Florida, California, and Arizona lead the way in consumption of photovoltaic (PV) and solar thermal energy in the United States, according to StateMaster.com. Most northern states fall somewhere in the middle of this list — Wisconsin, Michigan, Minnesota — or at the end — North and South Dakota, Iowa, and Alaska. With federal tax credits and state- and utility-sponsored rebate programs for renewable energy technologies throughout most of the country, it's possible that many residents in the northern climates may be harboring negative perceptions about the viability and costs associated with solar electric systems in their geographic area.
“One of the things people say is, ‘We don't get any sun,’ says Ron Anderson, majority owner of Energy Conservation Services, Carlton, Minn. “We get quite a bit of sunlight here.”
The entire United States — even the northern regions — has more than adequate solar resources. Minnesota, according to Duluth, Minn.-based Minnesota Power, which serves 137,000 electric customers in Northeastern Minnesota and Northern Wisconsin, has as much sunlight available to solar energy systems as many parts of Texas, Florida, and California. Therefore, the solar energy market could be a potentially lucrative industry for many interested contractors and installers. In its 2006 annual report, San Francisco-based SolarBuzz, an international solar energy research and consulting company, predicts that the U.S. grid-connected PV market may grow to an annual installation rate of 290MW by 2010. Will northern contractors allow their colleagues in so-called sunnier states to ride off into the sunset without them, or will they also have their day in the sun?
Price and payback time
Most of the policies that have an impact on the solar industry in the United States are driven by state rules and regulations or are sponsored by local utilities. Almost half the states in the country have passed Renewable Portfolio Standards, which require electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date. When combined with the federal tax credit established by the Environmental Protection Act of 2005, these rebates and incentives may pay up to as much as 50% for the hardware necessary to convert solar energy to electricity. However, some industry professionals still deem the initial costs associated with the necessary equipment and installation as too high.
“Why are we spending money on PV systems in northern states when we can calculate paybacks pushed to 50-plus years?” asks Donald E. Nolte II, P.E., electrical engineering manager, Progressive AE, Grand Rapids, Mich. “What troubles me is that our technical community generally feels that PV systems in northern states will provide a reasonable return on investment.”
Up-front costs for PV systems aren't chump change. Residential PV systems may have an initial retail price tag of up to $24,000 before tax credits and rebates, says Tom Carhart, marketing and business development director for Minneapolis-based Innovative Power Systems. Currently in Minnesota, the tax credit for residential customers is capped at $2,000, and rebates are still being debated by the legislature. However, IPS estimates that a 12-module solar electric system (2,900kWh per year) will pay for around 40% of the electric bill for a family using about 7,200kWh of electricity per year, the average residential electrical consumption rate, according to Minneapolis-based Xcel Energy.
“It's better than it was five years ago, but it's still something you have to decide,” says Carhart, who advises his clients to think of themselves as a power producer rather than a power renter. Therefore, as the price of electricity rises, so will the value of the PV systems.
“Everyone has their own version of what a realistic payback on investment is, but I come back to folks and ask, ‘What's the payback on investment on your current utility bill?” he says. “When you get an electrical bill from Xcel, how often is it going include a credit?’”
For business customers, who will inevitably pay even higher hardware and installation costs for larger spaces, the tax credit equals 30% of the retail cost of the system. “That is a big motivator,” Carhart says. “That makes the payback on an investment for business PV systems between eight and 12 years.”
(For a ballpark estimate of the price, savings, and system size needed in your area, visit www.FindSolar.com. The site, sponsored by the U.S. Department of Energy (DOE), in conjunction with the American Solar Energy Society, Boulder, Colo., and the Solar Electric Power Assoc. Washington, D.C., provides basic information based on assumption of geographic area as well as data you enter.)
The heat is on
Most residential customers make the decision to go solar based on a green political perspective. In the north, however, if they're making an economic decision, they may choose heating systems over PV. According to Carhart, the payback on residential heating systems averages between 13 and 18 years. “But that's at current natural gas prices,” he says. “As gas prices go up, that will improve.”
Throughout the Midwest, solar thermal systems are in much higher demand than PV systems. The high cost of heating has led many residents to look for alternatives to gas. According to a comparative study of the thermal and economic performance of the parallel and series solar-heat pump systems, standalone solar, and standalone heat pump systems for residential space by the Solar Energy Laboratory at the University of Wisconsin, Madison, Wis., a line can be drawn across the United States, north of which the parallel heat pump system saves the most energy, and south of which the solar system saves the most.
“In northern Minnesota and Wisconsin, the biggest bill we have is for heating the house, so that's the market that we're going for,” says Anderson, who estimates that his company's installed systems will produce a payback within seven years.
By using an alternative to PV panels — the former physics teacher developed a panel that uses hot air heated by solar energy — Anderson's company is able to lower up-front installation costs for its clients, which can still come in between $4,000 to $8,000, depending on the size of the system. To make the systems more flexible, the panels can also be used singly, like a window unit, for smaller applications. To install the panels, Anderson's crew must be conversant in several trades: carpentry and mechanical being the main ones. He relies on electricians to hook the units up to the electrical system.
Price aside, solar power systems are still a tough sell in Minnesota. “There really hasn't been a solar industry here,” Carhart says. “We're just starting to make commercial sales.”
Anderson remembers the tax credits in the mid-1980s that helped improve sales of solar energy systems; he also remembers sales dropping when the credits expired. “People were buying the systems for tax credits rather than energy savings,” Anderson recalls.
Anderson, along with most of the solar industry, assumed that when the federal government passed more tax credits, business in the northern states would once again increase. They assumed wrong.
In the Midwest, the demand for solar energy, particular PV, may have a direct correlation to the price of electricity. “Why would you buy the next 30 or 60 years of electricity and invest it up-front on your roof if you could buy electricity for less than 5 cents a kilowatt hour?” asks Richard Orawiec, owner of BTF Ltd., a solar- and wind-energy contractor in Fennville, Mich.
In Michigan, where the average retail price of electricity is 7 cents per kilowatt hour, there are around eight solar contractors for the 10 million residents. According to Orawiec, that number hasn't changed in 20 years. “It's a tough game,” he says. “People say, ‘I'm not going to invest $8,000 or $40,000 in generating energy on my roof when that's the value of the next 50 years of what I pay at the price I pay now.’”
Orawiec's admits his current customers don't come to him for practical reasons. “They make a statement,” he says. “They wear it on their sleeves.”
But Orawiec feels the nation's at a transition point in society, where the mainstream has now started wondering about the high cost — specifically the impact on the environment — of non-renewable energy and are looking into the myths surrounding solar power.
For the most part, solar contractors in the upper Midwest are upbeat. “Customers are calling,” Orawiec says. “We're just small enough that we can all get by and be happy, and have peace of mind while providing for our customers.”
Sidebar: Chasing the Sun
A key step in a solar installation is to determine how much sun is available at the location. The amount of solar energy available is dependent on time of year and location. In the winter, the days are shorter, and the sun is lower on the horizon, so the optimum collecting angle may vary. As one moves north, changes in the sun's position are more pronounced, so the position of solar energy collectors will differ based on latitude and time of year for which the system is optimized.
Southeast to Southwest is the prime solar orientation. Determining how much sun is available can be done by looking at what obstructions there are on the south side of the building. Trees, other buildings, or natural features that cast shadows must be evaluated to figure out if or when they will cause shading at various times of the year.
In almost every region of the United States solar systems can be engineered to work with most roofing materials. According to the DOE, flat-plate collectors, typically fixed in a tilted position correlated to the latitude of the location, are the best choice for northern states.
Generally, all that is needed for a solar installation is a sunny rooftop place that measures about 120 square feet, or up to 1,000 square feet for larger systems. A south-facing roof area is optimal, but solar electric panels mounted on west- or east-facing roofs still produce more than 90% of the power of a true south roof mounting. To find the optimum mounting position, many solar contractors advocate the use of a Solar Pathfinder, from the Linden, Tenn.-based company of the same name, a device fitted with a reflective plastic dome, sun path diagram, compass, and level. Specific formulas are then used to determine the proper mounting height of the panels.
Sidebar: Higher Rates Turn Off
Some Solar Customers in California
In 2005, the U.S. domestic solar photovoltaic (PV) market grew to 105MW of installations, 80MW of which were grid-connected photovoltaics, says San Francisco-based SolarBuzz, an international solar energy research and consulting company. In its 2006 annual report, it predicts that the U.S. grid-connected PV market may grow to an annual installation rate of 290MW by 2010. To that end, the U.S. Dept. of Energy (DOE) currently accounts for around 20,000 PV grid-connected homes in the United States. Not surprisingly, in 2003, more than 80% of these grid-connected installations were installed in California, where as part of its Million Solar Roofs program, the state set a goal to create 3,000MW of new, solar-produced electricity by 2017.
To entice Californians to install rooftop systems, the Million Solar Roofs project set forth state rebates, which, when combined with federal tax incentives, may cover up to 50% of the total cost of the hardware for a PV system. However, at the beginning of 2007, California homeowners rejected the rebates, accusing the state of raising the price of electricity for those with solar systems. The holdup is a requirement the state added Jan. 1, which forces applicants to sign up for pricing plans offered by utilities that charge more for electricity during hours of peak demand, causing solar system owners to be charged higher “time-of-use” rates for their supplemental electricity.
The difference between peak and off-peak rates is largest in the 11 counties of central, coastal, and Southern California, where Southern California Edison provides service to 13 million customers. Edison charges summer time-of-use rates that range from 29.7 to 35.9 cents per kilowatt-hour between 10 a.m. and 6 p.m. on weekdays, up from 16.3 to 18.6 cents per kilowatt-hour from 10 p.m. to 6 a.m. weekdays and weekend days and holidays, according to documents filed with the Public Utilities Commission (PUC).
Homeowners who can't afford or lack the roof space to install systems that would supply all of their electricity needs have decided the cost of installation under such requirements is too high. With the higher rates, solar power offers fewer savings on electricity bills and may not justify the investment of more than $10,000 in solar panels, even with rebates and tax credits. As a result, the PUC reports a decline of 78% in rebate requests in the first three months of this year, compared with last year, and the solar installation industry says it is threatened with collapse across much of California.
“We can no longer sell to a good percentage of potential clients because they don't have a big enough roof,” says Patrick Redgate, owner of Long Beach, Calif.-based Ameco. “This is kind of a punishment for people going solar.”
Another installer, Gordon Bloom, executive vice president of GenSelf Corp., Irvine, Calif., had to lay off two employees after doubling his workforce in 2006 because he's only gotten eight new jobs this year.
In March, the solar industry petitioned the PUC to reverse its decision on rates. The reversal can't come soon enough, says consultant Glenn Harris. According to Harris, the residential market in California could collapse in 100 days if high electricity rates keep potential customers from buying rooftop solar systems. “If they don't make sales in the next two or three months, they'll have to lay their guys off,” he says.