Volatile incentives plaguing industry

Sep 18 - McClatchy-Tribune Regional News - Kirsti Marohn St. Cloud Times, Minn.

It's known as the "solar coaster."

For an industry struggling to compete with cheaper forms of energy, the volatile trend of tax credits, rebate programs and other incentives that come and go sometimes feels like an amusement park ride.

Any type of financial incentive encourages people to invest in solar, said Eric Jensen, chairman of the Minnesota Renewable Energy Society. But utility companies often introduce a rebate only to discontinue it later.

As a result, Minnesota's solar industry can't ramp up to the level seen in other states or countries, Jensen said.

"You get these opportunities and the industry grows, and then you pull the rug out from underneath them and the industry stumbles," he said. "It never is an incentive that is looking at the long term."

The latest example is Xcel Energy's proposal to end its popular Solar Rewards program, which offered a one-time rebate to customers who install solar photovoltaic panels on their homes or businesses.

The Solar Rewards program was popular because it helped knock down the initial costs of installing panels, Jensen said.

"It removed part of the upfront barrier," he said.

Xcel argued that the the rebates are too high to make the program cost effective. The company also said there are other incentives available, including federal tax credits, to help reduce the cost of solar for consumers.

In a preliminary ruling last month, the Minnesota Department of Commerce said Xcel must keep the rewards program through 2015, then work on possible alternatives. Xcel had proposed to reduce the rebate amount next year and end the program in 2014. A final decision is expected by.

In a written statement, Xcel said it's still reviewing the proposed decision.

"We are encouraged that the department recognizes the challenges of the current Solar Rewards program, and we will work with the department to explore alternative programs," the statement read.

Scott Randall, owner of Apex Solar in St. Cloud, believes incentive programs are a double-edged sword. They help encourage people to invest in solar, but they can cause frustration if there's not enough money to meet demand, he said.

"Ninety-nine percent of people you're working with don't get the funding, and they get very upset," Randall said.

If the rewards program is discontinued, Randall believes many installers will go out of business or will have to market much more aggressively.

One of his customers, Jeff Meyer, believes an incentive program would encourage more people to do what he and his wife Bonnie recently did: install 24 solar panels on the roof of their Princeton-area home.

A federal tax rebate covered 30 percent of the cost, reducing the cost from about $27,000 to $19,000, Meyer said. He estimates he will earn back the cost through savings on his electric bill in 10 years.

"From what I see, everybody should be putting this stuff on their roof or wherever they can," Meyer said. "I see nothing but good coming out of it."

The good news for solar advocates is the price of solar has fallen enough to make it competitive with other forms of energy, experts say. That's particularly true in states with high electricity rates, such as California and the Northeast.

Solar prices are falling about 7-9 percent each year and have come down about 50 percent from a decade ago, Jensen said.

Lynn Hinkle is policy director of the Minnesota Solar Energy Industries Association, a diverse group of installers, electrical contractors, utility companies and manufacturers of solar panels.

There are more than 33 companies in the state that do some type of solar manufacturing, plus others that produce furnaces for solar cell production or supply other parts, Hinkle said. He estimates they employ 2,000-4,000 people.

"It's a job engine throughout the state," he said. Developing industries like solar typically need some form of assistance to move into the regular marketplace, Hinkle said.

There are other developing possibilities for financial incentives, including a program that allows cities to assess commercial and residential properties for renewable energy or energy-efficiency improvements.

Called Property-Assessed Clean Energy or PACE, the program is available in 28 states including Minnesota. So far, Edina is the only city in Minnesota that has completed a PACE project, although others are considering it.

Whatever the program, it's the unknown that causes the biggest problem, said Ernie Diedrich, an economics and environmental studies professor at the College of St. Benedict/St. John's University. He thinks incentives should have a sunset clause so everyone knows when they're going to end.

"All that uncertainty is just bad for an industry that needs to establish itself," Diedrich said.