Finally! Congress Extends Solar Energy Tax Credit

After several failed votes, congress finally extended federal tax credits for renewable energy. The credits apply to renewable technologies including wind and geothermal power, large-scale solar plants as well as rooftop solar photovoltaic and solar hot water systems. Businesses as well as individuals qualify. The tax credits are a critical driver in meeting the state’s renewable energy goals, including driving a mainstream market for solar water heaters.

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California's Solar Water Heating Program 

The California Legislature took yet another giant step toward bringing about a mainstream solar power market. At 2:21 am, the California Assembly voted on concurrence, passing the Solar Water Heating and Efficiency Act of 2007 (AB 1470-Huffman). The bill would launch the nation’s largest solar water heating program, creating a $250 million fund to provide rebates to homeowners and businesses who invest in solar water heating technologies over the next ten years. 

Brief Summary

In addition to building for more solar electric power systems in California, there is an equally urgent need to develop the other most promising solar technology: solar hot water technologies.  

Solar hot water technologies use sunlight to typically heat water. The heated water is then used to displace natural gas consumed by a conventional hot water heater. The sun-heated water can also be used for space heating as well as cooling.

Solar thermal technologies can bring many benefits to California. Simple solar hot water systems available today can cut natural gas usage up to 50% per home or business. When combined with energy efficiency measures and solar electric systems, California can build “zero energy buildings” where the home or business displaces all their energy needs with solar technologies.

Solar thermal technologies have tremendous potential to reduce our dependence on fossil fuels and reduce air pollution. According to a study by the University of Wisconsin-Madison, equipping 75% of U.S. buildings and homes with solar thermal technologies by 2015 would cut more than 300 million tons of CO2 pollution each year and at some of the lowest costs.[1] To put this number in context, it is roughly twice the annual global warming pollution reductions to be achieved by California’s landmark global warming bill of 2006 (AB 32).

Furthermore, an initial analysis of California Energy Commission data shows that if California were to install solar hot water systems on a million homes and businesses over the next ten years, natural gas demand would be cut by 117 terms per year; this is nearly 10% of California’s total residential natural gas demand for water heating.[2] Such demand reductions could have a significant impact on the price of natural gas, helping stabilize energy costs.

Solar thermal technologies are popular in many places in the world. For example Spain just mandated them on all new developments and the European Union has a total installed capacity of 9,500 MW – well above the amount installed in the United States. Furthermore, solar hot water systems are cheaper than solar PV systems, costing around $3,000-$6,000 per home compared with the $16,000-$20,000 price tag of solar electric systems. Finally, while the market for solar hot water technologies slowed to a near standstill during the 1990’s when the price of natural gas was low, today’s rising prices create a favorable market for this technology.

Yet despite this potential, solar hot water technologies suffer from a general lack of knowledge among California consumers. When most people think of solar power, they think of solar PV. In addition, for a few older opinion leaders, solar hot water has a bad reputation from a few faulty installations made during the early 1980’s. A similar to the one created for solar PV under the Million Solar Roofs Initiative is needed for solar hot water technologies.  

 For more information on solar water heating technologies and the benefits of growing California's solar market, read our latest report, "Solar Water Heating: How California Can Reduce Our Dependence on Natural Gas".