Solar is on the rise in the U.S big time, and that’s very, very good news.
And yet there is something deeply wrong with solar in America.
From a cost standpoint, it’s just way too complex, variable, and unpredictable.
On a broader social, political and economic level, solar is wildly under-supported here in the good ole US of A.
Solar’s cost complexity, variability and unpredictability are directly related to the lack of consistent, national political and economic support for sun energy in the U.S.
I’ve been at least vaguely aware of the mind-numbing complexity surrounding residential solar costs since we dove into the solar in the summer of 2009, signing a contract with REC Solar to install a 5.59 kW solar system on our Colorado house.
Wait to buy and you’ll pay more
Our system went up in June of 2010 – but not before we had to go through some extreme maneuvering with our utility, Xcel Energy, in order to get, and afford, the system size we needed in order to cover 100 percent of our home electric use and 100 percent of the annual miles in an electric car, which we still don’t own.
I can’t complain about the price we got on our 5.59 kW system. Our out-of-pocket costs for our array were an eye-popping $8,000.
Yes, that’s right, $8,000 for a 5.59 kW system.
We hit the Xcel Solar*Rewards rebates at a great time, when they were $3.50 per watt in the summer of 2009. Add to that a 30 percent Federal Tax Credit, an additional $500 from the City of Aurora for going solar, and, finally, a great deal from REC Solar ($5.55 per watt, pre-incentives), and you have a price that could not be beat back in the summer of 2009.
An un-beatable price
Unfortunately – and this is the real kicker and the real problem with residential solar in the U.S. right now – that price still cannot be beat almost two years later.
I know $8,000, out-of-pocket for a 5.59 solar system can’t be beat right now because I’ve contacted a few folks in the Colorado solar industry. They confirm that under the new Xcel Energy Solar*Rewards program – which was just renegotiated after a showdown between the Colorado solar industry and Xcel – the closest someone can come to $8,000, out of pocket costs, for the same size system, is probably something like $11,000 (this is a rough estimate I’m told).
Why does the same size solar system cost more – a lot more – on Colorado’s Front Range nearly two years later?
Because Xcel’s rebate has dropped faster than solar panel and installation costs have.
Just to be clear, I’m not out to get Xcel here. Substantial rebate drops are not unique to Xcel: Incentives in the U.S. have generally fallen considerably more quickly than solar costs have. Indeed, in many cases, solar incentives have dried up altogether.
Head spinning complexity
If your head isn’t spinning yet, you’re either a solar industry professional, work for a utility renewable energy program like Xcel’s Solar*Rewards, or have already gone solar yourself.
But, wait, there’s more. The whole out-of-pocket cost equation has – you guessed it – become even more complicated than before. As part of the agreement hammered out between Xcel and the Colorado Solar Energy Industries Association (COSEIA), rather than pay a rebate entirely up front, Xcel will now pay some of the rebate in the form of so-called renewable energy credits (RECs) over a period of 10 years at the rate of 4 cents per kWh.
This is all incredibly complex – at least for the average consumer.
And it’s made worse, much, much worse, by the fact that rather than falling, the costs for individual consumers going solar are going up.
What’s my neighbor going to say when I try to convince him to go solar and he asks me how much I paid, and I say, $8,000, and the best a solar company can deliver for him is $11,000?
I know what he’s going to say: A big fat, Forget About It!
Rising out-of-pocket costs turn off consumers
That solar consumers end up paying more if they wait to buy a system even as the cost of panels continues to fall is not only counter-intuitive and frustrating, it’s a very big turn off.
My sense is that consumers think about solar the way they think about computers. Unlike autos, which people expect to go up in price, as the technology improves computers drop in price, and consumers expect this drop. They expect the same with solar.
Only they’re clearly not getting this drop with solar, at least not on Colorado’s Front Range — and I’m guessing they’re not getting it many other places in the U.S. The very same solar system can cost a consumer who lives in the “wrong” place four or five times more than a consumer who lives in the “right” place, with the “wrong” place sometimes being literally no more than a few feet away from the “right” one, thanks to wildly varying utility rebates.
That’s just plain wrong. And it underscores what’s wrong with solar in America.
Too much variability in incentives
There’s way, way, way, (can I write way again without going over the top – yes, I can!) way too much variability in solar incentives in the U.S.
The very same solar system can cost a consumer who lives in the “wrong” place four or five times more than a consumer who lives in the “right” place, with the “wrong” place sometimes being literally no more than a few feet away from the “right” one, thanks to wildly varying utility rebates.
And, no, the answer is very definitely NOT to do away with incentives altogether.
We need a consistent, national solar incentive, or, better yet, a broad residential renewable energy incentive that includes solar, wind, and geothermal power:
a) which makes solar and renewable energy affordable to consumers;
b) which makes residential renewable energy directly competitive with already heavily subsidized fossil fuel forms such as coal, natural gas and oil;
c) which gets rid of the outrageous, head-scratching and off-putting variability of local renewable energy and solar incentives once and for all.
National feed-in tariff
Will this end up costing the American consumer more?
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But “more” is exceptionally deceiving here – mostly because standard economic theory is fundamentally flawed.
The pollution costs incurred by using dirty forms of energy such as coal and oil, and, yes natural gas – the drilling process for natural gas is destroying our drinking water – are extremely high. And, when you include these costs in calculating total picture cost, the true cost of coal, for instance, is essentially the same as the cost of renewable energy. (See Harvard University’s recent report, The Life Cycle Consequenses of Coal, for more on coal’s true costs).
In the end, the U.S. needs something like a national renewable energy feed-in tariff such as that in Germany where consumers who install solar are paid an extremely attractive rate for producing sun electricity. It’s simply the best way to ensure fair, consistent, understandable and badly needed growth in renewable energy in the U.S.
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