Category Archives: Solar Energy

Should I wait to buy solar?

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By Johnny Ritzo

We’ve seen the price of solar panels plummet by nearly 80% over the past few years.  Now if you’re a homeowner, you’re probably wondering if you should wait for the price to go down even further, assuming, of course, you want to purchase your equipment outright instead of entering into a solar lease or power purchase agreement.  The following are four factors that may lead to an increase in the price of solar panels over the next few years.  But, keep in mind that solar panels represent only about 20-30% of the solar system, with the rest of the cost represented by the “balance of the system” — inverters, controls, rack mounts, monitoring devices, etc.

Reason 1: China

Chinese Solar PanelsChina has been trying to buy you solar panels.  Well sort of.  More accurately, the Chinese Government has been subsidizing its solar panel manufacturers, allowing them to sell panels in the United States below market price.  This practice, known as “dumping,” drives the cost of panels down significantly as it causes US-based manufacturers to reduce their prices to remain competitive.  To protect American solar panel manufacturers, the Commerce Department recently announced it’s going to impose a tariff of 24 to 36% on solar panels made in China.

Beyond providing direct subsidies, Chinese banks also over-invested in solar manufacturing at the encouragement of Beijing.   This lead to overcapacity, which further drove down the price of solar panels.  Now these manufacturers are having difficulty repaying their debts, and it’s anticipated that a majority of them will go bankrupt, further decreasing the supply of Chinese panels.

Reason 2: The Price of Polysilicon may Stabilize

Courtesy of Energy.gov

Polysilicon–a material used to make solar wafers–has dropped dramatically over the past few years, due, in large part, to oversupply. Some experts expect polysilicon prices to stabilize in the coming months, so long as manufacturers can limit production.  On the other hand, though, tariffs against Chinese-made panels could also restrict demand for polysilicon, which would lead to an even further decline in the price of polysilicon.  Thus, this factor is a bit uncertain but worth monitoring.

Reason 3: Tax Credits

The Solar Investment Tax Credit (ITC) is set to expire at the end of 2016.  This incentive provides a credit equal to 30% of the cost of the solar installation.  The cap on the credit is $500 per .5 kW of power capacity, which on average is roughly $6,000 per residential project.  Sure, this credit is going to be around for another 3 years, and may be extended by Congress, but it’s not going to be around forever.  So, if you’re thinking of adding a solar panel array to your home, make sure you do it before this credit expires.

Reason 4:  Net Metering

Net Metering Illustration

Net metering is becoming an increasingly contentious issue among utilities. This important policy requires utilities to credit a consumer’s account for excess electricity that the consumer puts back onto the grid from his/her renewable energy system.  For example, if you install photovoltaic (PV) panels on your home, and you produce more energy than you consume at a given time, you can “sell” that excess power back to the grid.

Several states are nearing the regulatory limit as to the number of PV systems that qualify for net metering.  Utilities are fiercely fighting efforts to extend the number of qualifying systems, arguing that the cost of net metering is simply being passed along to customers who cannot afford to purchase solar.  Should utilities prevail, you might not be afforded the opportunity to net the solar energy you produce against your electric bill.  Consequently, this change in policy would lengthen the period it takes for you to payoff your solar array, making it a less attractive investment.

Solar Contracting Just for Electricians?

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By Johnny Ritzo

Home Solar Electric ContractingIntroduction to Massachusetts Solar Contractors

A recent Massachusetts Superior Court case raised an interesting question with regard to solar installations: Should electricians be the only trade licensed to install rooftop photovoltaic systems?  Although the resolution of this case hinged on a straightforward statutory interpretation, it got me thinking about who ought to install solar and what tasks should properly be considered “solar installation”?  In the interest of safety and consumer protection, what special skills are required?  Is one trade better suited than the rest?  First, though, let’s take a look at the summary judgment decision.

Carroll v. Board of State Examiners of Electricians

The conflict began in 2009 when the Massachusetts Board of State Examiners of Electricians (BSEE) issued an advisory ruling essentially stating that an electrician’s license was required for all aspects of installing PV systems.  In support of its position, the BSEE cited General Laws c. 141, §1, which requires an electrician’s license to install wires to be used to carry electricity during the power generation process.  Thereafter, the BSEE began investigating claims and initiating charges against general contractors who advertised and contracted for installing rooftop PV solar arrays.

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John Adams Court House, Boston, MA
Courtesy of Mass.gov

In response to the investigations and charges, six general contractors filed suit seeking a declaratory judgement that the BSEE didn’t have authority to require an electrician’s license for all aspects of the solar install process.  The plaintiffs cited the second paragraph of GL c. 141, §1a, which exempts a general contractor when s/he uses a licensed subcontractor for all “electrical” work.   Seems simple enough, right?

Granting summary judgement in favor of the plaintiffs, the court held that the BSEE lacked jurisdiction to grant electricians a monopoly over the installation of PV systems.  The court reasoned that since both parties stipulated that licensed electricians must be used for hardwiring PV systems, general contractors qualified for the statutory exception.  The court further reasoned that by including an exception in GL c. 141, §1, the Massachusetts Legislature never intended to grant broad power to the BSEE to regulate non-electrical tasks, even when the overall project may be deemed “electrical” in nature.

Although the court stopped short of identifying those tasks requiring an electrician’s license, it did suggest that a license is required when a person “connects wires” for the generation of electricity using his or her “own hands.” Next session, though, the Massachusetts Legislature will consider creating a solar contractor’s license that would cover all aspects of the installation process, thereby superseding the Carroll decision.

Power Grab by the BSEE?

After reading the summary judgment opinion, I can’t help but feel that the BSEE unfairly tried to create a monopoly for electricians by excluding general contractors and solar contractors.  GL c. 141, §1 seems quite clear that a contractor does not run afoul of the law when s/he uses a licensed subcontractor to perform “electrical” work, which, in this case, would be hard wiring the panels, inverters, etc.  This basic exception makes good sense, as it promotes safety but also recognizes that general contractors can play a valuable role in helping homeowners address energy usage and conservation.

With regard to safety, it makes no sense to require an electrician’s license for tasks that don’t involve electricity, such as evaluating a roof to determine whether it’s structurally sound enough for solar panels.  In this instance, homeowners ought to be protected by requiring engineering expertise instead.

Beyond misguided safety considerations, the BSEE’s position ignores the important role a general contractor should play in addressing home energy consumption.  It’s critical that someone knowledgeable of building systems lead homeowners through the maze of energy-related decisions: Do I address energy efficiency before renewable energy?  What approach is the most cost-effective?  What about sustainability, comfort, or durability?  Available financing options and payback periods?

What constitutes “solar” work?

Next session, the Massachusetts Legislature will consider enacting a law that would establish a solar contractor’s license, rather than indirectly relying on licensing requirements for general contractors and electricians.  It will be interesting to see what tasks the Legislature places within the bailiwick of solar contractors versus those tasks it leaves available to other trades, such as builders and electricians.  In other words, what tasks are uniquely “solar” and require special training?

At one end of the spectrum, it’s probably too far of a stretch to say that energy auditing is “solar” work, although it’s an important first step.  But what about sizing a PV system, evaluating shading or consulting on available rebates?  Share your thoughts in the comments below as to those jobs you think should require a solar contractor’s license, if any.

Imposing Tariffs on Chinese Solar Manufacturers

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By Johnny Ritzo

Chinese Solar Panel DumpingLast week the United States Department of Commerce (DOC) determined that Chinese manufacturers were unfairly selling solar panels below market value in the US.  This practice, known as “dumping,” violates the World Trade Organization’s rules governing international trade.

As a result, the US will now impose a 31% tariff (higher in some cases) on solar cells manufactured in China and exported to the US.  The duty does not apply to panels assembled in China–just the cells, which are the basic “building blocks” of panels.  As the Los Angeles Times points out, Chinese firms can simply manufacture the cells in surrounding countries and assemble them in China to avoid the tariff.

The DOC’s action against China is controversial, since it will have a mixed impact on the US solar market.  On one hand, the DOC wants to curb the closure of US manufacturing plants, which has been happening at an alarming rate in recent years.

Solar Manufacturing Plant Closures - Congressional Research Service

Courtesy of Congressional Research Service

On the other hand, solar installers argue that the tariff will hurt the solar market, as it will make panels more expensive for homeowners and business.  The solar industry has experienced tremendous growth in recent years due, in part, to a 30% federal tax credit and dwindling panel prices.  As the price of installing solar becomes more affordable, the more sales and installation jobs we stand to gain.

Solar Industry Employment Trends - Congressional Research Service

Courtesy of Congressional Research Service

Is there reason to prefer solar manufacturing jobs to solar installation and sales jobs?  Should we be concerned if the tariff reduces the overall number of panels installed in the US?  How do we balance the environmental consequences of fewer solar installations? Energy security?  Share your thoughts in the comments below.

Interesting sources for further reading:

http://www.fas.org/sgp/crs/misc/R42509.pdf (in-depth report covering industry trends written by the Congressional Research Service)

http://articles.latimes.com/2012/may/18/business/la-fi-china-solar-dumping-20120518 (LA Times article providing solid overview of the recent DOC decision)

http://info.ussolarinstitute.com/blog/bid/79841/What-a-US-China-Solar-War-Means-for-Your-Solar-Installation-Career (Industry analysis of what DOC decision means for solar installers)

Solar Financing Models

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By Johnny Ritzo

Previous posts on this blog have dealt with financing energy retrofit projects.  As a general rule, residential efficiency is cheaper to achieve than installing renewable energy systems.  And it’s important to remember that saving energy is just as good as generating energy from renewable sources.

But, if you’ve already made energy efficient upgrades, you might consider looking at installing a solar array.  There are several interesting financing options available, including solar leasing, power purchase agreements and loans.  The following is a brief overview of each model and the pros and cons associated with each.

Solar Leasing

A solar lease is a contract whereby a homeowner (the lessee) rents a solar system–either a photovoltaic system or solar thermal unit–from a third party (the lessor).  The lessor is responsible for installing the solar array and maintaining it over the duration of the lease period–typically 15 to 20 years.  In exchange for making the monthly lease payments, the homeowner/lessee gets all the clean, solar energy produced from the system.

The primary benefit of leasing is that it requires little or no money down.  This means you don’t have to prepay for solar energy that you’ll use 20 years down the road–not bad if you’re on a tight budget!  Be aware, though, that some lease rates can increase between 2.5 to 4.5% per year (c.f. utility rates which typically increase about 5% annually).

However, there are a couple of drawbacks to the solar leasing model.  First,  the monthly fee is fixed, and not a function of the solar output of the array.  If you have a cloudy month, snow on your roof, or an equipment malfunction, you could be paying for the equipment without getting any production.  Thus, it’s important to choose a qualified leasing company with an equally qualified installation team.

Second, leasing is typically more expensive than buying a solar array outright, and often lease agreements have provisions for balloon payments or buyouts. The buyout price is determined by the fair market value of the equipment at the expiration of the lease period, not a predetermined number.

Other things to consider when entering into a solar lease are maintenance and downtime.  Ensure that the lessor is obligated to repair/replace any equipment in a timely and professional manner.  If not, see to it that you’ll be reimbursed for downtime.

Power Purchase Agreements

A PPA is a contract where a homeowner agrees to purchase all the solar energy produced from an array installed on his/her property (the host property), but the equipment is owned and operated by a third party (the solar services provider).   Rather than making a monthly payment, the homeowner is obligated to purchase all the power produced at a certain price per kWh.

Residential PV Solar Array

Much like a lease, the contract term for a PPA is usually between 15 and 20 years, requires little or no money down, and often a rate escalator of 2.5 to 3.5% per year applies if you don’t pre-purchase the energy.  However, the terms, PPA rate, annual escalator, term length should be negotiable.

There are numerous benefits under the PPA financing model:

  • For climates with significant snow or clouds, a PPA makes more sense than a lease.  Since you only pay for energy produced, you don’t have to pay out of pocket if your array is covered in snow or blocked by clouds.
  • Energy purchased under a PPA is typically cheaper than that offered by a local utility, so you can live sustainably while saving money!
  • PPA’s are a great way to avoid the volatility of energy markets, because you’re purchasing energy at a set rate for an extended period of time.
  • You don’t have to pay for maintenance or deal with the system if it breaks.

A PPA may not make sense for everyone, though.  If you can afford to purchase a solar system outright, or qualify for low-interest financing, you’ll pay less over the long haul than if you go with a lease or a PPA.

Purchasing, Financing & Incentives

If solar leasing and PPA’s don’t sound attractive, you can always do it the old fashioned way — purchase the system and pay for its installation.  A number of tax credits and local rebates soften the blow of the initial expenditure.  First and foremost, you can get a 30% federal tax credit until 2016.  Many states also offer rebates or performance-based incentives of up to several thousand dollars, which you can look up at www.dsireusa.org/solar.

If you can’t swing the initial expense, you can obtain a number of low-interest loans from both federal agencies and private lending institutions.  Solar projects can be financed through an Energy Efficient Mortgage (EEM) as well as through PACE loans in a few states.

There are two significant benefits under the purchasing model:

  • Once the system pays for itself in savings, you get free energy for the remainder of the equipment’s useful life (well, except for minimal maintenance); and
  • If your utility allows net metering, you can sell electricity back to the grid, or, at least, wipe out some of your utility bill each month.