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Solar Energy Is Ready. The U.S. Isn't

The green energy source could power a lot of the U.S. grid and
even be cost-competitive, but entrenched interests are a barrier

By Ken Wells
     Oct. 25 (Bloomberg BusinessWeek) -- Clean energy has become
a dirty word in presidential politics. In their second debate,
Mitt Romney and Barack Obama each tried to outdo the other’s love
of fossil fuels: Obama extolling his record on oil and natural
gas production, Romney vowing to take “advantage of the oil and
coal we have here.” The Republican candidate has ridiculed the
administration’s $535 million loan guarantee to Solyndra, the
bankrupt California-based solar panel maker, and accused Obama of
living “in an imaginary world where government-subsidized
windmills and solar panels could power the economy.”
     The candidates’ coolness to renewable energy comes at a time
when the domestic supply of traditional energy sources, such as
oil and natural gas, is at an all-time high. And yet this failure
to make the promise of renewables a keynote in the debate is a
huge missed opportunity. In particular, it ignores the dramatic
reduction in the cost of photovoltaic solar power worldwide and
the considerable benefits to U.S. consumers and the environment.
The untold story of this campaign is that what killed Solyndra
may turn out to be a boon for the nation. “Economically and
technologically, the game is over,” says Bill Powers, a San Diego
engineer and board member of Solar Done Right, a group that
proselytizes for rooftop solar power. “The hangups in the U.S.
are strictly political.”
     Over the past five years the price of photovoltaic panels
has plummeted 75 percent, due largely to a glut of Chinese-made
panels. The fall in prices rendered technically advanced
photovoltaic panels, like those produced by Solyndra and other
U.S. companies, too expensive to compete. But cheap panels have
been a godsend for consumers such as Powers. He recently took
advantage of a sale at his local retail solar panel store and
self-installed 1,000 watts of extra solar power on his roof at a
cost of $2 a watt, including a 30 percent federal tax credit.
Nationally, the average cost of residential
installations—including hardware, permits, and labor—has
plummeted from $9 a watt in 2006 to $5.46. Averaging in
commercial industrial installations, the national installed price
plummets to $3.45 a watt, says the Solar Energy Industries
Association, a Washington-based trade group.
     The result is a burgeoning rooftop revolution. The SEIA says
almost 52,000 residential rooftop systems were installed in the
U.S. last year, up 30 percent from a year earlier. Total rooftop
installations, including on commercial buildings, grew
109 percent from 2010 to 2011, according to SEIA data. Total
photovoltaic installations are projected to grow an additional
71 percent this year from 2011 levels.
     Worldwide, the picture is even more positive. Australia
projects that 10 percent of its 8 million houses will have
rooftop systems within the next 12 months—most of that growth
coming in the past three years. European rooftop installations
continue to outpace those in the U.S., even as some countries
begin to pare subsidies that have helped spur a continental
rooftop boom. Including residential, commercial, and
industrial-scale projects, the world had installed about
67 gigawatts of photovoltaic power at the end of last year—up
from just 1.5 gigawatts in 2000.
     Despite such breakthroughs, the U.S. economy is harnessing
only a fraction of solar’s potential benefits. Based on U.S.
Census Bureau data, about 100 million U.S. residential units
could physically hold rooftop systems one day, generating by one
estimate 3.75 trillion kilowatt hours of electricity a year. In
2011, total U.S. electrical generation from all sources was about
4 trillion kilowatt hours—42 percent of that from coal, according
to the U.S. Energy Information Administration. The trouble is,
many of the big,investor-owned utilities that provide about
85 percent of America’s electricity see solar as both a technical
challenge and a long-term threat to their 100-year-old profit
models. And the lack of a national energy policy means regulation
of solar is up to states, public service commissions, and a
wealth of local governments and bureaucracies—many of whom have a
vested interest in maintaining the status quo.
     The experience of Orrin Kohon, a Los Angeles resident with a
second home in Hawaii, reflects the hurdles facing consumers
hoping to join the rooftop movement. If all goes well, Kohon will
soon receive local government approval to let workers mount an
$18,000 leased solar power system on the roof of his Honolulu
house. Monthly electric bills for his modest 1,750-square-foot
abode run about $400—at 32.6¢ per kilowatt hour, the highest in
the nation. With his rooftop system, installed by a third-party
contractor, he’ll generate enough of his own power to lower that
rate to 7.3¢ per kilowatt hour for the next 20 years. That’s a
savings, he says, of $120,000 over that period. “It’s a hedge,
like locking in $2-a-gallon gasoline,” says the 63-year-old owner
of a Los Angeles career counseling service. “The thing is, I have
to act now. If too many of my neighbors beat me to the punch, I
won’t be able to connect.”
     That’s because thousands of Hawaii residents have also
realized that even the most elaborate systems, costing up to
$55,000, can pay for themselves in as little as four years given
current power rates and state and federal incentives that chop up
to two-thirds off the installation price. This rooftop stampede
is overwhelming the permit process—70 percent of all current
permit applications in the state are for solar installations—and
causing utilities to impose moratoriums in some areas on how much
solar they are willing to accept to their power grids.
     The rule of thumb had been that once rooftop installations
made up 15 percent of the power on a given circuit, utilities
could stay new connections until residents undertook an
engineering study—costing as much as $50,000—that showed their
addition wouldn’t destabilize the power grid. While that rule has
been eased to 25 percent in Hawaii, the extra burden on consumers
explains why “there are places on Maui where the saturation is
such that we don’t even solicit for business there,” says Alex
Tiller, chief executive officer of Sunetric, a Hawaii-based
rooftop solar power installer.
     The hidden costs of obtaining permits and regulators’
approval to install rooftop panels is a big reason the U.S. lags
behind Germany, which leads the world in rooftop installations,
with more than 1 million. The price of installed rooftop solar in
Germany has fallen to $2.24 per watt. In fact, on a sunny day in
May, rooftop provided all of Germany’s power needs for two hours.
“This is a country on latitude with Maine,” says Dennis Wilson,
president of the Mid-Atlantic Solar Energy Industries
Association, a solar-installer trade group. “Germany is showing
us what’s possible—if we can just get our act together.”
     That’s easier said than done. Unlike the U.S., Germany has a
national solar policy, a quick, inexpensive permitting process,
and a national mandate that utilities sign up rooftop
installations under what’s known as a feed-in tariff—essentially
a long-term contract whereby the utilities agree not just to
allow the solar on their grids but also to buy the excess power
from consumers.
     By contrast, the U.S. has more than 18,000 jurisdictions at
the state and local level that have a say in how rooftop solar is
rolled out, according to the U.S. Department of Energy. What’s
more, electricity is supplied by investor-owned utilities, mostly
state-regulated monopolies, which supply power from centralized
hubs to captured consumers. Profit is in part tied to growth
based on an ever-expanding demand as populations increase.
     Rooftop solar poses a threat to that model by turning
consumers into producers, thereby sapping utility revenue
streams. It also diminishes the need to build expensive new
plants and transmission lines. The saturation limits being
imposed by utilities in places with booming rooftop demand “are a
bit like speed bumps,” says Mark Duda of RevoluSun, Hawaii’s
largest residential rooftop installer. “They want to slow things
down out of fear of being overrun by PV.”
     While some large utilities are embracing solar—California’s
Pacific Gas Electric has 40,000 solar connections and an
easy-to-follow guide encouraging consumers to sign up—many
utilities and their political backers are standing in the way of
changes that could boost U.S. energy independence, reduce carbon
emissions, and save consumers billions. The U.S. needs more
initiatives like the SunShot Rooftop Solar Challenge, launched by
the Department of Energy to find ways to lower installation costs
by cutting down permit times and removing siting restrictions in
19 states. The goal is get these so-called soft costs down to $1
a watt—which would make homegrown solar competitive with
commercial power rates in many states.
     Congress should also extend beyond 2016 the 30 percent
federal solar tax credit for rooftop installation, then gradually
phase it out. Five years from now, solar—without subsidies—will
be competitive with conventional power prices in 17 states, and
the credit could greatly increase that number. Rooftop solar “is
a game changer,” says Powers. “And the game is already on.”

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