It’s not unusual for a program to go on hiatus in Los Angeles – unless it’s a government program. But now, if you’re looking for a rebate under the Los Angeles Solar Incentive Program, there’s not a ray of hope until July.

According to a statement from the Los Angeles Department of Water and Power (LADWP), which administers the program, “With 2,000 more requests in process, the demand for rebates has far exceeded our current budget.”  Therefore, in early April, the department suspended the Solar Incentive Program (SIP) for 90 days in order “to review and revise [it] to better serve its program participants.”

Since the Solar Incentive Program’s inception 12 years ago, it has helped support the installation of about 3,300 solar photovoltaic (PV) projects – providing more than $117 million in incentives to commercial and residential customers. Until now, the average LADWP rebate for a solar installation was $16,000, or about 40 percent of the cost. The program is funded by ratepayers.

“The combination of one of the highest solar PV incentive rates in California, generous federal tax benefits, ideal conditions for solar generation, and a customer base dedicated to promoting clean energy has made the program an extraordinary success,” the LADWP stated.

But there is such a thing as being too successful. The municipal utility announced recently that it was suspending its program due to lack of funding at the end of this fiscal year. While the department has $30 million budgeted for its Solar Incentive Program to help fund rooftop installation of solar panels, it has been inundated by more than triple that amount in requests. In fact, local homeowners who are eager to cut their energy bills have asked for $112 million in rebates.

Without another revenue source – such as a bond offering – it's unclear how much the program could be expanded to meet demand.

Solar-power subsidies vary among different utilities, but one thing is consistent: Homeowners will still be left with some pretty hefty costs. In the case of the LADWP, the utility estimates that it costs an average of $40,000 to install a typical solar-power system. Much of that price goes into the solar panels, which rely on refined silicon and other scarce materials to harness the sun's rays, and (at this point) aren't cheap to produce.

LADWP General Manager Ron Nichols stated, “We fully support and want more renewable energy, and we want to foster solar technology – but not at undue expense to our customers who pay for this important program.”

Nichols offered no details on how the program will be changed in months ahead but acknowledged that “we will reset the rebate at a lower level when the program is resumed.”Similar rebate programs offered by other SoCal cities have also been curtailed amid budget shortfalls. Anaheim isn't accepting new applications from homeowners until January 2012. Burbank doesn't expect funds for solar rebates to be available again until 2013.

To be sure, no one should be surprised that rebate money is drying up. Such programs were intended from the get-go to be temporary and to result in steadily shrinking refunds for solar installations. The idea was to reward early solar adopters and to kick-start activity in the market. This, in turn, would bring down prices through economies of scale and eventually make rebates unnecessary.

To a large extent, it's worked out that way. Following its recent Solar Leadership Forum, held in Napa, California, Bloomberg New Energy Finance noted, “The industry still requires market support mechanisms, in the form of public policy and financial incentives, in order to maintain current growth rates. However, all of the [Forum] participants agreed that excessively generous incentives are a thing of the past, and in fact are not desired by most in the market. Stability, not generosity, is paramount for solar industry support mechanisms.”

The London-based research firm predicted that, by 2020, the cost of a solar installation could be about half the current price. For a DWP customer, that would mean paying about $20,000 instead of $40,000 to go solar. That's still a big chunk of change, but the intent is to save money over the long run as your monthly energy bill declines.

And in a recent interview with Bloomberg (News - Alert), Lyndon Rive, CEO of San Mateo, California-based SolarCity Inc., forecasted that rooftop solar installations will become cheaper every year, as the industry grows.  ”System costs have declined 5 percent to 8 percent [a year], and we will continue to see that,” he noted.

Jim Cahill, Southern California Regional Director for SolarCity (News - Alert), also noted that, even if rebates vanished, his company offers homeowners the choice of leasing solar systems for potentially less than $100 a month. This eliminates the hefty upfront costs of buying a system but still provides the option of purchasing the gear at some point down the road.

Meanwhile the LADWP has told homeowners to continue to watch its website, “for updates to the program, including the re-launch date when it becomes available.”  For additional information, you may also send an email to [email protected] or call the Solar Hotline at (213) 367-4122.