My eye was caught by this bit of news, just a small GreenBiz.com report on a small survey about consumer responses to different kinds of utility incentives to save energy. The company that conducted the 1,000 person survey was EcoAlign, a consulting agency looking getting in on the “green market”. The findings of the study are not a real surprise, given what we all know, through experience, to be the general spending preferences of Americans. Half of the survey respondents would want utility savings expressed as credit on their monthly bill, while 34% would rather get a check in the mail. This is as opposed to cost adjustments, savings programs, or other more long-term strategies.

Which brings me to solar panel installations. The reason I was so snagged by this little survey is that I think it’s an excellent encapsulation of what might be the biggest hurdle in the path of a residential solar panel installation boom. A decently sized solar array for your home costs as much–or more, in some states and cases–than a new car, or a down payment on a house. Yet when you buy a new car, or move into a new home, you have an immediate, tangible reward for your investment. With solar, you get some cool-looking bluish panels on your roof that you can boast about to neighbors, and…$80 dollars off your utility bill! And yeah, of course it’s nice to have the smaller bill. But it’s a huge investment whose real worth must be calculated, as we at Getsolar try to emphasize constantly, over the 30-odd year lifespan of the system.

What this means is that it’s very difficult for your average family to take a look at their finances and go, “Hey! You know what we could get if we applied for a $20,000 loan? A solar panel system for our house!” Pretty much everyone would rather do things like repaint the house; put on an addition; upgrade their car; or even, if they’re “green-minded,” get all new Energy Star appliances and re-insulate their home. These are all tangible, immediate benefits of spending that much money.

So how do we get people to feel the sense of a home solar PV system so acutely that they actually spend money on it, rather than on something else? Educating themselves is certainly the first step. Reading articles like Adam’s post from Monday would help them to understand how much money they’re “losing” by delaying a solar panel installation, and see, in black-and-white numbers, how much they stand to gain. But even that doesn’t really solve the problem, it just mitigates it. The marketing around solar, the media buzz, all of that needs to acquire a sense of more urgency, I think. So far we are being told through these sources that solar is trendy and cool and the wave of the future, but not, necessarily, that it is the wave of the present. We need to see just how reliable it is and see reports not just of the Google installations and other huge projects, but the local ones. Interviews with local families who have gone solar and can talk about their decision…and savings. Testimonials that arrive with your utility bill. There are many ways this could be accomplished. Currently, all we have is a certain word-of-mouth approach and niche market attention. The attention needs to be mainstream.

We are a nation of immediate gratification: this won’t change overnight. But if we made media and social attention important enough, perhaps the allure of becoming part of the “in-crowd” of solar would convince some of the fence-sitters to hop on over. The savings are always going to be long-term; the appeal need not be.

Given current concerns about rising prices, both at home and abroad, I thought I’d review how inflation plays into investment decisions.

If you’re reading up on solar, or other forms of alternative energy, you’ve probably come across the following rationale: One of the best reasons to install PV panels—or purchase energy-saving technologies for your home, or put up a wind turbine—is that such investments will reduce your exposure to inflation in the price of retail electricity. This not only limits future uncertainty. It also is likely to save you a heck of a lot of money. Intuitively, this makes sense. By reducing your monthly electric bill, say, by half, a set of PV panels will lessen the impact of future price hikes. To explore this general conclusion, I’ll offer a couple of points.

(1) Nationwide, the annualized inflation rate for retail electricity is about 5 percent. Let’s assume that Sam, our representative resident of California, uses 10,000 kilowatt-hours (kwh) per year for a household of four (see the U.S. Energy Information Agency website for data on U.S. electricity use). On average, Sam pays 16 cents per kwh (for more info on electricity rates, see this previous blog post on tiered pricing). This year, Sam will spend $1600 on electricity. Assuming 5 percent annualized inflation, by 2020 this figure will be $2,800; by 2030, it will be $4,680.

Now, it’s important to remember that inflation will affect all prices. In nominal terms, Sam will be making a LOT more money. So the prospect of a $4600 energy bill shouldn’t automatically be cause for alarm.

But what if inflation in energy prices turns out to outpace inflation in the broader economy? This is currently the case, as core inflation (which doesn’t include food or energy) is lower than the increases in price for oil and natural gas. What if, for example, Sam’s salary increases only 4 percent year over year, while electricity prices increase at a rate of 6 percent (an increase already seen in parts of California). In this case, Sam would naturally feel the pinch more and more with each passing year.

(2) Now let’s assume that Sam installs a PV array that yields 5,300 kilowatt-hours per year (which is an entirely feasible amount of output). As a result, Sam’s monthly electricity bill is reduced by more than half. This year, Sam will spend not $1600, but $752 on electricity. And instead of dropping $2,800 in 2020 and $4,680 in 2030, Sam will now be on track to spend $1,277 and $2,199, respectively. This is a considerable amount of money to save. Of course, these future savings must be discounted. And upfront costs must be financed and maintenance costs must be accounted for. Only then can Sam determine the present value of installing a PV system (an issue I’ll be taking up in the near future). But suffice it to say here that reduced exposure to energy inflation is one of the main selling points of solar power and other types of renewables.

(3) The focus so far has not been on specific inflation numbers. This is mainly because it’s impossible to reliably predict where wage prices and energy prices will go in the future. Nevertheless, what can be said? It is safe to say that the current environment of 5 percent inflation is unlikley to persist for more than a year, maybe two. Put simply, the powers that be (e.g., the Federal Reserve) will ensure that prices don’t spiral out of control for too long, even if it means sacrificing economic growth in the near term.

But there are a number of longer-term trends that suggest energy price inflation is likely to persist in the coming decades. Asia’s growing demand for oil and gas is unlikely to relent. As a result, electricity produced from oil or natural gas turbines will continue to face upward price pressure. Moreover, any future U.S. climate policy would likely increase the costs of some utilities, particularly those that produce electricity from coal. These costs may be passed on to you, the consumer. New nuclear plants could lower prices. As could improvements in energy efficiency (by reducing the amount of energy consumed per capita, such improvements could, in theory, reduce overall demand and thus help drive energy prices down). But there’s no guarantee that the overall effect will lead to appreciably lower electricity rates.

It is these kinds of uncertainties that commonly play to the favor of renewable sources, like solar PV. Solar panels derive value by enabling you to avoid or offset monthly utility charges. The larger those charges, the more you stand to gain from installing PV. Ultimately, if you believe that electricity price inflation will continue, you’d be wise to look seriously into alternative electricity sources. This is particularly true if you believe electricity price inflation will outpace inflation in the broader economy. If, on the other hand, you don’t think electricity prices will continue their historic upward trend, you could sensibly choose against installing a renewable-energy system.

Is energy price inflation a big deal? We at Getsolar think, yes, it is. And ultimately it’s one of the factors that will lead to broader adoption of renewable-energy technologies. We encourage you to review what’s out there and come to your own conclusions, of course. And please share your opinions and findings.

Normally I like to write about the latest in the world of solar technology, and I’ll stick to that by pointing you towards this fascinating Economist article about the possibility of a solar cell that makes use of infared light, as opposed to the good old-fashioned visible light spectrum. Way, way too early to tell if this will be viable, but a great bit of experimentation all the same.

I’d be foolish, however, not to point out a gem in today’s San Jose Mercury News, which makes a straightforward and impassioned case for extending the solar tax credit. It’s great to see a major newspaper hit hard on the issue like this. The editorial closes with a simple point:

America is vulnerable to oil price spikes and unstable petrocrats. Extending the credit is good for the valley’s economy and America’s security.

When you look at the case for extending the credit, it has to center on that. Solar projects spur the kind of investment and growth that helps out many sectors of the economy, and the net result is pushing America one step closer to a cleaner and safer future. Lawmakers and commentators who are nominally in support of renewable energy and a cleaner planet need to step up and take the steps necessary to provide the subsidies and support that will actually help us gain more renewable energy and a cleaner planet. Until that credit passes, we can’t be sure that the solar industry will be able to grow at the rates it should in the next few years.

Right off the bat, I need to excuse myself for not discussing sustainability in this post. No matter how many green products and solar installations a Wal-Mart may feature, it’s hardly the missing piece of the sustainability puzzle. But if you’re going to be an energy-hogging, supply-chain-domineering monster, you might as well power yourself with solar, is what I always say. Or at least, just said.

Sam’s Club, Wal-Mart’s wholesale self, is taking the recent big box store trend towards solar and moving it indoors. They’re going to begin selling solar arrays. Through a partnership with Borrego Solar (installers) and BP Solar (manufacturers), nine California stores will have a photovoltaics-panel display inside the store at which customers can learn about residential solar, and order a system themselves. Having known one too many appliance installation experiences through Home Depot gone awry, I have some misgivings about how this will actually work out, but the idea is pretty cool. And in fact, Home Depot has been doing the same thing, with somewhat less fanfare, for a couple of years now. The informational kiosks inside the stores will, if nothing else, raise more peoples’ awareness of home solar, and for many, it will be the only place they can think of to start asking questions and possibly get a human being to answer them. (Here I will not say anything further on the subject of actual in-store question-asking experiences…)

Through partnering with a manufacturer and an installer, Sam’s Club is looking to offer a savings of about $500 per customer, compared with the cost of a system purchased elsewhere. $500 is not a lot of money in the realm of $25,000 systems, but it’s still $500, and a great advertising tool, I’m sure. And to avoid wasting the real estate required by these in-store “Efficiency Centers”, customers will find more immediately affordable products clustered nearby: CFLs, water-saving toilets and showerheads, Energy Star appliances, and the like. It does intrigue me that going through the store could actually be cheaper than going directly to the installer: what’s in it for Sam’s Club? We can safely assume, I think, that they are not offering solar as a public service.

I’ll be curious to see if Sam’s Club’s decision to become a solar retailer influences how solar ends of being marketed and sold in this country. We buy everything else at strip malls, so why not solar? But the design and installation of a solar energy system for your home requires highly skilled contractors and can be a time-consuming process; when only a couple of installations come out of each center, I imagine this will be fine, but if it really takes off, it seems like either many folks won’t be able to get solar at all through this method–or will be put on a long waiting list–or they’ll get installations not as tailored to and considerate of their personalized needs as they should. Convenience and cost versus quality: it’s the choice big box customers have been making for years.

Having just returned from watching several events at the Beijing Olympics, I feel that this is a good a time as ever to post some pictures of the Olympic venues I’ve visited. As 80 to 90 percent of the streetlights around the Olympic venues are solar, and solar power provides around 8 million kilowatt-hours of energy for Beijing’s Olympic facilities, it wouldn’t be far-fetched for me to declare solar one of the heavyweights in the renewable energy playground of these Games. Below, some quick glances:

The Beijing Olympic Basketball Gymnasium, which features a rainwater recycling system, easily cleaned glassand other environmentally-friendly attributes.

The Beijing Wukesong Sports Center Baseball Field, a venue built solely for the Olympics. After the Games are over, the baseball field will be torn down. Although they are difficult to see in the picture, solar panels jut into the sky alongside the lights.

A 130 kW solar system from Suntech Power powers the National Stadium, more popularly known as the “Bird’s Nest.”

The National Aquatics Center—appropriately, the “Water Cube”—is coated in a plastic material which allows solar heat into the building.

The lampposts along the Olympic Boulevard are powered by 66 kW of building-integrated photovoltaics (BIPV) from Canadian Solar.

With their fleet of hybrid, hydrogen cell and biodiesel-powered Olympic Village and public transportation vehicles unveiled for use during the Games, advanced rainwater collection systems and 43-wind turbine-large wind farm, among other examples of advanced alternative-energy technology, these Olympics have more than just its already impressive solar credentials to boast of.

Ikea announced today that they are investing tens of millions of dollars to research and development of solar panels and other energy efficiency measures. To put this outlay in comparison, the Department of Energy is putting down $24 million for grid integration improvements.

If, as the article speculates, Ikea is selling solar panels in-store in three to four years’ time, then this could coincide with a major tipping point for the industry. At that time America will be well into an administration, either Democratic or Republican, that will undoubtedly put more focus on climate change than our current one. Technologies will only have improved. Ikea’s solar products could well have the kind of killer-app impact that I talked about earlier as the “solar iPhone”, and spur mainstream adoption of solar technology.

The aspect I’ll be following most closely is how Ikea’s efforts fit in with the larger picture of solar in the home. Ikea will almost certainly not be marketing solar panels that would take the place of a full solar installation. They would instead offer an intermediate step. What will be the cumulative effect of these kinds of intermediate measures - single panels, solar curtains, solar windows, etcetera. Will they tie solar’s hands, and leave it as a niche or novelty product for too long? Or will they spur adoption by allowing consumers and homeowners to get comfortable with the idea of the new technology? In industry terms, will these products be a medium-term perception problem, a long-term investment, or both? The picture isn’t clear yet, but the overall success of solar in the next five to ten years will depend in no small part on how this narrative plays out.

Against the backdrop of the expiration of the federal incentive for solar installation–an extension of which has been voted down in the Senate a grand total of four times now–the amount of solar interest still visible in the states is perhaps surprising. Not that we would want it any other way, but those who are pursuing solar even as it becomes less attractive financially deserve a special nod.
Let’s take a quick look at projects going on across the country, from a variety of sources. In Florida, a developer is offering solar systems included with the purchase of a home. The state has been taking steps to ensure the future of solar by mandating increased production of renewable energy, noted recently in Business Week: “The governor signed a major energy bill, part of which directed utility regulators to draft rules for increased renewable energy production…[it] doesn’t specify the 20 percent [Governor] Crist was looking for, but he believes that goal is still something the state should attempt.”

Moving up, the largest solar farm east of Nevada is going to be installed in an unlikely home, the coal town of Nesquehoning, PA. The $65 million, 10.6-megawatt facility “will generate enough electricity to power 1,450 homes and eliminate more than 320,000 tons of greenhouse gas emissions…within 30 years of operation.”

Let’s skip across the country, now, and look at Oregon, where the rainy state is pioneering solar collection along an interstate. The I-5, to be precise. While the project is in its baby stages, the planners predict that by the end of 2008, “the row of solar panels about 5 feet wide and two football fields long will begin generating enough electricity to Portland General Electric’s grid to provide 28 percent of the energy needed to power lights at the interchange at night.” The Transportation Department will be paying a standard commercial rate for the energy, which is made so affordable my state and federal tax credits (I do wonder how the expiration of the federal tax credit at the end of 2008 will affect the growth of this installation). And next year, the department wants to elicit proposals for enough solar projects to provide about 4.5% of its annual electric needs. Also in Oregon, the retail chain Kohl’s has announced it will convert almost half of its stores in the state to solar.

This is just a sampling of what’s going on nation-wide. While commercial construction of solar projects has slowed way down, and will likely not pick up full steam again until after the federal tax credit is renewed, the viability of this technology–its ease and efficacy–will keep drawing supporters.

Since I’m always going on about solar thermal in China, it’s about time I sound off on the experience of using the technology. This is hardly a difficult task, as both my host family in Beijing and my uncle in Fuzhou, a massive seaside city in China’s southern Fujian province, are staunch supporters of solar energy and have owned solar hot water systems for several years already. Coincidentally, both my host family and my uncle own evacuated tube solar hot water systems from Tsinghua Solar, whose production factory I toured in mid June. (Disclaimer: a member of my host family is a Tsinghua University employee, the only reason I was able to tour the factory.)

Currently I am in Fuzhou, where the skies are blue and the sun brilliant whenever there isn’t a typhoon. Because it’s typically sunny here, it was a natural decision for my uncle to install a solar hot water system and to use his electric heater only on rainy days. Doing so has helped him save around 1495.03 RMB ($219.86 US) a year, using current price levels.

Breakdown of the calculation:

On a typical day, four people live in my uncle’s apartment—his wife, their son, and my grandfather. Because the Chinese government wants to encourage energy savings, electricity costs increase with monthly energy consumption. In the city of Fuzhou, electricity costs start at 0.4463 RMB/kilowatt-hour, for households that use under 150 kw-h a month. For a family of at least three to live comfortably, using under 150 kw-h a month is nearly impossible. Consequently, my uncle pays a rate of 0.5663 RMB/kw-h, which would be even higher if he used electricity to heat the water. Since Fuzhou winters are rainy, my uncle generally uses an electric heater for hot water in January.

2 kilowatt-hours/person x 4 people taking hot showers/day = 8 kw-h/day

8 kw-h/day x 30 days/month x 11 months/year = 2640 kw-h/year

2640 kw-h/year x 0.5663 RMB/kw-h =1495.03 RMB ($219.86)/year

8 kw-h/day x 30 days/month x 12 months/year = 2880 kw-h/year

2880 kw-h/year x 0.5663 RMB/kw-h = 1630.94 RMB ($239.84 US)/ year

As a result of his investment in solar thermal eight years earlier, the 1630.94 RMB per year that normally would have gone to pay for showers alone has been converted into 1495.03 RMB per year of savings. In less than three years, the 4000-so RMB ($588.23 US) he initially spent on the system paid itself back.

Of course, solar thermal has its flaws. As evidenced, solar-powered hot water makes sense as a complete substitute for electricity-powered hot water only in sunny climates. During my stay in Beijing, whenever it rained my host family and I had to take showers using electricity. However, even on somewhat cloudy days, as long as a spot of sun peeks through, a well-built solar hot water system will be able to heat the water stored inside its tanks to at least 40 degrees Celsius, which can provide lengthy showers for a family of four. While this doesn’t sound terribly impressive, our comfortable hot showers can be a bit more energy-intensive than we imagine—which, naturally, amounts to quite a few savings if we manage to conserve this energy. In spite of its drawbacks, the energy and economic savings—although these vary depending on your location—posed by solar thermal technology make it attractive enough for many Chinese to install them on their rooftops.

Understandably, what works for one country may not work perfectly for another. Electricity is cheaper, as a percentage of income, in America. China has numerous cost advantages the States don’t have. Furthermore, many would consider a four-to-five foot tall solar hot water system a rather unsightly presence in their perfectly manicured lawns—it’s the sort of thing that would be more appropriate on the rooftop of an apartment building. Still, I won’t lie that using solar for about two months has made the prospect of having a solar hot water system of my own back in the States quite attractive.

An eight year-old residential solar hot water system.

Side view of the system.

The temperature monitor.

A solar hot water system in use on a farm on the outskirts of Beijing.

This not-exactly economical solar table and a great instance of the Olympics using solar deserve mention, but cooler still is Oregon’s decision to use solar to help power a highway interchange.

OregonLive.com, which reported the story, states that “it represents a critical first step in what the department envisions as widespread use of solar energy.” Couldn’t be happier, and kudos to Oregon for taking this step. The big focus in solar right now, appropriately, is on the potential growth in residential and commercial contracts, but the federal government’s inaction on solar tax credits is a growing challenge. State governments, however, are facing budget crises in a more immediate fashion than those in Washington, and more than a few of them are going to realize that energy costs are not going to get any better anytime soon. Given the circumstances, long-term investments in renewable energy start to look a lot more sensible, and I wouldn’t be surprised to see more of these contracts handed out.

Another reason to expect more of these is that it provides direct government money to the private sector, especially for the emerging trend of “green-collar” workers. The typical fierceness of many congressional races means many legislators could see the benefit of being able to tout an accomplishment that’s fiscally sound, forward-thinking, green-conscious and putting lots of money back in local pockets. The obvious positives mean this is something for both analysts and political junkies to keep an eye on.

Last week, I talked about the major factors that determine whether now is the right time to pursue solar energy for your home. If you’ve done your homework, read on!

Investment. After taking a look at your finances and talking about it with your partner, hopefully you came up with a ballpark figure. If you’re firmly under $10,000, don’t worry: in some states this can still get you a photovoltaics system (see below), and in most states it will get you a small one. Is it cost effective to start out with a very small system and add to it as finances allow over the years? No. Is it a possible solution if you’re really committed to going solar? Yes.

However, a better use of your money might be a solar hot water system. Especially if your family uses a lot of hot water, your water heater is oil or gas-fired, or if you’re in a state with high insolation rates (basically, lots of sunshine), solar hot water systems are an incredible deal. Also referred to as solar thermal–though this term encompasses a broader range of applications as well–solar hot water can provide most of your home’s hot water needs, year round. Residential systems rarely cost more than $6 or $7k to install, are highly reliable, and are eligible for the same rebates and incentives as PV, in most cases. It’s a technology that’s been around since, oh, ancient Egypt. You really can’t go wrong.

Average electric bill. If you’re spending less than $100, on average, per month, it’s possible that a solar system would have an unattractive payback period for you. If you’re in a state with good incentives, right around $100 or higher is probably okay; if you’re in a state with poor incentives, your monthly average should be a great deal higher–at least $150–to warrant the investment in solar. The more you spend every month on electricity, the more money your solar system will save you; this is the main number that goes into figuring out how long it takes for your system to pay for itself.

Your roof. The ideal roof for solar faces south (west is the next-best), is totally unshaded, and has been recently redone. Flat or angled doesn’t matter too much–collector panels can be installed at an angle to correct for pitch. In general, you should allow about 100 square feet of roof area per every kilowatt of system size. An average 4kw system, then, would need 400 square feet of roof. For most people there’s no problem there. Many people are interested in solar shingles these days, which look like architectural shingles but act as collectors. Those require up to 50% more installation area, but are a good option if your housing association won’t allow panels that are visible from the road and yet your unshaded, southern exposure roof area happens to be facing the road.

State incentives. After reading through your state’s incentives on the DSIRE database–or at least checking out our handy reference map–you should have some idea of how receptive your state is for solar. The most standard incentives are tax credits, sometimes as high as 35% of system cost, and rebates. Rebates are usually calculated per watt of system size (good ones are between $2 and $5–with a national cost average of $8/per installed watt of system size, even a $2/watt rebate is equal to a savings of 25%). Rebates are the most attractive form of incentive but tax credits are helpful, too. They just don’t reduce your out of pocket expenses. If you live in a state with few or no incentives, think about waiting a year or two. The trend is toward renewables rather than away, and your state might institute incentives soon. Contact your state senators and representatives and tell them about your desire for solar: they’ll listen.

Net metering, which is available pretty much everywhere, should not entice you to a PV system on its own. This is the process through which excess energy created by your system is purchased by your utility; it’s a great program but on its own, it doesn’t get your system to pay for itself.

So let’s recap. If you’re prepared to spend more than $10k and preferably up to $25k, spend more than $100 per month on electricity, have a large expanse of roof that receives full sun, and live in a state that provides financial incentives for PV systems, you’re an ideal candidate for solar. If you don’t meet this criteria, you can still pursue solar: but be aware that the time to system payback might be much longer than ideal for you, and that you might be facing higher out of pocket expenses.

If you think you’re ready to pursue solar more seriously, take a look at our database of installers around the country and contact us. We can help connect you with the best qualified vendors in your area to help you move forward.