As fed steps up, states step back on solar funding
NEW YORK ” Homeowners who waited until this year to install rooftop solar panels and take advantage of a hefty new government subsidy might not get the payback they anticipated.
As federal subsidies are rolled out, states under severe economic strain and utilities have slashed their own solar incentives, and as a result, cut the expected discount by thousands of dollars in some cases.
“It’s two steps forward, one step back,” said Jeff Wolfe, CEO of Vermont-based solar installer groSolar. “It’s frustrating.”
In Massachusetts, for example, the Commonwealth Solar program cut its rebate by $1 per watt on Jan. 1, reducing the overall discount by $3,000 for a 3 kilowatt solar panel system. In Colorado, customers of Xcel Energy Inc. saw a similar rebate cut, and they’ll pay more now to install solar than they would have a year ago.
Connecticut cut its residential rebate program in October, a month before it ran out of cash. In a tough economic year, it’s unlikely the state legislature would jack up electricity rates that have been used to replenish the program, said Connecticut State Rep. Vicki Nardello, who co-chairs the House Energy and Technology Committee.
For years, states have led the effort to boost demand for rooftop solar and other alternative energy projects. They’ve spent millions to do so, and some states such as Florida and Maryland have quickly run out of money, said Rusty Hanes, who supervises the Database of State Incentives for Renewables and Efficiency at N.C. State University.
When Congress expanded a federal tax credit for solar in October, removing a $2,000 cap on installation costs, a number of states redirected their own incentive funding, and more are expected to do the same.
“I wouldn’t be surprised if other states will be doing the same thing” as Xcel Energy and Commonwealth Solar, Hanes said. “It’s an opportunity for the feds to pick up the tab.”
In some states, the best time to invest in solar technology may have already passed.
Gerry Christensen, 44, will be one of the last Xcel Energy customers to benefit from its old solar rebate. Christensen, who bought a 6.75 kilowatt system in October, would have paid about $800 more for his solar panels if he waited to purchase them this year.
“I got in just under the wire,” he said. “My neighbor was going to move ahead with solar too, but now that he’ll get less back, he’s pretty bummed out. I’m not sure if he’s going to do it.”
Joe Fuentes, a spokesman for Xcel Energy in Colorado, said Xcel’s goal was to pick up about half the cost of installing solar panels. Since the federal tax credit jumped, Xcel decided it could continue to meet that goal while pulling back on incentives.
“It’s still a good deal,” Fuentes said. “And it allows us to get more people in the program.”
Solar industry experts said the next state to reduce rebates could be New York, where officials are looking for ways to alter the state’s renewable portfolio standard.
James Denn, a spokesman for New York State’s Public Service Commission, said the commission is merely looking for ideas on how to best meet demand for alternative energy systems.
That could mean pumping even more money into solar panel rebates, he said.
“If the consumer in New York state wants to do solar panels as opposed to wind systems, you need to make sure that money is available,” he said.
Nobody should be surprised, however, if New York and other states eventually curtail incentive programs, said Massachusetts Secretary of Energy and Environmental Affairs Ian Bowles. Incentive programs are meant to boost demand, and so the rebates should continue to drop as prices for solar panels come down.
“Everyone knew this was going to happen,” Bowles said. “We’ll be able to lower the incentive and get the same results.”
Smaller incentives wouldn’t be a bad thing for the industry, either, said Scott Rakowski, regional manager of New York-based Alteris Renewables, which installs solar panels throughout the Northeast.
Rakowski said a cut in individual subsidies should allow states to hold on to their incentive programs instead of quickly burning through their remaining cash.
“It would give us a good fuzzy feeling to know that the money will be around for a longer period,” Rakowski said.
When Connecticut’s solar rebate program ran out of money last year, the sales staff at Alteris was stuck trying to convince customers to buy anyway, even though their solar systems were now double the cost.
“That’s a challenge,” he said. “We encouraged people to be in a holding pattern to wait and see what develops” with Connecticut’s program.