Solar power starts to make sense for business as prices fall
08/22/2014 5:51 PM
08/24/2014 12:33 PM
The sun seems to finally be shining on solar power.
After decades of being little more than an optimistic dream, solar power is finally getting close in price to other energy sources, say installers.
The cost of solar photovoltaic panels has come down sharply in the last two years, putting solar power within shouting distance of making business sense in Kansas, say installers.
At this point, there still aren’t many solar power systems in Kansas. For instance, just 200 of Westar Energy’s 680,000 customers have solar systems.
And there are only a handful of small solar power installation companies in the Wichita area.
Part of the reason remains the cost of the systems – even with the federal government’s generous incentive. It provides a tax credit that amounts to 30 percent of the project’s cost, although the incentive is scheduled to end at the end of 2016.
Kansas does have a net metering law, which requires utilities to buy excess electricity generated by individually owned solar panels, but the Kansas Legislature this year rewrote those rules to make them less favorable.
Mark Horst, owner of King Solar, a local installer said that, in Kansas anyway, the subsidies are small enough and the alternative power sources are cheap enough that environmental concern is necessary to spark buying.
“Two years ago, it was mostly environmentalists with cash to spend,” he said. “Now I’m selling to people who have a significant financial goal in mind, although very few look at it strictly as a financial decision.”
One of those is Michael Morgan, president of Ark Valley Distribution, the Anheiser-Busch distributor in Cowley County.
Horst recently installed a system on the roof of his warehouse at Strother Field.
He noted that his mother was an environmental engineer at the former Total Refinery, so the family is a little more attuned to the environment than most.
But, he said, it still had to be a decent business proposition. Part of the year, there will be no electrical bill.
“We are looking at the payout,” he said. “We’ve got to keep our beer cold, so our electrical bills are really up there.”
Solar can be done a number of ways, but the most common is in individual homes or businesses. There are a few installers in the area.
Horst said he is putting in a system, either residential or commercial, about every other week. That’s about twice what it was even a year to two ago, he said.
Even so, he said, the solar installation industry in the Wichita area is tiny, he said. He is the only full-time person at his company. A commercial system will pay for itself in six to eight years, and that includes the 30 percent federal tax credit, he said.
Horst said he and his crew first set up the electrical connections, build a frame on the roof and then mount the panels angled toward the southern exposure. The panels have a 25-year warrantee.
A five-kilowatt system, about enough for a residence, he said, is about $15,000 to $20,000.
Midwest Energy, an electrical co-op based in Hays, but stretching from Reno County to the Colorado border, is breaking ground next week on a community solar project in Colby.
Midwest Energy customers can buy a certain number of panels in a centralized solar panel farm. The electricity generated by their panels will offset their bills.
The panels cost $984 each. That includes the actual cost, installation and maintenance for 25 years. Midwest projects each panel will produce $57 worth of electricity a year.
Midwest expects the farm to have 4,000 panels. Not all panels have sold, said co-op spokesman Mike Morley, but there’s plenty of interest.
Midwest said it is responding to member demand, Morley said. In recent surveys, members said they wanted some of their power to come from alternative sources. And, he said, it’s a bit of an experiment, a way to test the future.
“There is not a whole lot of solar installations in Kansas, and we viewed this as a way to see real-world performance,” he said.
The solar farm is being built and will be operated by Colorado-based Clean Energy Collective, which has set up 33 similar community solar projects, mostly in Colorado, Vermont and Massachusetts.
“We look at a market like Kansas that is not on the leading edge of renewables other than wind and found a way that really works,” said Tim Braun, spokesman for the group.
Solar for Westar?
Westar has also installed some demonstration projects to learn more precisely about how well solar power works and what it really costs to generate. It has solar panels installed on the roofs of its service centers in Lawrence, Manhattan and Shawnee.
But Don Ford, director of renewable business solutions for the utility, said that, at this point, solar is still too expensive.
Westar and the other large utilities have a mandate to get 20 percent of their power from renewable sources by 2020 and will do that almost entirely with wind, rather than solar.
Ford estimated the price to build and operate a utility-scale solar installation at $2,250 per kilowatt of capacity, compared to wind at $1,500.
In addition, solar power plants in Kansas are only about 15 percent efficient throughout the course of a year, he said, That means that the solar panels generate just 15 percent of the electricity they could if they got full sun 100 percent of the time. That’s because of night, clouds, storms and haze.
A windmill operates at between 30 and 40 percent of capacity, or more, in Kansas.
Solar may become more competitive in the future, he said, but he doesn’t expect that to happen until after 2020. Westar already has its plans for alternative energy locked in.
The price of solar equipment has some room to fall further, he said, and the cost of competing sources could certainly rise, depending on new regulations such as the ones that are now forcing the shutdown of coal-burning plants.
“We like the idea of diverse generation; we’re always looking to see what is the most cost-effective,” he said.
But Ford said one fact is clear: Utility-scale solar power generation is cheaper than having people put solar panels on their roofs.
The biggest reason those rooftop systems seem as cost competitive as they are, he said, is because of the quirks of net metering.
Individual users are able to enjoy sufficient power year-round, sometimes overproducing and sending electricity onto the grid, and other times drawing power from the grid. The idea is that over the course of a year, they will average zero power.
But the users pay nothing to ensure that they have power anytime and all the time. Users aren’t paying Westar adequately for maintaining that backup system, Ford said. It’s like having an enormous, no-cost, battery in the backyard.
“That’s cost shifting onto the other users,” Ford said.
That’s not a problem now, he said, because there are so few people using net metering. If the numbers rise substantially, it could become a fairness problem.
“I don’t think it’s quite there,” Ford said of solar power. “Prices may come down to make it more economical and the price for other sources may go up, or the federal subsidies may expire to make it even less attractive. Eventually it may make sense.”
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