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New Laws Reshape, Fuel Solar Power Growth by Celia Lamb Sacramento Business Journal, October 20, 2003

Rebates generate call for more energy businesses

A rebate program that's helping pay for a small but noticeable uptick in commercial renewable power systems has won a four-year extension.

The renewed program should generate more solar power projects at Greater Sacramento businesses, like the one that went up on the roof of La-Z-Boy Furniture Galleries in Rancho Cordova last month. It should also stimulate more business for regional solar power companies like RWE Schott Solar Inc., which provided the La-Z-Boy store's new system and is part of Greater Sacramento's growing solar-power industry.

As rebates have boosted the demand for solar power in California, solar power consultants, installers and manufacturers from all over the country have set up shop here. Greater Sacramento now has more than 30 solar power companies listed on Web sites of the California Solar Energy Industries Association and the state Energy Commission.

The market is also dividing as local solar companies start specializing in manufacturing, distribution or installation. Schott handled the entire La-Z-Boy project, from making the photovoltaic panels in its Massachusetts plant to installing them on the roof of the 22,400-square-foot store. But the company thinks it may have a lot more business in the future as a provider of solar equipment for others to install.

"The market has really grown now where it's attracting the interest of other contractors," said Tom Starrs, Schott's vice president of sales and marketing.

Heating, ventilation and air conditioning contractors are getting into the act, along with roofers and general electrical contractors, he said. Recently Schott has worked with mechanical contractor Cal-Air Inc. of Whittier to put photovoltaic systems on a Sonoma County building, a police station in Cotati and a middle school in Modesto. Schott supplies the equipment and some engineering expertise; Cal-Air handles the rest.

The rebates have helped pay the way, at businesses from Davis to Auburn.

Inspired by rolling blackouts: During the 2001 energy crisis, the Legislature and the state Public Utilities Commission created the Self-Generation Incentive Program that pays the rebates. It was scheduled to expire at the end of this year. Assembly Bill 1685, introduced by San Francisco Democrat Mark Leno and signed by Gov. Gray Davis on Sunday, extends the program through Jan 1, 2008.

The incentive program, run by the state's three major utilities, pays up to half the cost of solar power systems large enough to meet the needs of a small business. All commercial customers of Pacific Gas and Electric Co., including those who buy natural gas from PG&E and electricity from the Sacramento Municipal Utility District, are eligible. The rebate money comes from charges paid by all PG&E customers with their bills.

Since June 2002, PG&E has paid out more than $15 million for 5,300 kilowatts of solar power. The Rancho Cordova La-Z-Boy store is the most recent business beneficiary in Greater Sacramento.

Other businesses paid through the PG&E program include Davis Lumber & Hardware Co. in Davis, which received $140,000 for a 30-kilowatt system, and Nella Oil Co. of Auburn, which received $200,000 for a 37-kilowatt system on a gas station in Newcastle. Nella Oil also owns gas stations in Auburn and Grass Valley that use solar power.

Other projects are in the works, including a solar-powered warehouse and office that Fillner Construction Inc. plans to build in Rocklin.

La-Z-Boy gets energized: The incentive program also offers rebates for wind power, fuel cells, natural gas generators that reuse waste heat, and microturbines installed in commercial buildings. But more than 80 percent of the money has gone to solar projects.

PG&E pays $4.50 per watt, or up to half the cost of solar power systems from 30 to 1,500 kilowatts. A 30-kilowatt solar power system could power 10 to 20 homes, according to Schott.

Solar power systems use photovoltaic panels containing silicon semiconductors to turn sunlight into electricity. The 30-kilowatt system installed by Schott is expected to provide about one-third of the power needed for the La-Z-Boy building.

"My real motivation wasn't so much the financial side, although I think it's a pretty good investment with the (incentives)," said store owner Jim Reego. "It just seems silly to have so much roof space with the sun shining on it."

He touted the benefits of producing clean energy, including reducing greenhouse gas emissions and helping California get more independent from out-of-state energy suppliers.

"It would just be great to see California not (held) hostage to energy crises," Reego said.

The La-Z-Boy store's system should pay for itself in about seven years, Schott representatives said. It has 216 photovoltaic modules and a data acquisition system that gives a daily update on the amount of electricity produced. A "net meter" installed by SMUD spins backward if the panels produce more electricity than the store can use, but that probably won't happen too often given the size of the system.

The system, produced by Schott under the trademark SunRoof, is glued to the roof instead of bolted down. That was important to Reego, who worried that holes in the roof might leak.

Reego and PG&E each paid $83,568 of the total $214,950 cost. SMUD kicked in 77 photovoltaic panels at a cost of $40,000 through a public interest energy research program it operates for the state Energy Commission.

"We have been working on research and development to help move the industry along and help make photovoltaics more affordable," said Ruth MacDougall, a project manager in SMUD's renewable power generation group.

SMUD's rebate plans: The Sacramento region has long been known as a solar power leader in the nation, largely due to SMUD's past solar programs. SMUD has about 10,000 kilowatts of solar power on the rooftops of homes, churches and public buildings, and in public areas such as the Cal Expo parking lot.

A few businesses in SMUD's service area, including Arden Fair Mall, the Limn furniture store on Arden Way and Sav Max Foods on Auburn Boulevard, have installed solar power. But by and large business has lagged the trend in Greater Sacramento.

Since SMUD's electric rates are cheaper than PG&E's, its commercial rebates haven't been as high as those offered through the self-generation incentive program, said Stephen Frantz, a program planner in SMUD's customer services group. SMUD hopes to change that starting next year by offering an additional rebate on top of that offered by PG&E. SMUD hasn't set the rebate level yet, but it will probably be $1 to $2.50 per watt, Frantz said.

Since power use in California typically peaks in late afternoon, when many people are running computers and air conditioners at work, commercial solar power offers a greater hope than residential projects for reducing the likelihood of future energy shortages. Businesses may also see a return on their investment sooner than homeowners.

"The economics are actually better for many commercial customers than they are for residential customers," said Schott's Starrs.

He cites three reasons. First, commercial electric rates are often based on when power is used. Rates are usually highest during the day, when solar power is most effective. Second, businesses can depreciate the costs of new solar power systems.

And finally, businesses may be able to write off the purchase on their tax returns. The state offers a solar and wind energy tax credit of 15 percent of the cost of equipment and installation, but that credit will drop to 7.5 percent at the end of this year. [ed note: also a Fed Tax credit of 10% is available]

SMUD hands off installation: SMUD sees an opportunity to get out of the installation business without giving up on solar power.

"After years of providing turnkey systems ourselves, we feel the photovoltaic industry has reached the stage where they're ready to come into this market," Frantz said.

SMUD plans to promote its upcoming commercial rebate program among its customers, but it won't do the installation. Businesses seeking solar power will pay independent contractors to obtain and install the systems.

The utility plans to solicit contractors who have previous experience installing photovoltaic panels. SMUD will pay the rebates to contractors with the understanding that contractors will break out the rebates in their price quotes.

"We really want to let the market work, and we want to make sure the contractors are ones we can bank on because of their experience," Frantz said. "The thing you really don't want to happen is for upfront rebates to start to increase the price of the systems."