The U.S. solar power industry is about to enjoy a moment in the sun. A new federal tax credit for household purchases of solar power equipment -- the first such credit for residential customers in two decades -- will take effect Jan. 1.
The U.S. solar power industry is about to enjoy a moment in the sun.
A new federal tax credit for household purchases of solar power equipment -- the first such credit for residential customers in two decades -- will take effect Jan. 1.
The industry is hopeful the credit will help raise public awareness of solar power, which has been receiving attention amid the surge in fossil fuel prices and more aggressive incentives and requirements for renewable energy at the state level.
That goes even more so for Florida, where the relatively small niche market of solar pool heaters accounts for the vast majority of household solar equipment, according to Bruce Kershner, executive director of the Florida Solar Energy Industries Association in Longwood.
"We're the Sunshine State," Kershner said. "You would think we would lead the country in thermal installations but we don't."
The federal tax credit comes at a time when the U.S. solar industry has been lagging its counterparts in Japan and Germany. For instance, the U.S. generating capacity of photovoltaic solar panels -- those black rectangles you see on the rooftops of some solar homes -- totaled 340 megawatts at the end of 2004, which is up 15 percent from the previous year, according to the Solar Energy Industries Association in Washington. The figure includes only those panels connected to local power grids.
By contrast, Japan had grid-connected photovoltaic generating capacity of 1,100 megawatts at the end of 2004, while Germany had 790.3 megawatts, helped by substantial government-sponsored consumer incentives.
The new solar federal tax credit, part of the energy bill President Bush signed last week, will give households an income tax credit worth 30 percent of the cost of the solar energy system, with a cap of $2,000. But consumers can get separate credits for a photovoltaic system that generates electricity and one for a passive thermal system to heat water.
The tax credit will expire after two years. Businesses, which are eligible for a 10 percent credit, will be eligible for a 30 percent credit during the same period. The credit for businesses has no cap.
The credit is the first for residential customers since 1985. Although the previous credit, which Congress passed in 1978, could only be used on solar water heaters, the maximum allowable credit was $10,000. That spurred rapid growth in the solar water heater market.
State incentives have lent an important boost to the solar industry's growth, with many offering a variety of income-tax incentives and rebates to customers, as well as imposing renewable energy requirements on electric utilities.
None of these incentives or requirements exist in Florida, which offers only a sales tax exemption on solar equipment purchases, according to Kershner of the Florida Solar Energy Industries Association.
"We have just not done a lot of the things that other states have done," he said.
The association is hopeful the new federal tax credit will encourage legislators in Tallahassee to consider additional incentives, such as a property tax credit for solar purchases, he said.
"I think that coupled with the price of crude (oil) going up and up, I think our Legislature is finally going to look at renewables and especially solar," he said.
The industry's hopes for a sales boost happen to come as worldwide demand for photovoltaic panels has been outstripping supply because of a shortage of silicon, a key raw material used in the panels.
Kyocera Solar Inc., a Japanese manufacturer of photovoltaic panels, has had a backlog of orders despite doubling shipments this year to the United States, according to Tom Dyer, vice president of marketing and governmental affairs for Kyocera Solar in Scottsdale, Ariz.
In the meantime, Kyocera and other companies have been exploring ways of reducing the amount of silicon used in its panels, which helps reduce production costs, Dyer said.
At a booth last week at the International Solar Energy Society's Solar World Congress in Orlando, Kyocera displayed images of the latest applications of photovoltaic technology, much of it aimed at integrating the panels into buildings, such as into roof tiles or the tops of car ports.
Doing so can make solar power more aesthetically pleasing for some customers, Dyer said, but he added that "some people don't care, some people like making a statement that they're solarized. It's a matter of personal taste."
While the boom in new housing construction would seem to provide an opportunity to get homeowners to go solar, most homebuilders have been enjoying such robust business they don't feel the need to offer additional options, according to Dale Gulden, chief executive of Solar Direct, a solar-equipment vendor in Bradenton.
Options for households
Because of the relatively high price of photovoltaic panels, solar water heaters and pool heaters remain the most appealing option for the typical household looking for an affordable way to go solar, Gulden said.
Solar water heaters can range from about $3,000 to $5,000. Because hot water heating accounts for about 25 to 30 percent of an average household's energy usage, the savings can be substantial, Gulden said. A solar water heater installed in an existing home can pay for itself in as quickly as two to four years, he said.
For a new homeowner, the savings can be more immediate, he said, explaining that if the equipment costs are incorporated into a mortgage payment, the savings on a monthly utility bill can exceed the corresponding increase in a monthly mortgage payment.
A 3- to 4-kilowatt photovoltaic system for a 3,000-square-foot home can cost $24,000 to $40,000. While it takes about a decade or more for such a system to pay for itself, it can be an attractive option for homeowners with high monthly utility bills exceeding $400, who can enjoy immediate savings of 20 to 90 percent on their bills, Gulden said.
Last year's hurricanes have increased interest in using photovoltaic panels for backup power in the event of a power outage, he said. While a photovoltaic system will have trouble generating electricity in the middle of a heavy storm, simple cloud cover isn't enough to put it out of commission.
"Go out in a parking lot on a cloudy day and touch a black car," Gulden said. "You'll know the sun's there."
Progress Energy Florida and Tampa Electric allow customers to connect their photovoltaic panels to their power lines to collect credits for excess solar power that they send back to the utility's power grid. Customers are paid credits at a lower rate than what they pay for electricity from the utility.
But with photovoltaic installations accounting for only a tiny fraction of solar equipment in Florida, very few customers opt for the service.
Progress has just six such customers. Tampa Electric has none.
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Source: Knight Ridder/Tribune Business News
