by Joseph Pereira, June 2, 2005
Tired of paying $140 a month in electric bills, Frank Corradi decided to do something about it. So last December, he had part of the roof on his four-bedroom colonial covered with solar panels.
Today his suburban Cedar Grove, N.J., home is a mini power station. Not only does it produce enough electricity to run the household, it also generates about $170 in cash roughly every six weeks for Mr. Corradi under a state program that rewards developers of clean energy. “That’s a treasure sitting up there on my roof,” says the 43-year-old financial analyst.
Once almost the exclusive domain of the ecologically minded, solar electricity, also known as photovoltaic power, is starting to attract pragmatists simply looking for a way to cut their electric bill. Installation costs have fallen sharply in recent years, at the same time that states have been expanding their tax breaks and rebates. Mr. Corradi’s project, which cost about $50,000, would have come at about twice that amount just a decade ago. In addition, various incentives covered more than two-thirds of his out-of-pocket costs.
Incentives such as these are expanding quickly and are now available in more than 30 states, including California, New York and Texas, up from just four in 1999. (A list of states and incentives is at www.dsireusa.org1.) The states are looking for creative ways to offset heavy consumer demand for electricity, without building new fossil-fuel-burning power plants. Typically, the incentives are funded by alternative-energy surcharges on utilities bills.
It is happening as power costs are rising in a few solar-friendly places, such as Dallas and Houston, where electric bills have jumped nearly 50% in the past three years. Nationwide, electricity prices have generally remained stable despite rising petroleum and natural-gas prices, partly as utilities have turned to cheaper energy sources such as coal and nuclear power.
About 300,000 homes are equipped with solar electricity nationwide, according to a government analyst, up from fewer than 100,000 about five years ago. Manufacturers’ sales of residential solar panels climbed 28% to about $500 million last year and are expected to rise another 20% this year, says the Solar Energy Industries Association trade group.
In California, where Gov. Arnold Schwarzenegger is a solar fan, installations jumped 53% under the state’s rebate program last year, to 4,614 residences. California rebated $69.3 million to customers under the program, and the California Energy Commission says application approvals this year are running about 25% ahead of last year.
California also is considering a bill, pushed by Gov. Schwarzenegger, that would provide additional solar incentives for homeowners and businesses, aimed at attaining a goal of “a million solar roofs” in 13 years. The bill is opposed by Southern California Edison, which argues that the initiative would place an extra burden on ratepayers, particularly nonsolar customers whose surcharges would support installations.
Of course, solar panels on the roof aren’t for everyone. To begin with, the financial attractiveness depends on a range of factors, including local electricity prices and the availability of incentives — not to mention the amount of sunlight that falls on your house. The best place to be is in a southern, relatively dry climate such as Texas or Nevada. Other parts of the country, such as Pennsylvania and Washington, are less favorable due to extended periods of cloudy days. Maine, for instance, receives 20% less sunlight than San Diego.
Another problem is a lack of easily accessible information. The wide availability of incentives isn’t well-known to consumers, partly because utilities aren’t eager to market them. After all, more solar users could mean less revenue for them.
The cost-benefit ratio is improving. The SEIA trade group estimates that wholesale price of solar-power systems fell to $3.60 a watt of generating capacity last year, from $5.31 a decade earlier. A typical suburban home needs a 2.5 to 3-kilowatt system, costing from $19,000 to $22,500, after installers add their mark-up. With an electricity bill of, say $1,000 a year, most people would consider the installation cost too high to justify the savings. That is where the incentives can make a difference.
For instance, Mr. Corradi’s home state, New Jersey, paid him $5.50 for each watt of generating capacity in his system. That alone covered about $35,000 of the $50,000 cost. Mr. Corradi figures he will recoup the $15,000 balance in four to five years through savings on electric bills and via special “credits” earned under a state program that amounts to a sort of frequent-flier mileage program designed to reward producers of nonpolluting energy. A typical system has a life expectancy of 30 years.
New Jersey offers the most generous outright rebates. California — which was one of the first to offer incentives, starting in 1999 — has a more lucrative program, although it is structured partly as a tax credit. It covers $2.80 a watt of generating capacity, and adds a tax-credit equivalent to $4.50 a watt. Connecticut and Ohio pay $5 a watt, Nevada pays $4 and Oregon up to $3.50. Idaho, which offers no rebate, allows homeowners a 100% tax deduction up to $20,000.
The rebates and incentives are paid out in a variety of ways. In some cases, the state directly reimburses the company that does the installation. In other states, such as California, homeowners have to apply to a state agency to get their rebate.
However, rebate money can be limited, typically by the amount collected through the alternative energy surcharges. Once the surcharge fund is used up for the year, a state stops paying, and often will stop taking applications.
State officials advise getting rebate applications as early in the year as possible; late filers may have to wait until the next fiscal period to be reimbursed.
Wyoming, which has seen a doubling of applicants to 24 this year for its small program, has exhausted its rebate fund and is putting new applicants on a wait list, says Dale Hoffman, a state energy manager. The District of Columbia, with a rebate budget of $180,000, isn’t accepting any more applications for 2005, either.
In New Jersey, 280 installations qualified for rebates last year, and the state is expecting the number to double this year. It already has received 400 applications in 2005 and can accommodate more. It expects to use about $50 million of the $85 million available for the program.
Another important consideration is whether local laws enable home generators to sell their electricity back to the local utility. Known as “net metering” clauses, such regulations are critical for someone who wants to install photovoltaic panels on their home (or, for that matter, any other form of electrical generator, such as a windmill). Not only does net metering enable a homeowner to sell excess power back to the utility, it also enables a homeowner to draw power from the utility at times when the solar panels aren’t generating enough electricity. (Such as when it is dark outside.)
Thirty-nine states mandate net metering. But even some sunny states don’t, including North Carolina, Missouri and Nebraska.
Loading...