Solar power heats up as costs drop, electric rates rise
By Steve Everly, The Kansas City Star, Mo.
Apr. 26--The prospects for solar energy in the Midwest are brightening.
Surprised? You shouldn't be.
The Midwest gets plenty of sunshine -- more than Germany, which uses more solar power than any other country. Kansas City has the same percentage of annual sunshine as San Antonio, for example, and Dodge City, Kan., has as much as Miami.
And the big cost considerations that for years have held back solar power in the region have changed. The price of solar panels has dropped substantially, and the Midwest's traditionally low electricity prices are on the rise.
Those factors came together recently for Tom Lawler, a Commerce Bank vice president. As coordinator of the bank's sustainability efforts, he has crunched the numbers on solar power for years. But this time he got a big surprise. They made economic sense.
The payback time for a solar panel project had plummeted from 25 years to just 10 years. As a result, Commerce this month is installing photovoltaic panels at its branch at 135th Street and State Line Road in Kansas City.
Area interest
Solar power still isn't a bargain, but many other Midwest businesses and homeowners are agreeing with Commerce: It has become a viable investment. New solar customers range from a couple in Lee's Summit to Posty Cards, a Kansas City greeting card company that later this year will install the largest solar installation in Missouri. Kansas City Power & Light plans to have its first solar power installation up and running next year.
Ray Baisch of Lee's Summit is a retired custodian who worked at the Federal Reserve Bank in Kansas City. He believed President Jimmy Carter when he gave a speech in the late 1970s warning that the U.S. was wasting energy and relying too much on imported oil.
Baisch looked for ways to conserve and became a believer in solar energy, but he was put off by the cost. As recently as three years ago, a system for his home cost $38,000, but that price has come down to $30,000. Various government and utility incentives now cut that price in half for him. Baisch was the first KCP&L customer this year to take advantage of the utility's solar-installation rebates.
"If I had my way, every new house would come with solar already installed," he said.
Gaining traction
To be sure, solar energy remains in its infancy in the U.S., providing only 1/1000th of the country's electricity generation. But the amount of solar-generated electricity in U.S. homes doubled last year, and a growing number of businesses are jumping in. FedEx recently installed the largest rooftop solar installation in the country in Woodbridge, N.J., and Wal-Mart has solar installations supplying power to about 20 of its stores. Overall, solar capacity for the first time moved above 2,000 megawatts, enough to power 350,000 homes, convincing many in the industry that solar is at a turning point.
Last year was the best ever for the U.S. solar industry, and 2010 is expected to be even better.
"We expect a breakout year," said Rhone Resch, chief executive officer of the Solar Energy Industries Association.
Solar has always been a tough sell in the Midwest, but several trends are helping make it more competitive:
--The cost of photovoltaic panels, which account for just over half of a solar installation, have plummeted 40 percent in the last year, thanks to cheaper prices for silicon and ample manufacturing capacity.
--Available incentives have never been more generous. Federal tax credits or grants are cutting the cost of commercial and residential solar installations by 30 percent. Businesses also can accelerate depreciation of their investment, helping recover their costs faster. Other incentives include the KCP&L rebate for its Missouri customers, which can lower a system's cost an additional 25 percent or so.
--The Midwest's low prices for conventionally generated electricity are going up. KCP&L, for example, will have raised rates about 40 percent in just a few years if its most recent rate request is granted.
--Several states, including Kansas and Missouri, are encouraging use of renewable energy, including requiring utilities to use more. Missouri's law specifically requires some solar use, and both states require utilities to buy excess renewable energy produced by households and businesses.
Evolving business
Solar power has had some success in the past, but mainly with solar thermal products such as water heaters and devices that provide warm air to heat homes. Those applications account for most of the solar energy used in the U.S., with paybacks of six to eight years. But the idea of using nonpolluting sunshine to generate electricity has gripped the imagination of environmentalists and others for decades. The enthusiasm is easy to understand, given that all the energy stored in Earth's reserves of coal, oil and natural gas is matched by the energy from just 20 days of sunshine.
"I'd put my money on the sun and solar energy," Thomas Edison said in 1931.
A big step toward making that happen occurred in the early 1950s when a Bell Laboratories scientist found that a wafer of silicon exposed to sunshine produced electrons. That was the start of the photovoltaic panels used today to produce power.
Through the years, the technology improved, the price dropped, and the government and utilities have increased their incentives to adopt solar power.
The federal government has had a 30 percent tax credit for solar, but it was capped at $2,000. When that limit came off more than a year ago, inquiries increased, said Susan Brown, vice president of business development for the Energy Savings Store in Lenexa.
Her company has offered photovoltaic systems since it opened seven years ago. The first two years, it sold none. Since then it has sold 100, with the majority installed in the last two years.
Commercial property owners also are showing interest -- a big change from the past, when some who bought solar-equipped buildings had the panels removed because they didn't want to mess with them, said Phil Thomas, president of A.L. Huber.
His company constructs commercial buildings and recently installed photovoltaic panels at its Overland Park headquarters.
"Everyone now is interested in sustainability," Thomas said.
Commercial projects now are eligible for grants in place of tax credits, so they can get their 30 percent break on costs much sooner.
Taking the plunge
Erick Jessee, president of Posty Cards, was considering a solar project to meet 7 percent of his business's electric needs. He said the grant helped him decide to go for an even bigger installation, able to supply 11 percent of his electricity. He considered other energy alternatives but settled on solar because his property didn't have the right soil for a geothermal heat pump, and wind turbines don't perform as well in urban areas.
His company's solar project, to be finished later this year, is part of a $6 million, 25,000-square-foot expansion of the company's plant. It will consist of 198 photovoltaic panels and is expected to be the largest solar installation in Missouri.
"We just want to do the right thing," Jessee said.
Still, Posty and others have to look at the economics. A 10-year payback was a bit longer than Commerce Bank would typically accept, but it was close enough to get the project serious consideration. The branch that is getting the solar panels will be a test to see how it works in "real world conditions," but Lawler doesn't think there will be many surprises.
"I don't think there are a lot of unknowns," he said.
Some of the toughest converts to solar could be the utilities themselves, in part because a generating-station-size project takes a lot of land.
Westar Energy, Kansas' biggest electric utility, hasn't rejected solar energy outright but says its preferred alternative is wind energy. The state ranks No. 2 in the country for wind-energy potential, and costs are lower.
"Right now, solar is still five or six times higher than with wind," said Don Ford, a project manager for Westar.
KCP&L doesn't disagree about the cost, but it's still going ahead with 4 megawatts of solar power next year. That will go toward meeting Missouri's renewable standard, and it will give the utility a chance to work with solar, which could become more important in the future.
The federal Energy Information Administration projects wind will be a tough competitor for solar for utility-scale installations. But it sees more growth for smaller solar installations in residences and commercial buildings.
KCP&L is pursuing that angle as well. The utility is installing 180 kilowatts of solar power in Kansas City's Green Impact Zone on schools, businesses and residences as a pilot project.
"In the future, this is going to be significant," said Kevin Bryant, vice president of energy solutions for KCP&L.
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Part of an occasional series Wind farms and ethanol are familiar fixtures in the Midwest. But the region has little-known potential for virtually every unconventional energy source, from solar, geothermal and hydropower to cleaner ways to power our cars and trucks. In occasional stories throughout the year, energy reporter Steve Everly will explore and explain those possibilities -- and what's already under way.
------ Solar electricity in the Midwest Big advantage: The fuel is free, and the Midwest has sunshine to match Texas, Florida or just about anywhere in the country outside the desert Southwest.
Big drawback: Upfront costs, though those are coming down. Conventional electricity is still needed, especially at night.
Economic factors: Solar-panel costs are way down, and federal tax credits or grants can cut costs 30 percent. More utilities are helping with rebates, too. And with conventional electricity prices on the rise, the payback time for many solar projects has dropped by more than half.
Short-term potential: Electricity from home installations doubled last year, the best year so far for the industry, and 2010 is expected to be better.
Long-term potential: Promising for small scale, but uncertain for large-scale generation. Midwest utilities are focused more on wind power for their own alternate-energy electricity generation. ------
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To reach Steve Everly, call 816-234-4455 or send e-mail to severly@kcstar.com.
