives are paid up-front based on estimated first year therms displaced.
  • Incentives decline in four steps based on program participation.
  • 40% of the incentive budget is reserved for single-family residential systems; 60% for commercial and multifamily systems.
Electric displacing incentives:

Step Level
Electric Displacing Incentive
Incentive for Average Residential System

  • Incentives paid up-front based on estimated first year kWh displacement.
  • Incentives are slightly lower than the natural gas-displacing incentives due to different system economics, but the incentives reduce in four steps to match the natural gas-displacing incentive reductions.

The programme will run until 31 December, 2017, or until the programme funds are exhausted.

"The dispersion of solar heating systems can play an important role as we strive to achieve the goal of zero net energy in residential and commercial buildings by 2020 and 2030 respectively, as outlined in the California Energy Efficiency Strategic Plan," says Commissioner Dian M. Grueneich.

"These systems can be cost-effective for ratepayers, while helping to displace both electricity and natural gas usage in new and existing homes and businesses. Thus a focused, cost-effective program to improve the market for this technology can serve as a key step in our path to zero net energy."

The CSI Thermal Program will be funded by US$250 million in collections from natural gas ratepayers, pursuant to Assembly Bill (AB) 1470, as well as up to US$100.8m in funds already authorised and currently being collected through the general market CSI solar PV programme and earmarked in Senate Bill 1 for solar thermal projects such as solar water heating.

Money collected under AB 1470 from natural gas ratepayers will fund incentives to solar water heating systems that displace natural gas usage, while funds collected through CSI from electric ratepayers will fund electric displacing solar water heating systems.

Per AB 1470, 10% of the natural gas-displacing programme budget, or US$25m, is set aside for incentives to low income customers. There is no set-aside for a low income programme for electric-displacing solar water heating as only 10% of California homes use electricity to heat water.

The CSI Thermal Program will be administered by PG&E, Edison, SoCalGas, and by the California Center for Sustainable Energy (CCSE) in the SDG&E territory.

PG&E and SDG&E, in coordination CCSE, will disburse incentives to both electric and natural gas ratepayers who install eligible solar water heating systems in their territories. Edison will disburse incentives through the CSI Thermal Program to customers who install electric displacing solar water heating systems.

SoCalGas will disburse incentives to customers in its territory who install natural gas displacing solar water heating systems.


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