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The Cost of Going Solar

Copyright © 2012 Albuquerque Journal

Placitas resident Tom Stueber enjoys admiring the solar photovoltaic system on his daughter’s mobile home.

Albuquerque’s Affordable Solar Group installed the system last March for about $9,000, thanks to generous state and federal tax credits, utility subsidies and a sharp drop in solar prices. It should pay for itself in about 12 years.

Public Service Company of New Mexico has been sending Stueber’s daughter a $25-a-month check as a subsidy for helping the utility meet its renewable energy requirements, and as payment for excess electricity fed by the system back to the grid.

When the system sends electricity to PNM, the mobile home’s electric meter runs in reverse to measure what the utility owes the customer, a process called net metering.

“I just love going out there and watching that meter spin backwards,” Stueber said.

Before installing the system, Stueber’s daughter and granddaughter consumed about $50 per month of electricity from PNM. Now, they pay $75 per month on the loan they used to buy the solar system. That includes the $25 check from PNM, so monthly costs remain about the same as before.

In addition, a 30 percent federal tax credit and another 10 percent state credit cut the system’s cost from about $15,000 to $9,000.

Tom Stueber stands in front of a solar photovoltaic system at his daughter’s mobile home in Placitas. The system was installed for about $9,000, thanks to tax credits, subsidies and falling prices. (ADOLPH Pierre-Louis/JOURNAL)

Incentives set to expire

With electricity savings and net metering, Stueber expects the system to pay for itself in about 12 years. And, as PNM electric rates rise, benefits should grow, because the mobile home’s electric costs remain fixed at current levels, while PNM’s reimbursements for excess electricity increase.

“The system is guaranteed for 25 years, so there are no recurring costs,” Stueber said.

Stueber is among hundreds of New Mexicans taking advantage of the tax credits, subsidies and cheap panels to install photovoltaic panel systems on their homes and businesses.

But it’s an open question whether the budding industry can gain enough traction to sustain its momentum without tax credits and subsidies in the near future. Both federal and state tax breaks are scheduled to expire on Dec. 31, 2016. And PNM’s renewable energy incentive payments are rapidly declining, reflecting similar trends in other markets.

“I believe costs for solar systems will continue to come down between now and 2016, but incentives aren’t going to get any better,” said Kevin Bassalleck, co-owner and director of commercial project development at Albuquerque’s Consolidated Solar Technologies. “The federal tax credit could be eliminated, or maybe drop back to 10 percent as it was a few years ago, and PNM’s incentives will continue to ratchet down. It’s tough to say whether it will all balance out to keep today’s payments in line with payments without incentives at the start of 2017.”

Tom Stueber describes the solar PV system that Affordable Solar installed at his daughter’s mobile home in Placitas. Incentives helped reduce the cost from $15,000 to $9,000 for the system, which Stueber expects will pay for itself in 12 years. (ADOLPH Pierre-Louis/JOURNAL)

Panel prices low

Substantially lower costs for solar panels, the core component of photovoltaic systems that convert sunlight to electricity, has driven down prices for installed systems to about one-third the cost from early 2010, said Ryan Centerwall, Affordable Solar general manager for installation business.

“For the average customer, it costs about $10,000 less to install a system compared to two-and-one-half years ago,” Centerwall said.

Most industry veterans expect panel prices to drop further, thanks to a market glut caused by a flood of cheap Asian imports and depressed demand in Europe.

Installers also expect costs to drop for other photovoltaic components, such as solar mounting platforms and DC-to-AC inverters. In addition, workers should improve efficiency through more experience and training. Permitting and licensing costs will fall, and more low-cost financing options will become available, Centerwall said.

Still, price drops alone won’t compensate for the lowering, or elimination, of tax credits and other incentives in 2016. Rather, installers are betting on net metering to keep the industry going in the future. That’s because electricity prices are likely to increase in most markets, which means customers with solar power could get paid more for the electricity they send back to the grid, while paying a fixed cost for their own home-generated power.

This solar power meter installed along with the solar PV system on Tom Stueber’s property in Placitas measures the amount of energy generated by the system and consumed by his daughter and granddaughter, who live in the mobile home the system powers. They receive a $25 check every month from PNM as a subsidy for helping the utility meet its renewable energy requirements, and for the excess electricity generated by the system and sent back onto the grid. (ADOLPH Pierre-Louis/JOURNAL)

Betting on net metering

Bassalleck and others say net metering is more important for industry sustainability than the utility incentives, known as renewable energy credits, that PNM and other electric companies pay to customers with solar. PNM launched its incentive program six years ago to comply with state mandates for more clean electric generation, but subsidy payments have decreased from about 13 cents per kilowatt-hour for homeowners with photovoltaic systems in 2009 to just 4 cents per kilowatt-hour today.

In its 2013 renewable energy procurement plan, PNM asked the state Public Regulation Commission to allow payments to keep ratcheting down through 2016, when subsidies would bottom out at 2.5 cents per kilowatt-hour.

Kumiko Styes, PNM’s customer solar program manager, said 2,600 customers now participate in the program, and the number keeps growing despite declining incentives.

“This year, we’ll sign up the largest number of customers since the program began,” Styes said.

The incentives produce the least bang for PNM’s renewable energy procurement buck. Under PNM’s 2013 procurement plan, the utility earmarked about 44 percent of clean-energy spending on subsidies for customer-sited systems, but those installations will only provide about 10.6 percent of all clean energy procured.

A push to eliminate

Given its high cost and the fact that declining payments are not stunting the market, Industrial Energy Consumers want the PRC to end renewable energy “diversity requirements,” which obligate PNM and other utilities to derive a percentage of their clean energy from customer-sited systems, said the group’s general counsel, Peter Gould.

“Diversity quotas have upped the cost of renewables,” Gould said. “Going forward, utilities should be allowed to purchase the least-cost renewable energy available.”

PRC Commissioner Jason Marks, whose term ends in December, said he believes the incentives should continue a few years more to allow customer-sited solar systems to reach “grid parity,” or a price comparable to other electric generation.

“These systems will probably hit grid parity in about five years with the incentives,” Marks said. “Without them, it will take a little longer.”

Meanwhile, customers are benefitting from the best of all worlds, including price declines, net metering, tax breaks and subsidies.

“It’s one of those investments that’s kind of a sure bet,” said Ray Danen, a PNM customer who installed a solar system in July on his 2,000-square-foot home on Albuquerque’s West Side. “The system will pay for itself in about eight years, less if PNM’s electric rates go up. I don’t have to wonder if I’ll get a return, I know I will.”