[enviro-vlc] More Sun for Less: Solar Panels Drop in Price

[Vern Weitzel]

http://www.nytimes.com/2009/08/27/business/energy-environment/27solar.html?_r=1&ref=global-home

More Sun for Less: Solar Panels Drop in Price

By KATE GALBRAITH
Published: August 26, 2009

When Greg Hare looked into putting solar panels on his ranch-style home in 
Magnolia, Tex., last year, he decided he could not afford it. “I had no idea 
solar was so expensive,” he recalled.


But the cost of solar panels has plunged lately, changing the economics for many 
homeowners. Mr. Hare ended up paying $77,000 for a large solar setup that he 
figures might have cost him $100,000 a year ago.

“I just thought, ‘Wow, this is an opportunity to do the most for the least,’ ” 
Mr. Hare said.

For solar shoppers these days, the price is right. Panel prices have fallen 
about 40 percent since the middle of last year, driven down partly by an 
increase in the supply of a crucial ingredient for panels, according to analysts 
at the investment bank Piper Jaffray.

The price drops — coupled with recently expanded federal incentives — could 
shrink the time it takes solar panels to pay for themselves to 16 years, from 22 
years, in places with high electricity costs, according to Glenn Harris, chief 
executive of SunCentric, a solar consulting group. That calculation does not 
include state rebates, which can sometimes improve the economics considerably.

American consumers have the rest of the world to thank for the big solar price 
break.

Until recently, panel makers had been constrained by limited production of 
polysilicon, which goes into most types of panels. But more factories making the 
material have opened, as have more plants churning out the panels themselves — 
especially in China.

“A ton of production, mostly Chinese, has come online,” said Chris Whitman, the 
president of U.S. Solar Finance, which helps arrange bank financing for solar 
projects.

At the same time, once-roaring global demand for solar panels has slowed, 
particularly in Europe, the largest solar market, where photovoltaic 
installations are forecast to fall by 26 percent this year compared with 2008, 
according to Emerging Energy Research, a consulting firm. Much of that drop can 
be attributed to a sharp slowdown in Spain. Faced with high unemployment and an 
economic crisis, Spain slashed its generous subsidy for the panels last year 
because it was costing too much.

Many experts expect panel prices to fall further, though not by another 40 percent.

Manufacturers are already reeling from the price slump. For example, Evergreen 
Solar, which is based in Massachusetts, recently reported a second-quarter loss 
that was more than double its loss from a year earlier.

But some manufacturers say that cheaper panels could be a good thing in the long 
term, spurring enthusiasm among customers and expanding the market.

“It’s important that these costs and prices do come down,” said Mike Ahearn, the 
chief executive of First Solar, a panel maker based in Tempe, Ariz.

First Solar recently announced a deal to build two large solar arrays in 
Southern California to supply that region’s dominant utility. But across the 
United States, the installation of large solar systems — the type found on 
commercial or government buildings — has been hurt by financing problems, and is 
on track to be about the same this year as in 2008, according to Emerging Energy 
Research.

The smaller residential sector continues to grow: In California, by far the 
largest market in the country, residential installations in July were up by more 
than 50 percent compared with a year earlier. With prices dropping, that 
momentum looks poised to continue.

John Berger, chief executive of Standard Renewable Energy, the company in 
Houston that put panels on Mr. Hare’s home, said that his second-quarter sales 
rose by more than 225 percent from the first quarter.

“Was that as a product of declining panel prices? Almost certainly yes,” Mr. 
Berger said.

Expanded federal incentives have also helped spur the market. Until this year, 
homeowners could get a 30 percent tax credit for solar electric installations, 
but it was capped at $2,000. That cap was lifted on Jan. 1.

Mr. Hare in Texas cited the larger tax credit, which sliced about $23,000 from 
his $77,000 bill, as a major factor in his decision to go solar, in addition to 
the falling panel prices. Sensing a good deal, he even got a larger system than 
he had originally planned — going from 42 panels to 64. The electric bill on his 
7,000-square-foot house and garage has typically run $600 to $700 a month, but 
he expects a reduction of 40 to 80 percent.

Mr. Berger predicts that with panel prices falling and the generous federal 
credit in place, utilities will start lowering rebates they offer to homeowners 
who put panels on their roofs.

One that has already done so is the Salt River Project, the main utility in 
Phoenix, which cut its homeowners’ rebate by 10 percent in June. Lori Singleton, 
the utility’s sustainability manager, said the utility had recently spent more 
than it budgeted for solar power, a result of a surge in demand as more solar 
installers moved into Arizona and government incentives kicked in.

California has been steadily bringing down its rebates. An impending 29 percent 
cut in rebates offered within the service area of Pacific Gas and Electric, the 
dominant utility in Northern California, means that “with the module price drop 
over the last few months, it is pretty much a wash,” Bill Stewart, president of 
SolarCraft, an installer in Novato, Calif., said in an e-mail message.

Even if falling rebates cancel out some of the solar panel price slump, more 
innovative financing strategies are also helping to make solar affordable for 
homeowners. This year about a dozen states — following moves by California and 
Colorado last year — have enacted laws enabling solar panels to be paid off 
gradually, through increased property taxes, after a municipality first 
shoulders the upfront costs.

Some installers have adopted similar approaches. Danita Hardy, a homeowner in 
Phoenix, had been put off by the prospect of spending $20,000 for solar panels — 
until she spotted a news item about a company called SunRun that takes on the 
upfront expense and recovers its costs gradually, in a lease deal, essentially 
through the savings in a homeowner’s electric bill.

“I thought well, heck, this might be doable,” said Ms. Hardy, who wound up 
having to lay out only $800 to get 15 solar panels for her home.