The U.S. drifts toward rooftop solar

The massive building of new homes that ended abruptly in the U.S. two years ago did not include among its accoutrements electricity-generating solar panels on the roof. There are actually plenty of residential and small business solar installations in the U.S., but their distribution is very uneven. About 60% of all current solar installations in the U.S. are taking place in California; a few years ago the figure was 85%. The reason for the high concentration of installations in California, and the reason why the U.S. generally has far fewer installations than Europe, lies in the incentives offered by state and federal governments.

“In Europe you have a very simplified process through the feed-in tariff,” explains Raju Yenamandra, head of sales for SolarWorld USA. “It incorporates all of the incentives – federal, state, whatever else – into one kilowatt hour basis. The process is simple, and easy to understand. If you have a roof, you have a business opportunity to make money.”

The price the homeowner receives for the electricity he generates is likely to be significantly higher than the retail price of the electricity from the utility, Yenamandra adds. This has created a brisk market for solar installations in Europe.

In the U.S., the market is smaller, but beginning to grow. Some of the larger makers of solar systems in the U.S. sell to utilities who are setting up large solar farms, rather than to residences or small businesses. Often the utilities are being required by the state government to derive a given percentage of their electricity from alternative sources..

In the U.S., the federal incentive program for homeowners and small businesses is simple: the federal government reimburses the homeowner or small business owner for 30% of the cost of the installation. The real obstacle to widespread adaptation is that each of the 50 states can also develop its own incentive programs.

“Around the country we have 50 jurisdictions, and in fact a lot more than 50 jurisdictions because there are a lot of states that have a high proportion of their customers served by municipal utilities, which aren’t covered by regulation,” says Steve Chadima, vice president of SunTech America. In California, he adds, 40% of the state’s customers are not regulated by the state’s public utility commission, and California’s incentive program exists today only because the state legislature forced all utilities, including municipally owned utilities, to take part.

State-by-state, incentives for solar in the U.S. are largely determined by the Renewable Portfolio Standard, which has been adopted by Italy, Belgium, Britain, and 27 of the 50 U.S. states.

So any given state may have an outstanding incentive program such as California has, no incentive program at all, or an incentive program that suffers from complexity and bureaucracy, Raju Yenamandra explains. For example, a homeowner in New Jersey can receive the 30% federal credit. He has a second source of income: he collects and can sell his Renewable Energy Credits (RECs). He can also sell excess electricity to the utility company – but at the same rate that he pays for electricity and not, as in Germany, at a higher rate.

The reason that the homeowner does not receive a higher price, Steve Chadima notes, is federal law. “By and large there is this belief in the U.S. – it has not yet been tested [in court] – that federal energy law prohibits utilities at the state level from paying more for electricity than what is called the voided cost. So the BPU (Board of Public Utilities) would be subject to that law.”

Keeping track of all three benefits – the federal credit, the RECs, and his sales to the utility is too complicated for most homeowners. Besides, at the moment, as Steve Chadima explains, the New Jersey incentive program is hindered by the reluctance of the state government to collect the surcharges that would fund the program.

Unlike Europe, the U.S. uses what is called net metering to pay the installation owner for the excess electricity that he generates. Electric meters can run in either direction accurately, so the installation owner’s bill may essentially consist of the value of electricity from the public utility minus the value of electricity generated by the homeowner and put into the grid.

Despite the fragmentation of policy in the U.S., residential and small business use of solar installations is likely to grow in the near future. Lisa Morse of First Solar explains that a key driving force will be the cost of the installations. “A few years ago we were manufacturing our solar panels at $3 a watt, and as of last quarter we were manufacturing them at 93 cents a watt. And that reduction is due to scale.” At some point in the near future, lower panel costs, the 30% federal credit, and state incentives will cause the price of solar electricity reach the cross-over point, where it equals, and then becomes less than, the price of grid electricity. When that happens, America’s rooftops will begin to resemble those of Europe.

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