Will Solar Make It?

Solar Power is here in a big way.   It may not make the front pages of the paper, but it is huge.  The rate of new installations is breathtaking.

Large retailers like Target and Walmart are putting solar arrays on the roof of their stores to reduce energy costs over the long term. British Petroleum may have been one of the first companies to consider the implication of eliminating the cost of electrical power from their operating expenses.  The long term benefit of converting the unused roof space on local gas stations are staggering, and may have been the incentive for BP to enter the solar manufacturing business.

And why wouldn’t businesses be interested in reducing their costs?  Especially when the costs are paid for by subsidy programs from the power companies, incentive programs from the Federal government and in many states, programs from the state level to help pay for the technology.

I don’t even know how to do the math on this one.  The utility contribution is often 30% or more of system cost paid directly to the contractor.  The Federal contribution is another 30% plus 5 year accelerated depreciation.  Some states have subsidies of 20 and 30 percent.  So 80 to 90 percent of the direct cost is paid by others, plus the depreciation value.

What a great deal!  It’s not surprising that the solar industry is booming.

But is this how American businesses run?  I thought that the incentive to start a business is the opportunity to make a profit.  To earn money for goods and services, pay a living wage to employees and hopefully return a profit after everything ia accounted for.

Well not in New United States.  We underwrite new businesses with Tax dollars when the government decides the situation is important enough.

But the utiliity companies are running out of money to pay for the incentive programs and are having to cut back.  And the Federal and State subsidies must eventually follow suit.  What then?  Will the needed jobs be created or will the industry stall?

We come back to the Absolute Value of the technology.  Actual ROI’s for the standard photovoltaic systems going into today’s projects are in the range of 9 years without the discounts and subsidies.  If  Solar Power is going to make it as an industry it has to achieve better rates of return, especially as subsidies become less available.

Silicon based photovoltaics are falling in price.  Which would seem to be a problem, but in fact, falling cost should lead to more sales.  As the technology becomes less expensive, it’s rate of return increases.  If panel prices are falling, then the balance of system costs, labor and installation, will be under pressure to find means of cost reduction..

There is a lot of work to be done to get solar energy to stand on it’s own.  I say, let’s get to it!