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Homeowners Take Shine to Solar

Panel Installations Pick Up as Cost to Consumers Falls

By CASSANDRA SWEET
September 13, 2013, 6:00 p.m. ET

http://online.wsj.com/article/SB10001424127887324906304579036701156179752.html?mod=WSJ_business_whatsNews

U.S. residential customers have started to embrace solar-panel installations for a new reason: cutting their utility bills.

Until recently, homeowners generally installed the panels because they wanted to use clean energy, but increasingly cost savings factor in, solar-power companies say.

Analysts and the industry cite steep declines in the price of solar panels, as well as a growing number of programs that let homeowners lease solar equipment rather than buy it, for the new cost competitiveness—especially in places where electricity charges are high.

The rise of cheap solar helps explain why utilities are battling government-sponsored subsidies and incentives for consumers that they claim are fueling the boom, even though home solar installations account for less than 1% of U.S. power use.

In California, where the fight between utilities and solar companies is particularly fierce, solar panels are expected to furnish as much as 5% of peak power use in the next few years, utilities say.

Dan Thornton opted to lease, rather than buy, solar panels from SolarCity for his home in suburban Denver.

Utilities in California, Arizona and Colorado have asked regulators to cut incentives for customers with solar panels, arguing that other customers are subsidizing those benefits and face spiraling costs. On Thursday, a bill passed by California lawmakers would allow regulators to reduce solar incentives and rein in electricity prices.

"It's about ensuring that everyone is paying for the services they're receiving," said Steven Malnight, a vice president at Pacific Gas & Electric Co., a San Francisco-based utility.

Solar developers and their customers oppose reducing the amount utilities pay for power created by residential solar, saying utilities are trying to maintain a monopoly over power sales. For utilities, "it's a revenue loss," says Lyndon Rive, chief executive of SolarCity Corp., one of the biggest home-solar companies.

The solar industry is targeting 16% of the U.S. retail electricity market where prices are 15 cents a kilowatt-hour or more, according to a study by the Edison Electric Institute, a utility trade group.

Total retail power sales last year were nearly $364 billion, according to the federal Energy Information Administration.

Residential solar developers say they have been promoting power for between 10 cents and 20 cents a kilowatt-hour, depending on location and what state subsidies are available.

The EIA says traditional power companies charge between 11.4 cents and 33 cents a kilowatt-hour in California, New Jersey and New York, all of which have experienced big jumps in solar installations.

Home solar-power installations are expected to rise more than 50% this year, totaling 776 megawatts in systems installed on about 128,000 homes, at a value of more than $3 billion, according to analysts at GTM Research. In 2014, the firm expects an additional 38% jump in installations, to more than 1,070 megawatts of panels installed that year on more than 177,000 homes.

That would bring the nation's total to more than 3,300 megawatts of panels on about 550,000 homes, producing as much energy on sunny days as roughly 10 average-size coal-fired power plants.

Last year, Matthew Hone of Escondido, Calif., signed a 20-year contract with SunPower Corp. to install panels on the roof of his 3,000-square-foot home. Under the lease, he pays a flat monthly rate.

Since the installation, Mr. Hone has increased his electricity use by buying an electric-hybrid car. The car has saved the 27-year-old policeman about $600 a month at the gas pump, he says, and despite using more power he pays $14 a month less for electricity, part of which still comes from the local utility.

"The green factor was the cool part of it, but what made us do it was the money savings," says Mr. Hone, who lives with his wife and 2-year-old daughter.

Some critics still see rooftop solar as a niche market that will remain a tiny portion of the overall electricity mix.

"This is probably one of the most expensive ways to generate electricity," says Richard McMahon, a vice president at the Edison Electric Institute, the electric-power trade group. For example, building one large solar farm is less costly than installing arrays on thousands of individual roofs, he says.

They also say the cost benefits available to homeowners who install solar panels rely heavily on incentives and subsidies, including federal tax credits and state-mandated payments by utilities for power that solar panels produce in excess of homeowners' needs.

But the solar industry says that as the cost of installing panels continues to drop, solar power will remain attractive on a cost basis even as incentives wind down.

Prices for home systems fell by 14% in 2012, to a median price of $5.10 a watt, for capacities between 5,000 watts and 10,000 watts, according to an August study by the federal Lawrence Berkeley National Laboratory. That means buyers of such systems spent between $25,500 and $51,000.

Like increasing numbers of solar-panel users, Dan Thornton opted to lease, rather than buy, signing a 20-year lease with SolarCity in 2011 for a rooftop array on his home in suburban Denver. Even though the 42-year-old computer programmer wasn't originally drawn by the cost savings, he happily reports that he has been paying almost a third less for electricity, on average. "It was a smart financial move," he says.

Write to Cassandra Sweet at [e-mail]

A version of this article appeared September 14, 2013, on page B4 in the U.S. edition of The Wall Street Journal, with the headline: Savings Fuel Solar Demand.

http://online.wsj.com/article/SB10001424127887324906304579036701156179752.html?mod=WSJ_business_whatsNews