Price to use sun to power homes less astronomical

Tim Johnson sits on his roof next to solar panels that have cut the electricity bill at his Philadelphia home by about $20 to $30 per month.
Tim Johnson sits on his roof next to solar panels that have cut the electricity bill at his Philadelphia home by about $20 to $30 per month.

— The high costs that for years made solar energy impractical as a mainstream source of power are plummeting.

Real estate companies are racing to install solar panels on office buildings. Utilities are erecting large solar panel “farms” near big cities and in desolate deserts. And creative financing plans are making solar more realistic than ever for homes.

Solar power installations doubled in the United States last year and are expected to double again this year.

“We are at the beginning of a turning point,” said Andrew Beebe, who runs global sales for Suntech Power, a manufacturer of solar panels.

To be sure, solar is growing from a very small base. All of the panels now installed across the nation produce enough electricity to power 600,000 homes, or about as much electricity as one large coal-fired power plant. But its promise is great, despite drawbacks such as reduced output on cloudy days. The sun splashes more clean energy on the planet in one hour than humans use in a year, and daytime is when power is needed most.

Solar panels also have the advantage that they can be installed near where people use power, which reduces the cost of moving power through a grid.

While cost has held back solar power — it’s still about three times more expensive than electricity produced by natural gas, according to estimates by the federal Energy Information Administration — solar panel prices have plunged by two-thirds since 2008, making it easier for installers to market solar’s financial benefits, and not simply its environmental ones.

Last month two of the nation’s biggest utilities, Exelon and NextEra Energy, each acquired a large California solar power farm in the early stages of development. Another utility, NRG Energy, has announced a plan with Bank of America and the real estate firm Prologis to spend $1.4 billion to install solar systems on 750 commercial rooftops.

Nationwide, solar power installations grew by 102 percent from 2009 to 2010, by far the fastest rate in the past five years.

“Every manufacturer globally is looking around for the next major growth market, and the U.S. is the first one everyone points to,” said Shayle Kann, managing director for solar research at GTM Research.

Making solar affordable still requires large tax breaks and other subsidies from federal and state governments. The main federal subsidy pays for 30 percent of the cost of a residential system. When state and other subsidies are added, as much as 75 percent of the cost can be covered in some areas of the country.

But prices of solar panels, the squares of crystalline silicon or thin layers of metal films that turn the sun’s rays into electricity, are falling so fast that its advocates now claim that solar will be able to compete with fossil fuels even when the federal solar subsidy shrinks by two-thirds in 2016.

“Over the past 10 years the industry has made the case that we needed to increase scale so we could reduce prices,” said Arno Harris, chief executive officer of solar developer Recurrent Energy, a subsidiary of Sharp Corp. “We’re seeing it happen.”

The falling prices can in part be attributed to inexpensive manufacturing costs in China, which have hurt some U.S. solar companies and caused the high-profile bankruptcy of Solyndra, which received $835 million in federally backed loans.

Solar panel prices have been declining for years because of lower costs for polycrystalline silicon, the main raw material for most solar panels. In the past six months, demand has dropped sharply in Germany, the world’s biggest solar market, in response to shrinking subsidies. This has created a global glut of solar panels and accelerated the decline in prices.

Larger-scale, lower-cost manufacturing in China and other Asian nations is the other main factor in the decline of price for solar panels.

Panel prices, which are based on the amount of power they can produce during full sunshine, sold for $1.34 per watt in mid-September, according to data from Bloomberg New Energy Finance. That’s down from $1.90 at the beginning of 2010. In 2008, they sold for $4 a watt.

While many U.S. companies that make solar panels remain profitable and are growing, three U.S. panel makers have filed for bankruptcy in two months, including Solyndra.

But the lower prices have made solar power systems appeal to homeowners who want to save on their electric bill, not just reduce their environmental effects.

Tim Johnson, a high school math teacher in Philadelphia, had wanted to put solar panels on his roof for years. Like many people concerned about the environment, the thought of powering his home without burning fossil fuels had a strong appeal. But with two kids in college, he couldn’t justify spending $15,000, after subsidies, to do it.

But since March, he has generated 50 percent to 75 percent of his electricity with a set of solar panels on his roof, saving 20 percent on his electricity bills. His upfront cost for the system: $0.

Instead of buying and installing the panels himself, he signed up with SunRun, one of a handful of companies that build, own and maintain solar systems on homes. These companies earn money by charging customers for the power the panels produce.

Johnson pays SunRun $52 a month, and he pays his traditional utility for whatever extra power he needs from the grid. In all, he pays $60 to $100 a month for power; he used to pay $90 to $120.

SunRun can charge Johnson a competitive rate because federal and state subsidies pay for a portion of the installation. Also, the arrangement allows SunRun to take advantage of one of solar’s big advantages — it is generated near where it is needed and doesn’t have to pass through hundreds of miles of wires, transformers and other equipment. The power price SunRun has to beat to entice customers like Johnson is an expensive retail rate, bloated with transmission and distribution charges that home solar doesn’t incur.

It would be cheaper over the long run for a homeowner to buy and install a solar system, because he would not have to pay a company like SunRun for financing, service and maintenance. But these plans have growing appeal because they don’t require homeowners to lay out thousands of dollars upfront.

In California, which leads the nation in solar power installations, 51 percent of the residential solar systems installed through the first three quarters of this year were sold with these plans, up from 12 percent in 2009.

SunRun and competitors such as SolarCity and Sungevity are expanding into more states, including Arizona, Colorado, Delaware, Maryland, Massachusetts, New Jersey and Pennsylvania. Last month, Google Inc. announced it would create a fund that local installers in every state can tap so they too can offer no-money-down plans.

Some installers are teaming up with big hardware chains Home Depot and Lowe’s in an effort to expose solar to customers who might not otherwise consider it.

“Awareness is still one of our biggest problems,” said Lynn Jurich, co-founder and president of SunRun, which has a partnership with Home Depot.

The Solyndra bankruptcy has sparked a political uproar. Republicans have accused President Barack Obama’s administration of pushing for Solyndra’s loan for political reasons and have used the bankruptcy to question Obama’s plan to help boost the economy by subsidizing clean energy projects.

The market will not get any easier for small solar panel makers. General Electric Co., Samsung and other big companies are entering the business. This should increase supply and bring down costs even further. GE announced this month that it would build the largest panel factory in the U.S., near Denver.

Business, Pages 21 on 10/31/2011

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