Cloudy outlook for green incentives in biggest U.S. state

SANTA CLARA, Calif. — It's a sunnier climate for solar equipment makers in Germany and South Korea than in the beach state of California, according to presentations from leaders of the three hot spots competing for global investment from the emerging green tech industry.

"You guys have really gotten ahead of us and I will do my best to catch up," said Sue Kateley, executive director of the California Solar Energy Industries Association (CalSEIA) after presentations from representatives from Germany and Korea at a conference here sponsored by market watcher Displaybank (Seoul).

"I wish we had the kind of commitment you have," she told the European and Asian representatives, pointing to loan and feed-in-tariff programs they offer but California lacks. "I am ashamed about that," she said.

California does have several rebate programs for people who install solar panels and a requirement to generate a significant fraction of its energy from alternative sources. And several new pieces of legislation will encourage solar energy for water heating and reduction of greenhouse gases. A feed-in-tariff bill is also in the works which could benefit the solar industry.

However, the California utility network is congested with as many as 42,000 Megawatts of alternative energy plants still trying to find a way to get on its distribution grid. Tax credits for solar installations are slated to expire at end of the year, a fact which presages a big slowdown in deployments.

Electric rates in the state are set at low levels, especially at low usage levels. That keeps the cost of solar energy relatively high and thus demand low.

In addition, California has yet to install any significant solar thermal systems which are seen as an important new area. "People don't even think about solar thermal here, and it's a shame," she said.

By contrast a representative from the Korea Energy Management Corp. said Korea aims to get five percent of its energy needs from all alternative sources by 2011. Last year the country consumed an estimated 43.7 MW of solar energy.

The country will spend about 5.3 billion Won to develop and deploy alternative energy sources in 2008 more than double the amount it spent in 2004. It aims to have 100,000 homes outfitted with solar panels by 2012. It also aims to carve out a seven percent share of the world market for producing solar panels.

For its part, a representative from Germany noted the country is home to six of the world's best known solar photovoltaic producers including First Solar, Nanosolar and Signet Solar. The country has already installed 3.8 peak Gigawatts of solar power in some 430,000 facilities, a market that has been growing rapidly since Germany passed renewable energy legislation in 2004.

California doesn't lack for venture capitalists willing to invest in new solar panel startups. However, that is part of the problem, Kateley suggested, because they are setting the state up for a shakeout in manufacturing.

Worldwide some observers estimate that as many as 150 companies are planning production of solar panels. At the conference, Displaybank's analysts said Korea's top display makers including Samsung and LG will start producing solar panels by 2009.

"I was at a VC conference recently and I actually asked them to stop being so reckless" by continuing to invest in new solar panel startups, Kateley said.

Venture investments in the clean tech sector as a whole have skyrocketed from just $66 million in 2000 to $12.3 billion in 2007, according to Jon Guice, a partner with AltaTerra (Palo Alto, Calif.).

Kateley described the near-term scenario for California's solar companies by showing a picture of someone parachuting into a pond surrounded by alligators "This is what the market in California looks like today—very risky," she said.

Longer term, she expressed optimism the rising demand for energy, increasing energy costs and improving products and supporting legislation will grow the pie for all alternative energy suppliers globally. Founded in 1977, CalSEIA has 40 members who are panel distributors or manufactures and another 150 who are integrators

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