Riding the Solar Roller Coaster
Author: Linda Tolliver
May, 2012 Issue
Last year was a “hang onto your hat” one for Solar Works
, Sonoma County’s oldest solar design and installation company, which has been in business since 1986. And it was a year full of huge ups and downs in the United States and world solar markets as well.
Record low prices for solar panels
In the second quarter of 2011, Chinese-owned panel manufacturers started reducing prices drastically. U.S. companies followed suit, and soon, the price of Chinese panels dropped so low that the U.S. government accused the Chinese of selling panels below production costs. Finally, in March 2012, a stiff tariff was levied on Chinese-made panels and prices began to creep back up. But in the first quarter of 2012, solar panel prices were still low, stimulating solar interest and installations.
Financial incentives and challenges
The solar industry has long relied on state and federal incentives for reducing the cost of going solar. However, all available incentives were greatly reduced or closed in 2011. For example, the California Solar Initiative (CSI) rebate, based on the number of watts in a solar installation, started at $2.50 per watt in 2007. By the end of 2011, the rebate had shrunk to $0.25 per watt for residential installations. The New Solar Homes Partnership (NSHP) provided an incentive for new construction projects that used solar. However, record interest in the program forced it to be put on hold in 2011, because applications exceeded available funds. The reductions and loss of incentives dampened the market.
Expiration of federal tax grant
All solar projects are eligible for a Federal tax credit equal to 30 percent of the system price. However, an additional incentive for commercial projects, the Federal 1603 Tax Grant, has now expired. Until the end of 2011, commercial projects could take the tax credit as a grant or check and still employ a whopping 100 percent bonus depreciation on the system cost. The tax grant helped community-based small businesses, like Benedetti Tire and Lube in Sebastopol, go solar at a very favorable price. In December 2011, Solar Works installed a 27 kW solar system at the tire shop that will offset Benedetti’s annual PG&E bill by 88 percent. Benedetti owner Mark Reece says the grant was critical in making the project affordable.
Solar lease options
The federal tax grant and commercial incentives spurred what may be the biggest solar sales trend of 2011, the solar lease. Although the tax credit has expired and the commercial bonus depreciation is down to 50 percent, the lease remains a money-saving option.
Solar product manufacturers and vendors partnered with financial backers to offer a “prepay lease” option (similar to commercial PPAs) to finance solar projects. In this scenario, the customer makes an upfront payment to a finance company that’s 40 to 60 percent less than the retail cost of the system. Because the finance company technically “owns” the system for up to 20 years, it can take advantage of commercial tax incentives and pass some savings to the property owner. Most prepay leases include a full 20-year warranty and guaranteed production.
Solar Works sells two of the many leases on the market, from SunPower and Clean Power Finance. Benedetti Tire and Lube’s Reece took advantage of a SunPower prepay lease to install a 7.0 kW system at his home. The PV system is expected to produce enough electricity to offset 60 percent of his family’s annual PG&E bill.
Property Assessed Clean Energy (PACE) programs
Considered a shining star in financing solar projects, PACE programs began in 2010. Locally, the Sonoma County Energy Independence Program
(SCEIP) was one of the success stories in helping property owners pay for solar and other energy conserving projects through annual property tax assessments.
However, in 2011, SCEIP took a major hit when Sonoma County accepted program funds that required property owners to demonstrate a 10 percent reduction in energy use before qualifying for SCEIP funds. The requirement, known as a “loading order” had a devastating effect on both SCEIP and solar contractors. Applications for SCEIP funds immediately fell, and local solar contractors lost significant sales due to the added energy efficiency requirement. In 2010, Solar Works did the first SCEIP project in Sonoma County, but new SCEIP projects fell to just two in the last 6 months of 2011—still, it’s the most SCEIP projects of any other solar business.
In early 2012, Solar Works owner John Parry led the effort to remove the loading order from SCEIP. Local solar companies joined together and were successful in convincing the Board of Supervisors and, in March 2012, the loading order was dropped. SCEIP has begun to rebound by offering an option to make solar affordable and accessible to Sonoma County homeowners once again.
Sunny future for local solar projects
Solar has a strong base and a resilient future in the North Bay. Challenges are being tempered by triumphs: Renewal of the 1603 tax grant has been delayed in Congress until after the upcoming presidential election; the CSI rebate continues to dwindle and will soon expire. However, the reinvigoration of SCEIP and the growing success of prepaid and monthly lease programs are giving property owners options to go solar, save money and contribute to a healthy environment and local economy. Solar is back in the sunshine again!
Linda Tolliver is the manager for Solar Works in Sebastopol, gold medal winner for Best Green Business in the 2011 Best Of the North Bay readers poll. Contact her at (707) 829-8282.
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