Current federal renewable-energy incentive programs will end by 2020, leaving the future of Washington’s solar industry clouded. A state program, though, got a new lease on life Saturday. Installers say the incentives remain key to selling solar systems to cost-conscious customers.
In often-rainy Washington, people in the solar-energy industry have a term for the sector’s ups and downs: riding the “solar coaster.”
But it’s not the approaching gloomy winter months that make the industry view the future with uncertainty.
“Solar energy is looking at 2020 as a critical year,” Jeremy Smithson, CEO and founder of Puget Sound Solar, said last week about the scheduled sunset date for state renewable-energy incentive programs designed to make solar more affordable.
Solar by the numbers in Washington
Roughly three quarters of homes in the state are viable for solar.
Roofs viable for solar
Roofs viable for solar
Source: Project Sunroof data explorer (February 2017)
Cost remains the biggest barrier for solar. Weather is not actually a problem, with long summer days providing enough sun to make up for rainy winters. Despite increasingly efficient technology and declining costs, most customers in Washington still rely on state and federal incentives to make the substantial cost of installing solar pencil out.
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The federal incentives start decreasing in 2019. State incentives for renewable energy — what’s known as the Washington State Production Incentive — were scheduled to end the following year, and funding already was limited.
But the industry just caught a break: In the last hours of the Legislature’s special session, it passed and sent to Gov.Jay Inslee’s desk the Solar Incentives Job Bill, extending funds for the program until 2030.
Many in the industry were pinning their hopes the bill, which they believe could help carry the industry until the prices of solar panels go down enough to make it sustainable.
Reeves Clippard, president of A&R Solar, a Seattle-based installer, said before its passage that the bill would provide “more certainty to the industry than (they) have ever seen.”
“It would be weaning off” the incentives, he said. “Enough to glide past, rather than just a cliff that says figure it out by this date.”
Solar technology is becoming more affordable: A unit that cost $60,000 in 2008 might cost just $20,000 today before the incentives, according to Clippard.
The federal tax credit accounts for 30 percent of a system’s cost. State production incentives pay back up to $5,000 a year, and many systems have little to no sales tax. And net energy-metering programs give owners credit for excess energy their solar panels produce, with a higher payout if all the components are made in the state.
Warren Raven, a Kirkland homeowner with a solar system, said he wanted to go solar both for the clean energy and in hopes it would give him control of future energy costs when he retires. But the incentives were still crucial for him, as for many other people, because ultimately it’s “all about the pocketbook,” he said.
Current incentives for residential solar
State: Washington Production Incentive — the state will send checks based on energy usage up to $5,000. Capped at certain total amount for each utility district, so it may be reduced or not available. Also, no sales tax charged on systems under 10kW. Production credit was scheduled to expire in 2020 but the Legislature extended it to 2030 for systems installed by June 2021.
Federal: Tax credits for 30 percent of the solar system. This credit decreases to 26 percent in 2020, 22 percent in 2021, then 0 percent for residential and 10 percent for businesses.
Net energy metering: Excess electricity from solar panels will be sent to the grid and credited toward reducing your bill.
Source: Solar Washington, Seattle Times staff
Homeowner Michael Berta estimated that his electric and gas bill combined are reduced to $35 a month in the summer because of his Kirkland home’s solar system. Berta said he looked at solar as a smart investment.
“As much as I want to do something good for the world it has to make sense financially,” he said.
Some industry members were already seeing effects of the incentive programs running short. Each utility district has a cap on how much money it can provide solar owners each year from the Washington Production Incentive funds, which pays owners for any excess electricity generated. Some districts have had more homeowners signed up than they can pay for in full, and either must cut off any new owners from incentives or reduce payouts for everyone. Seattle is already at capacity and now has had to give lower paybacks to owners.
New homeowners in districts that ran out of incentive funds were not receiving paybacks. Clippard said only eight utility districts in the state are still open, limiting where companies can realistically expand.
“How do you plan a business and growth without utilities?” Clippard said. He had been eyeing an expansion in the Tri-Cities, but utilities in the area are closed to new customers, changing his plans. He said even areas still open are a gamble because they could close, making any training or investment a waste.
The bill passed early Saturday is designed to reduce some of these uncertainties by increasing funds and reducing payouts over time. It extends the window for installations to June 30 2021. Any solar residential solar project installed by then can receive incentives until 2030.
Austin Perea, a solar researcher for Greentech Media, said nationally, even with incentives, only 2 percent of U.S. households where solar power is viable have the technology installed.
Nationwide the industry fluctuates, at times taking companies down with it.
Several industry members said Chinese companies sometimes sell panels in the U.S. at lower prices, making it hard for U.S. manufacturers to compete.
Two of the biggest American manufacturers have run into trouble: Georgia-based Suniva filed for bankruptcy last spring, and Oregon-based SolarWorld announced layoffs after its parent company filed for insolvency.
About 90 percent of solar panels installed in the U.S. are made overseas, Perea said.
The two manufacturers favor raising tariffs to protect against the cheaper Chinese imports — but critics say this would hurt the larger solar-installation industry by raising prices.
The state requires that panels be made in the United States to qualify for the highest incentives, encouraging consumers to buy local.
Pure Solar, based in Tumwater, and Bellingham’s Itek make panels, the latter dominating much of the in-state manufacturing.
Karl Unterschuetz, director of business development for Itek, said “solar is here to stay” in Washington but acknowledged a short-term need for continued incentives.
Evolving technology could open up solar to more customers. David Ginger, chief scientist for the University of Washington Clean Energy Institute, said the potential includes flexible or thin panels to allow solar on rooftops that aren’t optimal for traditional panels.
Much of where the pricing can continue to decline is in “soft costs” such as permitting, training and installation.
Last year the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy found soft costs amounted to about 64 percent of the total cost of solar.
Many are waiting for solar’s “tipping point“ — a time when it shifts from early adopters to mainstream. Industry members disagreed when that would occur — some believe it would be when 15 percent of people adopt solar.
Hawaii is already seeing these numbers. Smithson, founder of Puget Sound Solar, predicts it will be slower in Washington state.
“The tipping point is real,” Smithson said. “Customers are going to ask for clean energy. The demand is going to build up.”
Information in this article, originally published July 1, 2017, was updated the same day after the Legislature passed a bill extending the state incentive program to 2030. A previous version said the incentive would expire in 2020.