Solar panel costs fall, but utility costs rise

Nov 18 - North County Times, Calif.

The price of solar panels tumbled in the waning years of the 2000s, yet prices for large-scale solar arrays contracted by California utilities rose in 2009, a ratepayer advocate group said.

After the economic collapse in 2007 and 2008, manufacturers of solar panels slashed prices to reduce excess inventory. In California, only small-scale residential customers enjoyed falling costs, according to a report from the Division of Ratepayer Advocates, an independent consumer advocacy division of the California Public Utilities Commission. Despite reduced prices for panels, the 2009 costs of large-scale solar generators rose, thanks to high financing costs, state requirements for renewable energy, and an unwillingness of regulators to reject overpriced contracts, the report said.

Officials from local utilities and a consumer group agreed broadly with the report, but said it stopped too soon: Bid prices for utility-scale solar projects in 2010 have since plummeted.

The PUC must approve all deals between the state's investor-owned utilities and companies that build electricity generators, but the commission keeps the details of such agreements secret -- especially the pricing.

Thus, the report's authors had access to data that said utility-scale solar prices were high, but published no numbers.

Because of the size of their projects, utilities had to bear some expenses that smaller-scale customers avoided. Builders of large-scale projects need investors to get started, but a credit freeze during the worst years of the recession meant money came at high interest rates.

Also, California required utilities to buy 20 percent of their electricity from renewable sources by 2010, and 30 percent by 2020. Knowing utilities had to buy, and bidders offered higher prices, the report said.

Even still, the PUC could have rejected contracts and forced utilities to negotiate a better deal. But the report said the board never rejected a proposed contract because of price alone.

"The commissioners haven't been so vigilant in rejecting contracts," said Nika Rogers, the report's main author. "It doesn't provide an incentive for developers."

Stuart Hemphill, senior vice president for power procurement for Southern California Edison, said that while he agreed with the report's conclusions, it didn't go far enough. 2010 has proven to be an excellent year for utility-scale solar plants.

"We're seeing a lot more competitive prices, ultimately due to the cost reductions," Hemphill said.

San Diego Gas & Electric Co. waited until this year to contract for solar-generated power.

"The fact that we have signed three power purchase agreements for PV solar projects in 2010, and none in the years prior, indicates that we (along with our Procurement Review Group) are convinced that photovoltaic technology has priced itself into the market," said SDG&E spokesman Art Larson in an e-mail.

The continued decline in prices for photovoltaic solar panels has caused a tidal shift in the industry, said Matthew Freedman, an attorney for The Utility Reform Network, an advocacy nonprofit.

After years in which electricity experts predicted wind or solar thermal would be the dominant form of renewable energy, suddenly photovoltaic is all anyone can talk about, Freedman said.

"It's a shocking reversal," he said.

Call staff writer Eric Wolff at 760-740-5412.

-----

To see more of the North County Times or to subscribe to the newspaper, go to http://www.nctimes.com.

Distributed by McClatchy-Tribune Information Services.