Solar Power: Smaller, Cheaper, on the Rise
Business + Economy

Solar Power: Smaller, Cheaper, on the Rise


Last fall, a Church of the Brethern less than ten miles from the nation’s capital threw the switch on 99 solar panels on its south-facing inclined roof, turning itself from a coal-consuming electricity user into a sunlight-consuming electricity manufacturer.

Not only did the University Park, Md., church sharply cut the price it pays for electricity, it sells about a third of its production back to the local utility, the outage-plagued Potomac Electric Power Co., which in turn resells it to the church’s neighbors. The project is owned and financed by church members and local residents, who will earn a solid 7 to 9 percent return on their $139,000 investment over the next two decades from the installation.

“The production is on target and we’re doing pretty well,” said David Brosius, president of University Park Community Solar, LLC. “We’re producing well above what the church needs so it goes back into the grid.”

From churchgoers in suburban Maryland to savvy corporations with acres of sun-drenched yet vacant rooftops, a growing number of commercial and industrial electricity consumers are turning to small-scale solar installations for their electricity needs.Kohl’s Department Stores , for instance, has installed rooftop solar cells on 100 of its stores. Wal-Mart has completed nearly three dozen solar roofs as part of its campaign to generate 100 percent of its power from renewable sources. It is known in the trade as distributed power.

The rapidly falling price of solar cells has also led to an equally dramatic increase in utility-scale centralized solar facilities in the west and southwest. Last year, the rapidly growing U.S. solar market grew 67 percent to $6 billion, according to the annual report of the Solar Electric Industries Association (SEIA). The pace of installations doubled, with rooftop projects accounting for three-fourths of the growth.

“We went from 50,000 roofs to 100,000 roofs in just one year,” said Scott Sklar, an industry consultant and former president of the SEIA. “We could meet 20 percent of the U.S.’s electricity demand with just rooftops.”

Sklar cites three factors driving the current upsurge in demand: government incentives; steadily increasing prices for coal- and oil-generated electricity, especially for commercial and industrial users; and the declining reliability and quality of the electricity coming from the traditional industry , which in a digital world has become unacceptable to many businesses. “As the grid gets older, the quality is going down because the investments aren’t being made,” he said.

The sector’s total share of the electricity marketplace is still quite small, about a quarter of one percent. Yet even conservative projections, which presume the absence of a major shift in federal policy like a carbon tax, show the sector quadrupling over the next two decades. “The current drivers are the fundamentals of the technology itself,” said Chris Namovicz, a senior analyst at the Energy Information Agency. “Costs have declined substantially and policy drivers are creating a demand-side pull.”

Chief among those are the 31 states and the District of Columbia that have set so-called renewable energy portfolio standards for their local utilities, which require them to generate a minimum percentage of their electrons from solar, wind, hydropower and other non-carbon emitting sources of power. The federal government in 2009 also passed a grant program, which expires at the end of this year, and a 30 percent investment tax credit for solar installations, which expires in 2016.

Sensing the tide has finally turned on solar energy’s competitive position in the energy marketplace, behemoth General Electric recently entered the solar game. Earlier this month, it announced plans to build a $600 million solar cell manufacturing plant, whose annual production will be sufficient to power 80,000 homes. Chinese manufacturers currently dominate global solar cell production, with even some small U.S. manufacturers, whose U.S. government-supported technologies created the industry in the late 1970s, relocating there to take advantage of its cheaper labor costs and more supportive government policies.

The shaky position of the nuclear power industry in the wake of the Fukushima Daiichi tragedy in Japan is also spurring on the trend. Even before the disaster, Jonathan Rowe, the chief executive officer of Exelon, which is America’s largest nuclear utility, said  he wouldn’t build a new nuclear plant. He foresaw a future where combination solar, wind and natural gas facilities were not just competitive, but were the more socially acceptable choice for future large-scale installations.

A number of cash-strapped states and municipalities are turning to solar energy to help lower their electricity costs. Standard Solar, a Maryland-based installer that has tripled in size in the past year, recently signed an estimated $1.2 billion deal to deliver 300 megawatts of solar power in a consortium of municipally-owned utilities in Ohio. “The cost has dropped significantly in the last three or four years, from $6 a watt to $4 a watt,” said Tony Clifford, the chief executive officer of the firm. “The number of places where you can do it economically [because of the price of local electricity] is three times greater today.”

The costs will continue to decline as production rises, according to Ken Zwiebel, who directs George Washington University’s Solar Institute. He ran the federal government’s National Renewable Energy Laboratory in Golden, Colorado, for several decades. “There is a 20 percent reduction in costs for every doubling in installations,” he told its annual symposium, which was held earlier this week. “That should allow us to get to the point where solar is competitive without incentives.”

However, that could be short-circuited by shifts in the policy arena. Despite the ongoing budget crisis in Washington, high gasoline prices are increasing demands from oil industry to give additional incentives to fossil fuels producers and open up more U.S. lands and off-shore drilling sites to drillers. Though Rep. Paul Ryan, R-Wis., on Thursday suggested those subsidies ought to be cut back , House Speaker John Boehner , R-Ohio, retracted his flirtation with that position after President Obama seized on the comments to renew his call for an end to oil subsidies.

The administration’s position has gone nowhere, given the nation’s long track record of granting generous government support for fossil fuels. A 2009 Environmental Law Institute study showed that oil, coal and natural gas producers received $72.5 billion in tax breaks and direct subsidies over the previous seven years, compared to just $5.2 billion for the solar and wind generation industries. Ethanol producers received $16.8 billion over the same period.

Another major policy tiff that could affect solar power’s future involves clean air. There is about 50 gigawatts of coal-fired electricity capacity (about 5 percent of the nation’s capacity) that will be retired over the next decade because it doesn’t meet existing clean air standards for mercury, nitrogen, sulfur and particulate matter, which contribute to serious health problems in the U.S. Pressure to reduce or eliminate these standards is likely to build when coal producers and plant operators are faced with the prospect of having to build new, more expensive plants.

While coal-powered electricity costs about 4 cents a kilowatt hour now compared to 10 cents for solar, replacement plants that meet current clean air standards will probably cost substantially more. “What’s a new plant really cost, especially if it has to be cleaner?,” asked Kathy Weiss, vice president for First Solar, the nation’s largest solar cell manufacturer.

Weiss also makes the jobs argument in pushing for a greater shift to solar roofs, which use her company’s core product – solar cells. “You get more job creation [for installers] through distributed solar,” she said. “These are jobs that can’t be exported.”

Related Links:
New York Times, Study Finds Panels Increase Home Value 
USA Today, Home Solar Panels Doubled Electric Output Last Year