Reasons to install a solar array at your home or business boil down to two categories: environmental and financial. Early adopters fell in the environmental camp — they wanted to mitigate their carbon footprint, so they paid a steep price for clean energy.
Today, solar consumers have toes in both categories. Installation prices have plummeted so much that some users are seeing their energy bills drop immediately with no upfront cost. But for most it’s still not cost-effective to get significant portions of energy from solar panels.
In the future, the decision will largely be financial. Solar is projected to be at least as affordable as fossil fuels in many regions in the near future, achieving what is called grid parity. A carbon tax also would make solar more financially viable. And, perhaps most important, the way solar panels are financed is opening the technology to lower-income consumers.
Washington’s solar industry is growing. In late June, Puget Sound Energy announced that more than 3,000 of its customers have solar arrays. According to Jake Wade, the utility’s solar program manager, the number of installations in PSE’s service area has been growing at a 40 percent annual clip.
Wade said increased solar adoption is primarily due to a couple of financial factors. The first is a federal tax credit that reimburses 30 percent of the cost of installations. Adding to the federal tax credit is a cost recovery program put in place by the state in 2005. Those who own a solar array are reimbursed at least 15 cents for every kilowatt-hour they return to the grid. The reimbursement payments are made through utilities — PSE doled out $3.1 million last year, and expects to hand $5 million to customers with arrays this year. Couple the cost recovery with net metering — the backtracking of your energy meter while solar arrays pump energy into the grid — and customers can save substantially on their energy costs.
Thus, more solar arrays have been thrown on rooftops. “When I started, we had 150 (solar arrays)” in the PSE network, Wade said. “Each one of them has been hard earned. At the same time, I just spent the weekend at Palm Springs. At a dinner party I attended … half the people at the table had solar, and they were discussing output and their arrays and their bills.”
California certainly has a larger solar market than does Washington — 10,695 megawatts of solar energy have been installed in the Golden State to Washington’s 42, but Puget Sound clouds aren’t entirely to blame. California has a cap and trade system, and its incentive program takes advantage of financing trends in the solar industry.
Washington’s cost-recovery system requires the homeowner or business to own both the property and the array to be compensated. The property ownership requirement is problematic for businesses that lease property (90 percent of PSE solar arrays are residential). The array ownership criterion leaves out homeowners who lease solar panels, an increasingly popular option that defers the high upfront cost of solar installations. Of the 3,000 solar arrays in PSE’s network, Wade said, only about 100 are leased.
State solar panel manufacturers and installers are torn on whether leasing should be embraced. While companies argue leased installations are of a lower quality and can steal market share, leases open up solar to a wider populous.
“I know there are some segments of the market where leasing would actually be a good thing, because they don’t have enough money for a loan and can’t use the tax incentive,” said David Nicols, president of advocacy group Solar Washington. ”
Leasing also is a thorny subject for utilities. Most utilities’ revenue is based on energy sales, so some utilities have resorted to monthly fees on solar arrays to recoup lost revenue. This isn’t as great an issue for PSE, which uses a decoupling model that ties base revenue to the number of customers, not sales. That said, too many solar customers could still cause an issue for PSE.
“What we’re most concerned about is cost shifting. That’s where the expenses not paid for by solar customers because they’re not buying as much power from us get shifted on to customers who can’t afford solar,” Wade said.
There’s another inhibitor to solar adoption in Washington: cheap, clean hydropower. The environmental and financial motivators to purchasing solar are diminished when the energy folks are currently receiving is both cheap and carbon-free. But PSE relies relatively little on hydropower — 32 percent of PSE’s electricity in 2013 came from hydro, compared with 63 percent statewide.
These factors mean solar energy likely won’t reach California- sized proportions in Washington soon, if ever, and utilities have yet to embrace solar here. While PSE customers are installing panels, the utility itself generates no energy with solar. Instead, solar remains a niche energy source, and is treated as such.
“When I was doing residential solar (installation),” Nicols recalled, “He had a lot of space on the south side of his roof (the best exposure for solar), but that was the side nobody could see from the street. He asked me specifically to put the inverters on the front of his house so people could see it from the street. He wanted to say to the world he had solar. … It’s the same as buying a Prius.”