Palo Alto Feed-in Tariff Stalled by Lucrative Rebate Program

1 Oct 2013

The City of Palo Alto Utilities (CPAU) has established various programs in the last few years to encourage solar development in the city. Despite space constraints that limit most projects to roof mounts and carports, the administration promotes two distinct initiatives designed to meet the statewide Renewable Portfolio Standard of 33% by 2015:

Photo Credits: Richard Masoner

Solar Panels at the City of Palo Alto Municipal Service Center

–       Palo Alto CLEAN, a feed-in tariff program

–       PV Partners Program, a rebate program that supports net energy metered (NEM) systems

On March 2012, CPAU launched the Clean Local Energy Accessible Now (CLEAN) program, in hopes to expand the production of cost-effective, clean local energy. This was an important step towards greater energy self-reliance, and for the city’s goal of supplying 33% of its electricity with renewable energy by 2015. The feed-in tariff pilot program was initially capped at 4 megawatts and it was targeted to medium-sized commercial rooftops with a minimum size of 100 kWs per installation. After opening the program for applications in April 2012, no applications were received at the initial rate of $0.14/kWh.

Realizing that the FIT incentive was not high enough to encourage developers and customers to submit, the city council approved various changes to raise the price, remove the minimum project size, and lower the amount of capacity to be accepted by this program. On December 2012, CPAU raised the tariff to $0.165/kWh, offered to purchase the output of up to 2 MW of new solar systems, and got rid of any project size restrictions. Despite several rounds of changes and an increasingly flexible platform, the program has yet to make a single award.

While feed-in tariff programs in other parts of the country have resulted in solar booms, the feed-in tariff program in Palo Alto cannot compete with the existing incentives for net-metered systems. Put simply, net metering plus local incentives offers Palo Alto residents and businesses a better deal. Because systems are restricted to rooftops and carports, it is unlikely for a host client to support a system producing significantly more electricity than what can be used on site. The feed-in tariff would only offer a comparative advantage for projects with a large site but without a suitable off taker. Today, CPAU’s last update reports that there are still 2 MW of capacity currently available, and that there are no applications in process.

On the other hand, the CPAU PV Partners rebate and production-based incentive (PBI) program offers an enhanced alternative for ratepayers in the City of Palo Alto. It was set with budget of $13 million a year, which is divided into 3 costumer classes: residential, small and medium commercial, and large commercial. Each class is divided into 10 steps, and every step has an established budget, capacity per step, and price at which these incentives would be provided. The host’s rate schedule determines their customer class, and the system’s size determines the type of incentive received. Systems below 30kW receive a dollar per watt rebate, and systems 30kW and over receive a production based incentive (PBI) for five years. After all the capacity in one step is awarded, the price per kilowatt drops to the next price step.

This program has experienced some interesting developments in the last few years. While the program started in 1999 and it was initially planned to last for ten years, funds were refreshed in 2007 and the program is on its 14th year of operation.  The below charts display the current rebate levels for small, medium and commercial systems, and the remaining portion of the initial budget.

Current Rebate Levels – 09/23/2013

Shaded cells indicate completed steps

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As shown on these tables, the PV Partners Program has used most of its available budget; Small and Medium Commercial only has 23% and Large Commercial only has 11% of its initial budget left. Considering the current scenario, it is likely that the Program will only have enough funds for the next year and a half. CPAU will have to decide then if they want to fund another PV incentives program or if they want to let net metering and the CLEAN program stand alone as options for ratepayers going solar.

Sol Systems expects to see increased activity in the feed-in tariff as the PV Partners program fills, or as costs continue to fall. To discuss financing for projects in Palo Alto or elsewhere, please contact our team at or 888-235-1538 x2.


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Alejandro Neira

Alejandro Neira