Solar power shines, despite clouds

Solar power shines, despite clouds

When Erica Grubb installed solar panels on the roof of her Berkeley house, the decision was both personal and political.

Personal because Grubb used a small inheritance from her mother to purchase the solar panels, which cost $18,000 — $13,000 after rebates.

Political because seeing “An Inconvenient Truth,” Al Gore’s movie on global warming, inspired Grubb, a lawyer, and her husband, an economist, to go solar and install equipment that can generate up to 2.8 kilowatts of electricity.

The Grubbs join thousands in California who are lining up to purchase equipment that converts sunlight into power or hot water for their homes and businesses.

Politicians, addressing high energy prices and climate change, have happily given the go-ahead to channel financial resources into solar efforts.

Subsidies include a $3.35 billion “solar initiative” that will offer consumers a refund of as much as $2.50 for each watt of solar capacity installed. Those subsidies, which can be combined with federal tax credits, will decline as the state progresses toward its goal of 3,000 megawatts of solar-generating capacity by 2017.

Investors have also pitched in. In 2005, venture capitalists put up more than $150 million to back companies in California and elsewhere that make solar equipment. Venture capitalists hope to make their money grow in a solar industry in which total sales are expected to rise from $11 billion in 2005 to $51 billion by 2015, according to market researcher Clean Edge Inc.

But as subsidies drive up demand for solar power, some clouds remain on the horizon. A shortage of silicon, a key raw material used to manufacture solar panels, has created a bottleneck in the supply of solar equipment. Solar electricity still costs much more than existing dirty or clean power. And previous pushes to green up the energy supply have faded when consumers balked at high prices or lost their passion for the environment.

But such worries remain distant as Californians rush to join a solar boom that has spilled into the mainstream, and even reached the aisles of Home Depot stores, where solar equipment makers and local contractors drum up sales.

Among those riding the tide is Mark Frye, a mechanical engineer who after the dot-com bubble burst could no longer find work designing equipment to make computer chips and telecommunications components. Now, says the 44-year-old Berkeley resident, “I make a living putting in solar.”

Yet subsidizing demand for products already in short supply raises a red flag for economists, who view that as a classic recipe for skyrocketing prices. So the silicon shortage, combined with a limited workforce of qualified installers, makes this a bad time to pour money into the state’s solar industry, said Severin Borenstein, director of the UC Energy Institute.

And solar’s limitations extend beyond a temporary silicon shortage, said Borenstein: “Even if it’s a great time, it’s a lousy technology.”

That’s because solar electricity is expensive. Robert Goodof, an analyst with Loomis Sayles & Co., recently estimated that the price of a kilowatt made with solar ranged from 25 cents to 50 cents, anywhere from three to 12 times the cost of a kilowatt fueled by coal, nuclear, natural gas or wind.

Of course, part of solar’s disadvantage compared with other fuels stems from subsidies, such as those provided for nuclear power, or a more subtle factor: The cost of pollution or greenhouse gas emissions usually doesn’t show up in the price of power from coal and natural gas plants.

Yet even in California, with tough pollution standards and new greenhouse gas caps, solar carries a heavy economic burden. PG&E customers, facing some of the highest rates in the country, pay no more than 22 cents a kilowatt hour until their usage doubles the baseline in their area.

Backers hope that solar technology will become more competitive as demand grows and larger scale production reduces costs. They point to a recent study by Lawrence Berkeley Laboratory that found that the average cost of solar capacity in California had dropped 25 percent, from $12 a watt in 1998 to less than $9 a megawatt in 2005.

Additional relief may also come from new technologies. At a recent gathering of the American Chemical Society in San Francisco, a Swiss researcher, Michael Graetzel, described his work to develop solar panels made out of plastic instead of silicon. Yet even as Graetzel talked optimistically about commercializing his approach, he recalled the challenges he faced: “Years have passed, years of frustration, before we finally struck it.”

Californians didn’t just discover the sun. According to the state Energy Commission, since 1981, utility customers have installed 20,000 photovoltaic systems with the capacity to produce 155 megawatts — weather permitting.

But even on the brightest day, solar remains a long way from providing the power needed by the state’s contemporary consumers and industries. The existing flotilla of solar systems produces less electricity than the state’s 63rd-largest power plant, a small 165-megawatt natural-gas fired generator in Oakland owned by an affiliate of Chevron Corp.

And even the state’s ambitious goal of 3,000 megawatts — which would multiply solar generating capacity nearly 20 times — represents less than 5 percent of the 63,534-megawatt peak statewide demand during last summer’s heat storm.

Until a new technology proves itself, California’s solar push will depend on existing photovoltaic technology that uses panels made from silicon. That, the Berkeley lab report noted, remains a market “driven by a mixture of state and local incentives.”

Just ask Jeff and Christy Myers, who paid $41,000 to install a 3.8-kilowatt photovoltaic system on their Concord house, and then collected a state rebate that brought the final cost down to $19,000.

“Most people wouldn’t be able to do it without the rebate,” said Jeff Myers, who expects his system to pay for itself in eight years and to continue operating for as long as 40 years.

Since 1976, California has handed out $1.1 billion in tax credits and $1 billion in rebates to residents and businesses that installed solar systems, according to a recent legislative analyst’s report. That breaks down to about $1,300 for enough solar capacity to turn on a 100-watt light bulb.

By that measure, $3.35 billion in subsidies for 3,000 megawatts of solar, or $100 for a 100-watt bulb, sounds like a bargain. But squeezing that amount of money out of a deficit-ridden state budget still posed a big challenge — especially to the Schwarzenegger administration, which has made “no new taxes” its bedrock principle.

To raise money for the subsidies, California policymakers bypassed the taxpayers and headed instead for the bills of the state’s electricity users, tacking on surcharges of about $1 a month for the average customer.

That can work out well for a homeowner like Paul George, who paid $48,000 but got a $14,000 rebate to install a 4.5-kilowatt system on his 2,300-square-foot house in Livermore. He got some instant gratification in July, when he had a $25 electricity bill as his neighbors paid hundreds of dollars. George, a former PeopleSoft employee who now works mostly at home, says that on sunny days he sometimes likes “to run out and look at my meter going backward.”

Whether that’s a good bargain for the state remains to be seen. A cost-benefit analysis commissioned by the PUC in 2005 found that California’s early solar installations worked fairly well for subsidized customers, for whom benefits nearly equaled costs. But the study found that society as a whole paid quadruple what it gained in reduced costs and pollution.

And despite providing a multibillion-dollar subsidy, California has surprisingly modest goals for its high-profile commitment to solar. A study by the administration of the state’s greenhouse gas reduction efforts estimated that installing 3,000 megawatts of solar would cut emissions by only 3 million tons, or less than 2 percent of the 174 million-ton total mandated by 2020.

And those new solar megawatts will produce less than one-sixth of the electricity required to meet the 2020 deadline for renewable fuels to generate one-third of the state’s power.

With so much else left to do, Californians can’t rest on their solar laurels.

Rick Jurgens covers energy and business. Reach him at 925-943-8088 or


For information on solar electricity and subsidies:

Northern California Solar Energy Association: California Energy Commission: PG&E:

California Public Utilities Commission:

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