TERENCE CHEA Associated Press

SAN FRANCISCO - Hoping to make California a world leader in solar power, state energy regulators on Thursday approved $2.9 billion in rebates over the next decade to encourage people to install solar panels on their roofs.

The state Public Utility Commission voted 3-1 to adopt the California Solar Initiative, which will provide the money in consumer rebates between 2007 and 2016. Last month, the five-member PUC approved $300 million in rebates for 2006.

"The California Solar Initiative is the largest solar program in the country, and I hope it will be a model for other states," Commissioner Dian Grueneich said Thursday. "The program will be a major source of dependable and environmentally friendly electricity."

The initiative's goal is to install 3,000 megawatts of solar capacity - equivalent to six large power plants - on 1 million homes, businesses and public buildings by 2017. California currently has about 100 megawatts of capacity from rooftop panels on 15,000 homes and businesses, with solar making up only 0.3 percent of the state's electricity supply, according to Environment California.

Solar advocates said the total $3.2 billion program will make solar energy more affordable, create jobs, reduce air pollution and cut emissions of heat-trapping gases blamed for global warming.

"California will be a leader in the next great high-tech growth industry - solar energy," said Rhone Resch, president of the Solar Energy Industries Association. "This long-term, visionary policy will save ratepayers money, create high-paying jobs and reduce our dependence on foreign sources of energy."

The initiative incorporates many of the same provisions as Gov. Arnold Schwarzenegger's "million solar roofs" plan, which had bipartisan support but died in the Legislature last year due to disputes over its labor provisions.

"When I ran for office, I promised the people of California an affordable, reliable and more environmentally friendly energy supply," Schwarzenegger said in a statement Thursday. "Today is a big step toward that goal."

Thursday's initiative includes $2.5 billion in rebates for existing homes, businesses and public buildings that install solar panels. Another $350 million in rebates will be offered for solar installations on new homes.

About 10 percent of the rebates will be set aside for installations on low-income or affordable housing projects. Utilities such as Pacific Gas & Electric Co. will not be eligible for rebates.

The rebate amount will decrease about 10 percent annually over 11 years, but the smaller rebate amounts are expected to be offset by falling solar costs as more people install rooftop panels.

Home or business owners who install panels this year will be eligible for a $2.80 rebate for each watt of capacity installed. So a homeowner who installs a typical 2,500-watt system costing $20,000 would receive a $7,000 rebate. The rebate drops to 25 cents per watt by 2016.

The rebates will be funded by a surcharge to residential and commercial gas and electricity customers, based on how much they use. Most residential customers will pay about $12 a year, but they won't see much impact on their monthly bills because a separate surcharge is set to expire next year, according to the PUC.

Critics questioned whether ratepayers should subsidize the most expensive form of renewable energy, and whether program would drive down the costs of solar energy as backers claim.

"We need rates to go down, but this goes in the other direction," said Joseph Lyons, a lobbyist for the California Manufacturers and Technology Association. "Energy-intensive manufacturers are going to be hit the hardest. They're going to be paying a disproportionate share of the program costs."

Solar advocates expect the massive state investment will lead to more solar energy ventures and increase business for existing companies.

"We anticipate that there are going to be a lot of companies getting into this space and thriving in this space," said Matthew Cheney, chief executive officer of San Francisco-based Renewable Ventures, which provides financing for renewable energy projects.

Advocates hope the $3.2 billion in subsidies will help California regain its position as a global leader in solar power. In recent years, the state has been overtaken by Japan and Germany, now the world's two largest solar markets.

"This is a historic event for our industry," said Howard Wenger, executive vice president of Berkeley's PowerLight Corp., one of the nation's largest installers of solar electric systems. "It puts us in position to achieve our ultimate goal, which is for this technology to compete on its own with traditional sources of energy."

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