Sunset for solar? Installers worry about industry’s outlook as incentives expire

Andy Davis, left, and Yonk Reinemer with Ecotech Solar of Bellingham install solar panels on the roof of Chandler’s Square Retirement Community on Sept. 29, 2016 in Anacortes, Washington.
Andy Davis, left, and Yonk Reinemer with Ecotech Solar of Bellingham install solar panels on the roof of Chandler’s Square Retirement Community on Sept. 29, 2016 in Anacortes, Washington.

In often-rainy Washington, people in the solar-energy industry have a term for the sector’s ups and downs: riding the “solar coaster.” But it’s not the approaching gloomy winter months that make the industry view the future with uncertainty.

“Solar energy is looking at 2020 as a critical year,” Jeremy Smithson, CEO and founder of Puget Sound Solar, said last week about the scheduled sunset date for state renewable-energy incentive programs designed to make solar more affordable.

A Solar Incentives Job Bill would extend funds for the state’s renewable-energy incentive program until 2030 if signed by Gov. Jay Inslee.

Cost remains the biggest barrier for solar. Weather is not actually a problem, with long summer days providing enough sun to make up for rainy winters. Despite increasingly efficient technology and declining costs, most customers in Washington still rely on state and federal incentives to make the substantial cost of installing solar pencil out.

The federal incentives start decreasing in 2019. State incentives for renewable energy – what’s known as the Washington State Production Incentive – were scheduled to end the following year, and funding already was limited.

But the industry just caught a break: In the last hours of the Legislature’s special session, it passed and sent to Gov.Jay Inslee’s desk the Solar Incentives Job Bill, extending funds for the program until 2030.

Many in the industry were pinning their hopes the bill, which they believe could help carry the industry until the prices of solar panels go down enough to make it sustainable.

Reeves Clippard, president of A&R Solar, a Seattle-based installer, said before its passage that the bill would provide “more certainty to the industry than (they) have ever seen.”

“It would be weaning off” the incentives, he said. “Enough to glide past, rather than just a cliff that says figure it out by this date.”

Prices drop

Solar technology is becoming more affordable: A unit that cost $60,000 in 2008 might cost just $20,000 today before the incentives, according to Clippard.

The federal tax credit accounts for 30 percent of a system’s cost. State production incentives pay back up to $5,000 a year, and many systems have little to no sales tax. And net energy-metering programs give owners credit for excess energy their solar panels produce, with a higher payout if all the components are made in the state.

Warren Raven, a Kirkland homeowner with a solar system, said he wanted to go solar both for the clean energy and in hopes it would give him control of future energy costs when he retires. But the incentives were still crucial for him, as for many other people, because ultimately it’s “all about the pocketbook,” he said.

As much as I want to do something good for the world, it has to make sense financially.

Homeowner Michael Berta of Kirkland

Homeowner Michael Berta estimated that his electric and gas bill combined are reduced to $35 a month in the summer because of his Kirkland home’s solar system. Berta said he looked at solar as a smart investment.

“As much as I want to do something good for the world, it has to make sense financially,” he said.

Some industry members were already seeing effects of the incentive programs running short. Each utility district has a cap on how much money it can provide solar owners each year from the Washington Production Incentive funds, which pays owners for any excess electricity generated. Some districts have had more homeowners signed up than they can pay for in full, and either must cut off any new owners from incentives or reduce payouts for everyone. Seattle is already at capacity and now has had to give lower paybacks to owners.

New homeowners in districts that ran out of incentive funds were not receiving paybacks. Clippard said only eight utility districts in the state are still open, limiting where companies can realistically expand.

“How do you plan a business and growth without utilities?” Clippard said. He had been eyeing an expansion in the Tri-Cities, but utilities in the area are closed to new customers, changing his plans. He said even areas still open are a gamble because they could close, making any training or investment a waste.

The bill passed July 1 is designed to reduce some of these uncertainties by increasing funds and reducing payouts over time. It extends the window for installations to June 30 2021. Any solar residential solar project installed by then can receive incentives until 2030.

Industry fluctuates

Austin Perea, a solar researcher for Greentech Media, said nationally, even with incentives, only 2 percent of U.S. households where solar power is viable have the technology installed.

Nationwide the industry fluctuates, at times taking companies down with it.

Several industry members said Chinese companies sometimes sell panels in the U.S. at lower prices, making it hard for U.S. manufacturers to compete.

Two of the biggest American manufacturers have run into trouble: Georgia-based Suniva filed for bankruptcy last spring, and Oregon-based SolarWorld announced layoffs after its parent company filed for insolvency.

About 90 percent of solar panels installed in the U.S. are made overseas, Perea said.

The two manufacturers favor raising tariffs to protect against the cheaper Chinese imports – but critics say this would hurt the larger solar-installation industry by raising prices.

The state requires that panels be made in the United States to qualify for the highest incentives, encouraging consumers to buy local.

Pure Solar, based in Tumwater, and Bellingham’s Itek make panels, the latter dominating much of the in-state manufacturing.

Karl Unterschuetz, director of business development for Itek, said “solar is here to stay” in Washington but acknowledged a short-term need for continued incentives.

Technology boost

Evolving technology could open up solar to more customers. David Ginger, chief scientist for the University of Washington Clean Energy Institute, said the potential includes flexible or thin panels to allow solar on rooftops that aren’t optimal for traditional panels.

Much of where the pricing can continue to decline is in “soft costs” such as permitting, training and installation.

Last year the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy found soft costs amounted to about 64 percent of the total cost of solar.

Many are waiting for solar’s “tipping point” – a time when it shifts from early adopters to mainstream. Industry members disagreed when that would occur – some believe it would be when 15 percent of people adopt solar.

Hawaii is already seeing these numbers. Smithson, founder of Puget Sound Solar, predicts it will be slower in Washington state.

“The tipping point is real,” Smithson said. “Customers are going to ask for clean energy. The demand is going to build up.”