On a day when the U.S. Supreme Court struck a couple of blows against the fossil-fuel economy, I was pleased to hear some encouraging news about solar energy. Globally, the production of solar photovoltaic cells to produce electricity grew by 40% in 2006. U.S. production of solar cells was up by 30%.
The data comes from a nonprofit research organization called the Prometheus Institute For Sustainable Development and they were given to me by Julia Judd, who leads a trade association called the Solar Electric Power Association in Washington. Some even more striking numbers from Julia: Her group’s annual solar power conference, which attracted a couple of hundred participants as recently as five years ago, and about 1,300 people in 2005, drew 8,000 people last year in San Jose. For this fall’s conference in Long Beach, she’s expecting 10,000 people. Sounds like a boom to me.
For those of you who (like me) don’t know much about the solar energy, the industry includes three sectors. Photovoltaic cells, typically installed on rooftops, usually provide electricity directly to commercial and residential customers. Solar thermal electric power generators are bigger facilities that concentrate the sun’s heat to produce steam to drive turbines, which makes electricity that flows into the grid. Solar energy is also used to heat hot water and swimming pools. All the segments are growing.
Solar energy has been a slow-growth business for decades because of the high capital outlays required; it could take a decade or more to recoup, with lower electricity bills, the costs of installing photovoltaic cells. What’s changed? Lots. Federal tax credits for solar installations went into effect last year. They provide up to $2,000 in tax credits to offset the costs of installing a residential solar system to provide electricity, and as much as 30% of the project cost of commercial installations.
Meanwhile, California (thanks, Arnold!) in 2006 approved a solar initiative that sets a goal of installing one million solar roofs in the state; eight other states created programs to either provide incentivites or require utilities to buy solar-generated energy to meet renewable energy standards. Most states now require utilities to allow people with solar systems to connect to the grid, and sell back excess power when the sun is shining.
The costs of photovoltaics are coming down as the market grows. Venture capital is flowing into the business. And, interestingly, new business models are making photovoltaic installations more appealing by eliminating the up-front capital costs entirely; companies like Sun Edison and MMA Renewable Ventures install and own the solar assets and sell the electricity to the site host under a purchase power agreement. Sun Edison delivers solar power to Whole Foods Markets, Staples and Macy’s, while MMA is developing a solar project for Fetzer Vineyards.
More reason to be encouraged: The Miami-based home builder Lennar Corp. recently announced that solar photovoltaic systems will be standard features on every house it builds in the Sacramento and San Francisco areas. Its plans call for 2,000 new homes over the next few years, according to this upbeat article on solar power in Sunday’s Austin American Statesman.
To be sure, the solar business remains small. Less than 1% of America’s electricity comes from solar power. And it’s easy to scoff at a business that depends so heavily on government subsidies. But the benefits of solar energy are significant–no emissions (after it’s built), energy security and independence, less reliance on the grid. What’s more, the economics of solar would look much better if the external costs of burning coal were built into the price of coal-generated electricity. If Congress decides to regulate carbon dioxide–this is why the Supreme Court decision on CO2 is relevant–solar power will become even more attractive.