Consumers or businesses trying to assess the payback on a solar energy installation must consider a variety of factors — installation and equipment costs, solar energy rebates, energy and income tax credits — against the background of an evolving public policy.
Although support has been growing for solar energy, particularly in California and New Jersey, Delores Phillips, director of government relations and communications for Energy Photovoltaics, a solar energy products manufacturer on Bakers Basin Road, believes that the state and national governments should be subsidizing renewable energy to the same degree that they have been supporting the big oil and coal-to-gas companies.
In terms of government support for research and development in solar energy, Phillips says, the budget in the United States has been about $80 million for the last for years, whereas in Japan it is $400 million. “The irony is that the solar cell, the key part of a solar panel, was developed in New Jersey 52 years ago. Today Japan has the lead in solar manufacturing.” And, she adds, China also has plans to become a worldwide supplier.
New Jersey is second only to California in rebate programs that encourage solar energy, but its
program is faltering. Rebates have
diminished and waiting lists
are long. The health of this program will be on the agenda at
the New Jersey Clean Energy
Conference on Monday, September 18, from 8 a.m. to 4:30 p.m. at the Hyatt Regency in New Brunswick. Cost: $195 (www.njcleanenergy.com/conference).
“The dynamics change dramatically with rebates,” says Phillips. “Solar rebates are needed on the consumer level for solar to be able to compete with oil and gas.” The cost for a residential system, she suggests, averages around $7.80 per watt, and it is offset by rebates, but state rebate levels dropped this year. For residential systems below 10 kilowatts, for example, the rebate on February 1 was $5.30 per watt; on March 15, $4.35 per watt; and is now $3.80 per watt. For a 5 kilowatt system, then, the approximate cost would be about $39,000 and the rebate $19,000, so the homeowner has to come up with around $20,000.
The reductions in funding for rebates is due to the popularity of the program, according to Doyal Siddell, public information officer for the New Jersey Board of Public Utilities (BPU).
To balance the rebate reductions, the state is taking other actions to increase the payback to homeowners and businesses who install solar energy systems. The 2005 Clean Energy Program annual report observes that, given the success of the clean energy programs, “the BPU is exploring options to transition from rebate-based incentives to market-based incentives” — in particular, through the development of the Solar Renewable Energy Certificate (SREC) markets.
The New Jersey Board of Public Utilities has also released more than $33 million in additional funds for the Customer Onsite Renewable Energy (CORE) program, for a total of $68 million towards solar rebates for homes, businesses, schools, and other public buildings.
The increase in overall funding for rebates was necessary in part to reduce the queue for rebates. Susan LeGross, executive director of the Mid-Atlantic Solar Energy Industries Association (SEIA), says there is now a backlog for private systems. All applications are put in a queue, based on when they are submitted. “Back in December the Office of Clean Energy was concerned that they might have more commitments than funds, so they put the program on hold until they could get a better read on which projects would go forward and which not.”
Based on a hand count of applications for systems in the private sector under approval review, as of May 11, the number for systems of less than 10 kilowatts was 428, and as of May 3, the number for systems of greater than 10 kilowatts was 291.
According to a July 19 article in the Star-Ledger, Michael Winka, director of BPU’s office of Clean Energy, said that about $111 million worth of projects were waiting in line at that time. Winka also said that the BPU releases between $1 million to $2 million per week for solar rebates, and has tripled spending from $30 million in 2005 to almost $90 million in 2006.
According to Sidell, New Jersey holds 20 percent of the solar market in the United States, having experienced a 300 percent annual growth rate in the clean energy program — in terms of people participating in renewable energy as well as energy efficiency programs. Currently New Jersey has more than 1,400 residential and commercial solar installations. Some buildings are particularly suitable for solar installations. “Solar energy has been very attractive to dairy farms, stables, churches, and municipal buildings that have a lot of roof space and significant electricity needs, and also have an incentive to try to save on their energy costs,” says LeGross.
An example: In the BPU’s annual report (www.bpu.state.nj.us) is a case study of the Bayonne Board of Education’s installation of almost 10,000 solar panels at nine schools. According to the report, the $13.2 million solar project is expected to produce about 2 megawatts of power and to save the district more than $500,000 yearly on energy costs. The project was made possible in part by a $5.4 million rebate from the Clean Energy Program.
When residents or businesses are investigating whether a solar system makes sense for them, they often hire an evaluator to determine whether their house or building is appropriate for a solar system. Evaluators look at how many hours of concentrated sunlight fall on the house or building, how it is situated on the property, how many trees surround it, and how the roof is oriented.
Tree huggers can be a problem. In Princeton Borough Christ Congregation is battlig the municipal shade tree commission. The environmentally conscious church wants to cut down a 75-foot high pin oak to maximize the sunshine on a roof to be fitted with solar panels. The commission denied the permit but then relented.
Potential purchasers of solar energy systems must evaluate their total energy needs, considering both the design of the home and the number and types of appliances. What percentage of these needs a solar system will supply depends not just on overall energy needs but also on the season. During the summer a system may produce excess power that then feeds back into the electricity grid, whereas in winter the owner may have to purchase power.
Through New Jersey’s electric utilities, a net metering option is available. It provides a credit for any excess energy produced by
solar energy systems, net of energy you have used that was generated by the utility. The utility “stores” any surplus in its accounts, and if a surplus remains at the end of the year, the utility will reimburse any unused balance.
One of the biggest impediments has been price. “It has dropped dramatically over last 10 years,” observes Phillips, “but it is still beyond reach of most people unless you get a rebate.” In New Jersey, the funds for rebates come from the societal benefit charge, a small fee added to all electrical bills. When this charge was first created, the funds it raised were slotted to help the indigent pay their electric bills; over time, the funds have been distributed more widely, for example, for the nuclear decommissioning costs of PSE&G.
Homeowners and businesses receive some income from the solar renewable energy credits they generate by installing solar systems. This is a market-based program in which utilities are required to buy a certain amount of solar or wind energy each year, called a “renewable portfolio standard.” One way they buy this energy is by purchasing these renewable energy credits from homeowners and businesses. Phillips says she knows someone with a 6 kilowatt system who makes about $2,100 a year in additional revenue.
Phillips believes that if the income generated through the energy credits program increased enough, solar rebates could eventually be phased out.
At the federal level, individuals and businesses who install solar energy systems get tax credits. According to the Solar Energy Industries Association website, for systems activated in 2006 and 2007, an individual can take a 30 percent federal tax credit of up to $2,000 for photovoltaics and an additional credit of up to $2,000 for solar water heating. The credit may be carried over to future years.
Business entities may take a 30 percent credit, with no cap on the total credit amount, provided they have a sufficient tax liability. Businesses have two years in which to take the credit. Given all of the factors that must be considered in determining the payback for solar energy, it is not surprising that the estimates vary. Phillips, for examples, says, “Because of the credits, there is a much shorter payback time — six to seven years instead of over ten.”
However, the SEIA website claims that a National Renewable Energy Laboratory study conclusively demonstrates that energy payback for photovoltaics is, in the worst case, less than four years.
Phillips was part of the genesis of renewable energy funding in New Jersey. The firm for which Phillips works, Energy Photovoltaics, manufactures solar modules, but also designs and builds equipment for manufacturing them.
Back in 1998 she was the environmental lobbyist representing a renewable energy coalition that went to the New Jersey legislature and asked for renewable energy funding. With the funding that ensued, the industry has grown from about five systems generating less than 1 kilowatt to about 6 megawatts of solar installed, and from two installers to over 100. “The industry was jump-started by the Kyoto Protocol,” she says. “It all started with Germany putting into place aggressive incentives for renewable energy.”
The solar energy industry still suffers from insufficient support, according to Phillips. “We have no level playing field between renewable energy and fossil fuel-based energy,” she says. In particular, coal-fired electricity is highly subsidized by the federal government in response to lobbying from states that want to support their local mining operations, from unions, and from coal-fired electricity generators. But, she adds, it is difficult to find these subsidies in the Department of Energy’s budget, because they are not under a single line item.
New Jersey Board of Public Utilities, 44 South Clinton Avenue, Seventh Floor, Box 35, Trenton 08625; 609-777-3300; fax, 609-777-3330. Jeanne M. Fox, president. www.bpu.state.nj.us