Solar energy industry shining bright, but clouds lurk

April 21, 2013 by  
Filed under Green Energy News

Related: Caltech works on creating energy from water and sunlight

When Sen. Gaylord Nelson created the first Earth Day 43 years ago Monday, solar energy was taken about as seriously as flower power and the music of Jimi Hendrix.

Today going solar no longer conjures up images of a hippie living off the grid in Berkeley or Santa Monica. Instead, solar power is being pursued by retail giant Wal-Mart and economic behemoth China – evidence that solar has gone mainstream.

Still, despite solar’s jump to legitimacy, 2013 will be a bellwether year for solar. The training wheels provided by the 2007 California Solar Initiative’s financial incentives are coming off, leaving renewable energy companies to ride on their own or fade into the sunset. Either way, analysts say they must compete with natural gas, coal, oil and nuclear power.

“The solar industry is here to stay. The policy mechanisms like the (California Solar Initiative) CSI, and tax support regimes in Europe and China have established the momentum for an industry that has really started to take off and is now maturing,” said Mark Tholke, vice president of EDF Renewable Energy in San Ramon.

Most analysts agree 2012 was a banner year for solar. Photovoltaic installations grew by 76 percent over 2011, with 3,313 megawatts of solar electricity installed in the U.S., according to the

Solar Energy Industries Association. “Solar is the fastest growing source of new electricity in this country and one of the fastest growing industries in the United States,” said Rhone Resch, SEIA president and CEO.

China snagged the top spot from the United States by attracting $65.1 billion in investments in renewable energy, which includes solar, wind and biomass, according to a report released Wednesday by the Pew Charitable Trusts entitled “Who’s Winning the Clean Energy Race. “

Still, though the U.S. is No. 2, the scope of solar energy has grown from five states with more than 50 megawatts of solar in 2010 to 12 states installing more than 50 MW in 2012, the SEIA reported last month. In the U.S., 7.7 gigawatts of solar capacity exists, enough energy to power 1.2 million American households.

California leads all states in solar business and was recently crowned No. 1 in solar jobs by the Sierra Club. Second is Arizona, then Hawaii, New Jersey and Colorado, according to an SEIA report compiled by GTM Research, a firm that follows energy trends.

“More people work in the solar industry than at the state’s two largest utilities,” said Evan Gillespie of the

Sierra Club’s My Generation Campaign in a prepared statement released Thursday.

From residential installations, to commercial and government rooftop photovoltaics, to the mega utility-driven projects popping up in the desert, California leads all states in all categories. But some see the investments in renewable energy softening as competition increases from Asia and U.S. and California incentive dollars dry up.

In 2007, the California initiative provided $3.3 billion for rebates that added 3,000 megawatts of new solar power, according to the California Public Utilities Commission. The state requires 33 percent of electricity from clean energy by 2020, a powerful mandate. (One solar installation in a typical three-bedroom home offsets 100,000 pounds of carbon dioxide over 20 years, as much as a car emits in 100,000 miles. Carbon dioxide is a major greenhouse gas and most scientists believe an over accumulation in the atmosphere is leading to global climate change.)

But now, San Diego Gas Electric has run out of subsidies as has Pacific Gas Electric. Southern California Edison is down to the last two tiers of funding, said Edison’s Rudy Perez, solar photovoltaic manager for the Rosemead-based utility. He said about $118 million remains in the CSI incentives program.

The changes coming will affect bigger, utility-driven installations more than those companies installing home systems, Tholke said.

“In 2013, in the U.S., a concern is the demand for new projects. The number of new solar projects being signed are down,” Tholke said. Projects such as EDF’s Catalina Solar Project in Kern County is being built. Several in the California and Arizona deserts will be completed this year, according to GTM. Others will follow in 2014 and 2015, but the numbers may slack off after that, Tholke said.

Environmental groups are torn. While they support clean energy, they worry about large solar projects destroying the fragile desert ecosystem. “One of the main problems with solar in the desert is everyone believes in it, but no one wants it to go in their specific spot,” summed up John Monson, a private environmental consultant in Northern California.

2017 is also the year that the U.S. Department of Energy tax incentives are scheduled to end, unless Congress renews them, Tholke said. A DOE loan program has contributed $12 billion since 2009.

Some say that solar, for example, is being propped up by federal and state tax incentives. Tholke said the industry hasn’t gotten anything that fossil fuel companies don’t already receive in tax breaks and have for decades.

“The argument that we are subsidizing renewable energy doesn’t hold water. Other sources, especially fossil fuels and nuclear, have been for years,” he said.

The other cloud in the solar outlook is China. Because it began making cheaper solar panels, many companies in the U.S. could not compete and went under, including the U.S-funded Solyndra, and other Silicon Valley companies such as NovaStar and Greenvolts.

“Yeah, the Chinese knocked down the price so a company like Solyndra could not compete,” said David Thoreau, a spokesman with Verengo, a Torrance-based solar company that specializes in residential installations.

However, there is a silver lining.

The Chinese helped installation companies like Verengo and the 14-state publicly-traded company, SolarCity, both operating in California, by lowering the price of supplies. Verengo can buy lower-priced panels from companies in China, Korea, Japan, Germany and the U.S. and pass on the savings to their customers, Thoreau said. That has dropped the cost of completed solar systems by 27 percent, according to SEIA.

A 4- or 5-kilowatt installation used that used to cost $30,000 now costs about $20,000, Thoreau said. The lower cost makes the California Solar Initiative moot. “There is almost no need for it anymore,” Thoreau said. “It is right at the tipping point. It is profitable. (Solar) isn’t the coming thing. It seems that it has arrived,” he said.

Lyndon Rive, CEO of SolarCity, said evidence of that is his company’s contract with Wal-Mart for 150 stores, and a newly signed deal with Walgreens. “Wal-Mart is an amazing company. What they won’t do is increase their cost. They look at cost and are adopting solar at a large scale,” Rive said.

Just as the price of laptops, tablets and smartphones has come down, so has the price of solar energy once the manufacturing is done in the global marketplace.

Since launching its solar rooftops program in 2008, Edison has experienced a drop in solar installation from $7 a watt to $3 a watt, Perez said. Edison has completed 25 large scale projects so far for a total of 91 megawatts – enough power to serve 5,600 customers, he said.

Edison’s renewable energy power portfolio has reached 21 percent, with solar accounting for 10 percent of that total, Perez said.

The growth in solar has overtaken wind power during the last few years, he said, in residential, commercial and concentrated power projects.

“The thing that is growing fastest is homeowners not buying the equipment but buying the electricity. That is the fastest growing model,” Rive said, describing SolarCity’s practice. SolarCity requires $0 down payment. The customer pays about 10 to 15 percent less in utility costs over 20 years but doesn’t pay for the equipment, Rive said. SolarCity employs 500 workers in Southern California, he said.

Verengo says it has grown 700 percent over the last four years. SolarCity, despite a disappointing earnings report for last year’s fourth quarter, saw an increase in total revenues from $59.5 million in 2011 to $128.6 million in 2012.

While Rive predicts robust sales this year as well, some dispute the solar companies’ rosy outlook because the scale is so small.

For example, homes going solar make up less than 1 percent of the single-family homes in California, and that’s in a state that is a leader in solar.

Doubters wonder why can’t 50 percent or 100 percent of homes hook up to solar power?

Rive said growth is slower in solar than in laptops or iPads because solar involves adding infrastructure while buying a laptop or tablet does not.

“It went from 0.1 percent to 0.8 or 0.9 percent now (of homeowners in California),” Rive said. It takes a few years to get there.

“This is actual, real infrastructure. You have to get people on roofs. You have to pull permits. You have to hire people to do real work. It is hard to go from 1 percent to 10 percent. A software company can do that because they don’t have the infrastructure. Energy is infrastructure,” Rive said.

Aside from the physical barriers are mental ones. People are not accustomed to having options for electricity, said SolarCity spokesman Jonathan Bass.

“People are not used to having a choice. They are used to rising rates. This is hard for them to get their hands around,” he said.

Solar energy companies and utilities investing heavily in solar say the growth arrow will continue to point upward. Solar provides American jobs and reduces greenhouse gases, two things politicians in Sacramento and Washington like to see.

Here in California, solar is also turning the geographical landscape upside-down. While environmental devotees mostly hail from the coast, it is the less attractive inland areas that are moving into the solar spotlight. Perez explained that inland cities with more sunshine wring more energy out of solar panels than installations in foggier and cloudier coastal cities.

Rooftop solar installations in Fontana and Ontario are some of Edison’s most successful. The single largest rooftop installation – the size of 26 football fields – sits on a warehouse in Perris, he said.

“The best area is the Barstow area, where you’ll get some of the best solar output in the world,” said Perez, who is an engineer. “Compare that to the output in Santa Monica, a coastal community, where you get a 35 percent drop in production. Basically, Victorville or Barstow is better than being on the coast,” Perez said.

Maybe the hippies should move inland, where solar is king.

When asked if real estate agents will think more highly of Barstow property than coastal properties, Perez chuckled, saying the lower prices make solar possible anywhere. “If you’ve got a good south-facing roof, we encourage (Edison) customers to check it out. Solar is becoming more and more economical,” he said.

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