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A New Generation

by Cassandra Sweet
Wall Street Journal, November 12, 2007

Renewable energy increasingly begins at home

Two years ago, after Stan Gelber had retired and started an Internet company out of his home in Santa Cruz, Calif., he took a good, long look at his $3,000-a-year utility bill and decided to make a change.

"My electric bill was skyrocketing," he says. "I really needed to get a handle on what was going out, versus what was coming in."

"I'm in support of anything that will address global warming and our power consumption," the 65-year-old Mr. Gelber says. "That's very important to me. But I think that's secondary to the economics of it. It's going to pay for itself in eight to 10 years, and essentially I have free electricity for the rest of my life."

As electricity prices rise and government incentives and technology improvements make renewable-power systems more affordable, a growing number of people are embracing self-generation. And while as much as 85% of the demand for home solar-power generation is in California -- the state with the most generous financial incentives -- the market is growing in other states, including New Jersey and New York, and could take off nationwide if more states implement favorable rules and funding, advocates say.

"This market wouldn't be happening without these government incentives," says Lisa Frantzis, managing director of renewable and distributed energy at Navigant Consulting, an independent consulting firm in Burlington, Mass. "There's a convergence with prices coming down, concern about climate change, volatility in the power market and people concerned about energy security."

California dominates the U.S. market for rooftop solar-power systems. California Takes Lead

By far, the most widely used home renewable-power systems are rooftop solar panels that absorb the sun's rays and convert them into electricity.

In California, people who install their own solar power or other renewable generators can get rebates of as much as $2.50 per watt of electricity produced. Residential customers of San Francisco-based PG&E Corp. utility Pacific Gas & Electric Co., who install an average-size system of about 4,600 watts, can expect to obtain a rebate of at least $10,000, utility spokesman Keely Wachs says. California's rebates are based on the electricity output of the solar generator. The highest-performing, most efficient system would qualify for the full $2.50-per-watt rebate, whereas systems on roofs that have heavy shade, or smaller surface areas, for example, would qualify for a lower rebate amount, such as $2.20, $1.90, $1.55 or less per watt, Mr. Wachs says.

In the first nine months of this year, requests for solar rebates -- from both residential and commercial customers -- covered 160 megawatts of electricity generated, the California Public Utilities Commission has reported. That is slightly less than the 198 megawatts of solar power installed in California over the previous 26 years, the regulators said. Almost 90% of this year's 5,109 applications are from consumers eager to generate their own electricity.

Mr. Gelber says that after rebates, his solar-power system cost about $28,000 to install. The system, which gets full sun, generates about 4,500 watts of electricity, enough to satisfy Mr. Gelber's daytime energy needs, including multiple computers and appliances. After dark, Mr. Gelber and his wife, Jean Pierog, rely on power supplied by PG&E.

Mr. Gelber's system feeds electricity into the utility grid, and any surplus is used as a credit toward the cost of power purchased from the utility on cloudy days or at night, a process known as net metering. If a resident like Mr. Gelber produces more power than he or she consumes, the home's utility bill is zero. Mr. Gelber says he ends up paying PG&E about $225 a year.

The Long Haul

Installing a home solar-power generator can take quite a bit of effort.

California requires extensive documentation before it pays a rebate, and building permits are required to install a solar-power system, as are scheduled inspections by the local utility, county and city. Mr. Gelber also had to replace the roof on his house to ensure that it would be able to handle the extra weight of the solar panels and converter.

"There's a lot of work putting them in," Mr. Gelber says of solar-power generators. "It's not a spur-of-the-moment thing."

In its Northern California service territory, PG&E charges tiered rates for electricity, between 11.4 cents and 36.4 cents a kilowatt-hour, depending on usage. (A kilowatt-hour equals the energy needed to run a 100-watt bulb for 10 hours.) Utility spokesman John Tremayne says the average PG&E customer pays about 15 cents a kilowatt-hour, including surcharges and fees.

Solar power generated with photovoltaic panels, meanwhile, will run a homeowner about 18 to 19 cents a kilowatt-hour, assuming a cost of $24,000 to install a system that produces 4,300 kilowatt-hours of electricity, over 30 years, according to Barry Cinnamon, president and chief executive of Akeena Solar Inc., a solar-power installer based in Los Gatos, Calif.

Some customers have managed to cut their installation costs to as little as $15,000 after state rebates and a $2,000 federal tax credit, which, over a 30-year period, would produce power for about 10 to 14 cents a kilowatt-hour, according to Mr. Cinnamon, who says PG&E rates in his area are around 36 cents a kilowatt-hour, after surcharges and fees.

Gold Standard

California's incentive program is the gold standard among advocates of solar power. When demand exceeded expectations last year, regulators expanded the state's self-generation incentive budget to $342 million from $42 million. This year, the state earmarked $3 billion for solar-generation incentives over 10 years, with a goal of installing 3,000 megawatts by 2017.

New Jersey has a rebate program, too, but it ran into trouble last year when demand far exceeded allotted funding. New Jersey consumers now have to wait, sometimes a year or more, for a rebate. But the state has a separate funding program under its renewable-power mandate for utilities that offers consumers 20 cents to 30 cents a kilowatt-hour for their solar generation. In return for those payments, the local utility collects renewable energy credits that it can use to comply with New Jersey's requirement that all power providers use renewables for 20% of their retail power by 2020.

The U.S. currently has about 700 megawatts of installed generation from solar panels connected to the grid, according to research by the consulting firm Navigant. That represents less than 1% of all of the electricity generated in the U.S. About half of that generation comes from residential solar generators. If state policies remain unchanged, generation from solar panels in the U.S. -- both from commercial and residential generators -- is expected to grow to 6,000 megawatts by 2015, with 3,000 of those megawatts in California, according to the research Navigant compiled for the U.S. Department of Energy.

Growth in the home solar-power market won't take off until more states adopt favorable net-metering rules, advocates say. Not only do such rules help offset the cost of installing a renewable-power system, they also prevent electricity from being wasted.

If every state that currently limits the amount of self-generated renewable power that can be sold back to the grid lifted those caps, an additional 3,000 megawatts of solar-panel generation would likely be developed in the next eight years, Navigant said in its study for the DOE.

A separate report published by New Energy Choices, a nonprofit clean-energy research firm in New York, graded states on their rules for net metering and interconnection, or allowing home generators to connect and send power to the grid. As of September, 39 states had adopted programs and rules for compensating consumers for sending self-generated renewable power to the grid, according to the report, which was produced with help from the Interstate Renewable Energy Council.

California, New Jersey, Pennsylvania and Maryland garnered the highest marks for net metering, while a number of states received low scores because of barriers in their policies, such as requirements that force consumers to purchase extra equipment or pay extra fees to participate, says Shaun Chapman, a spokesman at New Energy Choices.

States without net-metering rules didn't make the list at all, Mr. Chapman says. Those states include South Dakota, Kansas, South Carolina, Mississippi, Alabama, Tennessee, Florida and Arizona, though the latter two states are working on adopting such rules.

"While it's true we don't have rules, most of our utilities now have net metering," says Kristin Mayes, a member of the Arizona Corporation Commission, which regulates the state's electric utilities. Small utilities that serve about 5% of the state don't have net-metering programs, however, "which is why we're adopting statewide rules," she says.

Related Pages:
A Consumer's Guide to Going Green Wall Street Journal, 11/12/7

Cassandra Sweet is a news editor for Dow Jones Newswires in Jersey City, N.J.
A New Generation
Wall Street Journal, November 12, 2007

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