LOS ANGELES - Solar power makers will get a boost in California, already their largest U.S. market, as it sharpens its focus on small-scale projects as part of efforts to get a third of its power from renewable energy.

Executives with solar industry heavy-weights California- based SunPower Corp and China's Suntech Power Holdings Co Ltd and other supporters are optimistic the commission's proposal for a new solar feed-in tariff will take effect and jump-start development.

They believe smaller systems can get to market quicker and overcome transmission issues that have put California behind schedule reaching a 2010 renewables goal.

I think the feed-in tariff in California is a step in the right direction (for) customizing policy to the market segments, said SunPower's chief executive Tom Werner at the Reuters Global Climate and Alternative Energy Summit in San Francisco last week.

Werner expects that, if enacted, the PUC's proposal would absolutely increase SunPower's sales.

Detailed rules for how California will meet its 33 percent renewables goal -- and which renewable energy sources they may favor or hamper -- are yet to be determined and are in the hands of the state's chief climate change agency, the Air Resources Board.

Governor Arnold Schwarzenegger signed an order this week that the state get 33 percent of its energy from clean sources by 2020, while the state aims to get 20 percent of electricity from renewables by 2010 -- and faces long odds.

The proposal by the California Public Utilities Commission would give an incentive for small-scale solar systems of up to 10 megawatts, for a total of 1 gigawatt for the program.

A 10 MW system is fairly small in the solar industry, with utility-scale systems reaching hundreds of megawatts.

The entire U.S. solar market reached 8,775 megawatts at the end of 2008, according to Solar Energy Industries Association. Power generated by solar installations is expected to more than double in California this year, according to research house iSuppli. But the PUC estimates the state needs to almost triple its renewable electricity to meet the 33 percent goal.

Feed-in tariffs generally guarantee a higher price for renewables. In Germany, solar feed-in tariffs have pushed the country to be the world's market leader in solar power.

The PUC plan includes a pricing mechanism meant to appease skeptics of regulation and create market-driven pricing.

By having competition, you're ensuring that you will definitely get market activity and that you will get the best possible price, said Adam Browning, executive director of the Vote Solar Initiative, a national advocacy group.

Through the mechanism -- dubbed a reverse auction -- developers would bid projects to utilities similar to the regular solicitation process, but with some differences. The costs would be passed to the rate-payers, Andrew Kotch, a PUC spokesman, said in a email.

While California currently has an feed-in tariff for solar projects, critics say the current cap of 1.5 megawatts is too small to drive new projects. The PUC proposal would not set prices administratively, but use the auction to set them.

I think it's definitely worth a shot, said Steven Chadima, Suntech's vice president of external affairs for its U.S. unit.

Chadima said some would like tariffs like in Europe.

But there's this belief or legal opinion that that's not possible to do, he said, due to federal energy law.

Chadima said the proposal could clear some of those legal hurdles. If it is enacted, Suntech would likely partner with local developers to bid projects, Chadima said.

The California legislature is also pushing for a solar feed-in tariff, which would increase the existing incentive to 3 MW and allow the PUC to increase the rate utilities pay. FBR Capital Markets analyst Benjamin Salisbury wrote in a note to clients that a feed-in tariff could be an important RPS (Renewable Portfolio Standard) tool.

(Reporting by Laura Isensee; editing by Andre Grenon)

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