It's quietly been a big week for solar energy as California upped the ante for renewable energy. The state will now require utilities to acquire or generate 33% of their power from renewable sources. Right now, California gets 18% of its retail electricity from renewable energy, and there are already loads of solar projects in the pipeline.
Of the three major utilities that will have to deal with the standard, Edison International (NYSE: EIX) subsidiary Southern California Edison as well as Sempra Energy (NYSE: SRE) subsidiary San Diego Gas & Electric both supported the bill. Pacific Gas & Electric (NYSE: PCG) wanted to see more cost controls for customers.
What this means for investors is that it's game on for solar manufacturers. First Solar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA) have large pipelines in California, and now utilities have incentives to see those plants come to fruition. It was no coincidence that Gov. Jerry Brown conducted his signing ceremony at a new SunPower production facility, one of many U.S. plants popping up in Cali.
And this couldn't have come at a better time, with Italy clamping down on solar subsidies and sending solar stocks in their regular tailspin today.
Government subsidies done right
The new RPS wasn't the only news for solar this week. The Department of Energy announced it would offer a $1.187 billion loan guarantee for the 250 MW California Valley Solar Ranch. The development is being built by SunPower and will be owned by NRG Energy (NYSE: NRG).
The project will have $450 million of equity from NRG Energy, so the government backing is really leveraging private investment instead of being a handout like some other subsidies. The $6.55 cost per watt may seem extreme, but that includes grid connection and trackers, which add to the power output, so you have to consider the whole package.
The deal comes on the heels of a $1.3 billion Energy Department loan guarantee for the Ivanpah solar thermal plant built by BrightSource and backed by NRG and Google (Nasdaq: GOOG) this week.
California has taken big steps toward being the next solar frontier, and with the future of European subsidies in question, it might be just in time.
