Sunset for solar incentives? Panel installers worry about industry’s outlook
In often-rainy Washington, people in the solar-energy industry have a term for the sector’s ups and downs: riding the “solar coaster.”
But it’s not the approaching gloomy winter months that make the industry view the future with uncertainty.
“Solar energy is looking at 2020 as a critical year,” said Jeremy Smithson, CEO and founder of Puget Sound Solar, referring to the end of state renewable-energy incentive programs designed to make solar more affordable.
Cost remains the biggest barrier for solar. Weather is not actually a problem, with long summer days providing enough sun to make up for rainy winters. Despite increasingly efficient technology and declining costs, most customers in Washington still rely on state and federal incentives to make the substantial cost of installing solar pencil out.
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The federal incentives start decreasing in 2019. In 2020, state incentives for renewable energy — what’s known as the Washington State Production Incentive — are scheduled to end. And funding is already limited.
Currently, many in the industry here are pinning their hopes on a proposal that would provide smaller state incentives, but stretch the money further. They believe that could help carry the industry until the prices of solar panels go down enough to make it sustainable. The Senate Energy, Environment & Telecommunications Committee recently passed the measure, known as the Solar Incentives Job Bill.
Reeves Clippard, president of A&R Solar, a Seattle-based installer, said this would provide “more certainty to the industry than (they) have ever seen.”
“It would be weaning off” the incentives, he said. “Enough to glide past, rather than just a cliff that says figure it out by this date.”
Prices going down
Solar technology is becoming more affordable: A unit that cost $60,000 in 2008 might cost just $20,000 today before the incentives, according to Clippard.
The federal tax credit accounts for 30 percent of a system’s cost. State production incentives pay back up to $5,000 a year, and many systems have little to no sales tax. And net energy-metering programs give owners credit for excess energy their solar panels produce, with a higher payout if all the components are made in Washington.
Warren Raven, a Kirkland homeowner with a solar system, said he wanted to go solar both for the clean energy and in hopes it would give him control of future energy costs when he retires. But the incentives were still crucial for him, as for many other people, because ultimately it’s “all about the pocketbook,” he said.
Homeowner Michael Berta estimated that his electric and gas bill combined are reduced to $35 a month in the summer because of his Kirkland home’s solar system. Berta said he looked at solar as a smart investment.
As much as I want to do something good for the world it has to make sense financially,” he said.
Some industry members are already seeing effects of the incentive programs running short. Each utility district has a cap on how much money it can provide solar owners each year from the Washington Production Incentive funds, which pays owners for any excess electricity they make. Some districts have more homeowners signed up than they can pay for in full, and either must cut off any new owners from incentives or reduce payouts for everyone. Seattle is already at capacity and now has to give lower paybacks to owners.
New homeowners in districts that have run out of incentive funds won’t receive paybacks. Clippard said only eight utility districts in the state are still open, limiting where companies can realistically expand.
“How do you plan a business and growth without utilities?” Clippard said. He had been eyeing an expansion in the Tri-Cities, but utilities in the area are closed to new customers, changing his plans. He said even areas still open are a gamble because they could close down, making any training or investment a waste.
Austin Perea, a solar researcher for Greentech Media, said nationally, even with incentives, only 2 percent of U.S. households where solar power is viable have the technology installed.
Nationwide the industry fluctuates, at times taking companies down with it.
Several industry members said Chinese companies sometimes sell panels in the U.S. at lower prices, making it hard for U.S. manufacturers to compete. Two of the biggest American manufacturers have run into trouble: Georgia-based Suniva filed for bankruptcy last spring, and Oregon-based SolarWorld announced layoffs after its parent company filed for insolvency.
About 90 percent of solar panels installed in the U.S. are made overseas, Perea said.
The two manufacturers favor raising tariffs to protect against the cheaper Chinese imports — but critics say this would hurt the larger solar-installation industry by raising prices.
The state requires that panels be made in the United States to qualify for the highest incentives, encouraging consumers to buy local.
Pure Solar, based in Tumwater, and Bellingham’s Itek manufacture panels, the latter dominating much of the in-state manufacturing.
Karl Unterschuetz, director of business development for Itek, said Washington “solar is here to stay” but acknowledged a short-term need for continued incentives.
Evolving technology could open up solar to more people and roofs. David Ginger, chief scientist for the University of Washington Clean Energy Institute, said the potential includes flexible or thin panels to allow solar on rooftops that aren’t optimal for traditional panels.
Much of where the pricing can continue to come down is in “soft costs” such as permitting, training and installation.
Last year the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy found soft costs amounted to about 64 percent of the total cost of solar.
Many are waiting for solar’s “tipping point“ — a time when it shifts from early adopters to mainstream. Industry members disagreed when that would occur — some believe it would be when 15 percent of people adopt solar.
Hawaii is already seeing these numbers. Smithson predicts it will be slower in Washington state.
“The tipping point is real,” Smithson said. “Customers are going to ask for clean energy. The demand is going to build up.”