SEATTLE -– Going solar is expensive, but a confluence of plummeting equipment prices, rising utility bills, new financing schemes and a raft of federal, state, and local incentives are encouraging homeowners across America to take the plunge and put photovoltaic panels on their roofs, even in rainy Seattle.
In 2013, 792 megawatts of solar capacity was installed on homes. That figure is expected to increase 61 percent in 2014 and another 53 percent in 2015, according to the Solar Energy Industries Association, a Washington-based trade group. A megawatt of solar capacity is typically enough to power 200 average U.S. homes, though the number varies depending on factors such as available sunlight and panel orientation.
On a recent drizzly July morning here, homeowner Brian Palmer gestured out the window to the falling rain. There, workers in slickers from a local solar energy company prepared to put photovoltaic panels on his roof, one of the hundreds of such installations that occur daily across the country.
"Seattle is one of the most overcast cities in America. It is infamous for how rainy it is," the software engineer said. Yet, he added, it is just as cloudy in Germany, which leads the world in the number of solar-powered homes. If it works there –- and it does –- it will work in Seattle. Palmer's neighbor has had a solar system on his home for several years.
Palmer's 6.48 kilowatt system cost $30,380 fully installed. The federal government will give him an income tax credit for 30 percent of that bill. As a resident of Washington with Washington-made equipment, he'll also receive $0.54 for every kilowatt-hour of solar energy his system produces up to $5,000 a year. What's more, the local utility will purchase his excess electricity at the retail rate, which in Seattle is currently $0.11 per kilowatt hour at peak demand.
With all of the incentives factored in, Palmer reckons it'll take ten years to pay off the home equity loan he used to pay for the solar system and about $40,000 for a new energy-efficient home heating system, insulation, and to seal leaky windows and doors. "I would rather be paying that money toward paying off this investment," he said, "than just having it pour down the sink."
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For those who balk at the upfront cost to invest in solar, a new leasing model has emerged in recent years that is pushed by companies such as California-based SolarCity. The company owns the equipment and installs it on its customers' homes. In turn, customers pay the company as they would a utility for the electricity the solar system generates, but typically at a lower rate.
"There are a lot of people who want to do something positive for the environment, they want to use cleaner energy, but there is a smaller set of people that are willing to make a financial sacrifice to do it," said Jonathan Bass, a SolarCity spokesman.
The company serves 15 states, including Washington on a limited basis as well as California, Colorado, Arizona, Hawaii, and much of the Northeast. It currently installs between one in three and one in four of the new solar systems in the country, according to Bass.
Lease agreements indeed are fueling much of the growth in the residential market around the country, according to Dave Kozin, president of Solar Washington, a Seattle-based trade group. However, the incentive program in Washington, he explained, isn't available for leased systems. Rather, it is structured to encourage residents to purchase and install Washington-made equipment. This makes it difficult for SolarCity to turn a profit in Washington, Bass explained.
Penetration and pushback
Currently, 0.6 percent of the nation's total electricity generation comes from solar. Penetration is expected to reach 1.6 percent by the end of 2015, according to the Solar Energy Industries Association. A solar installation is completed in the United States every four seconds, the association said.
A recent report from Bloomberg New Energy Finance in New York predicted a 27-fold increase in rooftop solar between now and 2030, but clouds are on the horizon.
Many incentive programs are winding down or are soon to expire, and electric utilities are pushing back against policies that require them to pay homeowners for their excess solar electricity. The solar industry is concerned the incentives may end before the industry is ready.
Much of the pushback stems from maintenance and upgrades to the electric grid. The retail price of electricity includes the infrastructure to deliver it such as power lines, substations, and transformers. As more people generate their own electricity and sell the excess back to the grid, the more utilities are compelled to pass on the maintenance costs to other consumers.
That, then, "makes it even more of an incentive to those that don't have solar to pick up solar, so it is kind of a positive feedback cycle," said Michel DiCapua, head of analysis in the America's region for Bloomberg New Energy Finance. At some point, the utilities fear, they won't make enough money to maintain their systems, let alone invest in necessary upgrades to equipment and software.
In November 2013, Arizona Public Service was granted precedent-setting authority to charge homeowners with solar panels on their roofs a fee to connect to the electric grid. For the average consumer the cost is about $5 per month. The charge "should spread the cost of maintaining a reliable electric grid more fairly," the utility said in a press release.
How much solar can the grid handle?
There is not a one-size-fits-all answer to the question of how much solar the grid can handle, according to Kevin Schneider, an electrical infrastructure engineer with the Department of Energy's Pacific Northwest National Laboratory. To explain why, he pointed to the power lines running down the street outside a coffee shop near his Seattle office.
"What Seattle has will look completely different than what (nearby suburb) Bellevue has, than what Chicago has," he said. "And it is because these are all little individual companies that over time build their systems up. And it is not consistent."
What's more, he said, the electric power system was designed for one-way traffic. Rooftop solar requires a grid to go both ways. While technically feasible, Schneider said, it requires an upgraded operational mindset and sometimes new infrastructure as well. Both cost time and money.
For now, solar boosters see ample growth opportunity. A recent survey of 1,600 people conducted for SolarCity, Bass noted, found that "two out of three homeowners in America are interested in solar for their own homes and yet less than 1 percent have it today. That shows you the potential for this technology."