New Mexico’s solar energy developers say their industry is finally hitting its stride as thousands of new residential and commercial customers opt to go solar, and more utilities nationwide turn to the sun for electric generation.
Plunging prices are driving the market for solar systems, with waves of homeowners and commercial establishments tapping into sun power to offset rising electric utility bills. And, with many more financing options available today, plus a lot more solar companies competing, solar generation is beginning to penetrate the consumer mainstream.
“We continue to see about 20 percent more growth per year as more people become aware of the opportunities,” said Regina Wheeler, CEO of Sunpower by Positive Energy Solar, which installs residential and commercial systems throughout the state. “There’s solid knowledge today that solar is a viable, attractive way to fix a customer’s long-term energy costs at an affordable price. It can help control unlimited utility costs and people understand that now.”
Jerry Mosher, managing member of Consolidated Solar Technologies LLC in Albuquerque, said his business is signing up a lot more residential and commercial customers.
“We’re doing a lot more solar installations than we used to,” Mosher said. “Business is very steady, whereas before it was up and down. The solar market has matured now to the point where it’s a pretty steady deal and there’s still a lot more room to grow.”
By all counts, 2015 was a banner year for the industry in New Mexico and nationwide, and 2016 is so far shaping up to be even better.
As of early this year, the U.S. market had reached 1 million solar installations – a milestone representing 27.5 gigawatts of installed generating capacity, or enough electricity to power 5.4 million homes, according to the national Solar Energy Industry Association.
The SEIA expects another 14.5 GW to be installed this year, or nearly twice the 7.3 GW developers built across the country last year.
As of year-end 2015, New Mexico had about 400 megawatts of installed capacity. That includes 85 MW of residential and commercial systems, and 316 MW of utility-scale generation scattered throughout the service territories of New Mexico’s public utilities and electric cooperatives.
The generating power of solar systems can vary widely. Some utility-scale plants provide enough power per MW only for a few hundred average homes. Some offer a lot more, depending on location, type of technology used, and strength and availability of sunlight.
Public Service Company of New Mexico accounts for about 41 percent of all installed solar capacity in the state. That includes 15 utility-scale projects with 107 MW of capacity, which PNM says is enough to power about 140,000 average New Mexico homes.
All told, New Mexico ranks 8th in the nation today in terms of installed solar capacity per capita, according to the Environment America Research and Policy Center.
New Mexico’s utility-scale solar has increased as public utilities strive to meet the state’s renewable portfolio standard, which requires them to derive 15 percent of their electric generation today from renewable sources and 20 percent by 2020. Although PNM has no immediate plans to procure more solar now, other utilities and cooperatives are building new installations and the renewable portfolio standard will drive more procurements in coming years.
Residential and commercial installations are booming in part because of state-mandated utility incentives to encourage consumer adoption, plus a 10 percent state tax credit for solar installations in effect since 2008.
Until recently, PNM and El Paso Electric Co. in southern New Mexico offered payments to customers for each kilowatt-hour of solar electricity they produced, which helped consumers and businesses offset the costs of installing systems.
Those utilities also offer net metering, which allows customers with solar systems to sell all the excess electricity they produce back to the grid at a price equal to what PNM pays for its own electricity. That net metering is separate from the renewable payments, which PNM pays to consumers for helping it meet its RPS mandates.
To date, 7,100 customers have signed up for PNM credits, said Kumiko Styes, the utility’s customer solar program manager. That’s up from 4,400 in 2014.
“It really has exploded,” Styes said. “2015 was a big year, but 2016 has been even bigger.”
This year, many PNM customers rushed to get their applications in because the payment program is winding down. Payments fell from 13 cents per kwh in 2009 to just 2.5 cents by year-end 2015. And, as of mid-2016, PNM stopped processing new applicants because the number of customers seeking credits surpassed the money available in the program.
“We’re fully subscribed now, so we’re not paying renewable energy credits for the rest of this year,” Styes said. “We received like 2,200 applications and we have hundreds on the waiting list.”
PNM is seeking approval from the state Public Regulation Commission to restart the program in 2017, but at just one-quarter cent per kwh. El Paso Electric’s payment program ended entirely in 2015.
The 10 percent state tax credit also came to an end this year. That credit was formally scheduled to sunset in December, but available funding ran out in July and no more credit applications are being accepted.
Nevertheless, solar installation companies expect residential and commercial markets to keep growing. For one thing, PNM and El Paso Electric still offer net metering, which solar companies say is far more critical for consumers to offset system costs than the renewable energy payments.
In addition, the federal government still offers a 30 percent tax credit for solar systems and, in December, the U.S. Congress extended that through the end of 2019 before it begins to slowly ramp down.
Most important, solar prices have spiraled downward. Prices for both residential systems and utility-scale power plants declined by more than 50 percent from 2008-14, according to a recent study by Lawrence Livermore National Laboratory. In 2015, prices overall fell another 17 percent, according to the SEIA.
Today, for example, an average 4.4 kilowatt residential system in New Mexico costs about $17,000 before tax credits or other incentives are factored in. That’s down from about $30,000 in 2009, according to some local installers. And, with credits and incentives, the actual cost to consumers ends up much lower.
That same system, for example, would be reduced to just $11,900 after federal tax credits are factored in. And, with financing, the average New Mexico homeowner would in the end pay about $99 a month, or less than the average monthly bill for many utility customers today.
Constant technology improvements for solar panels and components, plus increased operating efficiencies by installation firms, have cut costs. More solar companies are also operating here and elsewhere, offering better deals and broader options for consumers. That includes leasing, rather than buying solar systems, although there are costs and benefits to those new alternatives, such as ongoing responsibility for a lease contract when selling a house.
There are also many more lending institutions providing financing.
All that is generating fierce competition, creating economies of scale that help lower prices. New Mexico now has about 60 contracting and installation companies, including national firms like Solar City and ZingSolar that entered the market last year.
As a result, most solar firms are poised to absorb the loss of New Mexico’s state tax credit, as well as the decline in renewable energy payments from utilities, said Ryan Centerwall, CEO of Albuquerque-based Affordable Solar, which installs systems here and sells them nationally.
“It shows the development and maturity of the industry,” Centerwall said. “Even without state incentives, we’re still able to save customers money from day one and with no money down for a financed system, because it typically costs less now than for utility retail service.”
The industry in New Mexico and elsewhere could face more hurdles in coming years because many electric utilities want to roll back incentives like net metering, while imposing new charges on customers with solar systems. Power companies say they still maintain generating plants, transmission and distribution lines to serve customers with solar installations when their panels don’t provide enough electricity, and those fixed costs remain unchanged, even though utility revenue has declined with more consumers going solar.
When PNM filed for a new rate increase with the PRC in 2014, it asked for changes to its net metering program, plus a new “interconnection fee” on solar customers. It withdrew those things from the rate case in 2015, but they could come back in future rate cases.
For now, however, with net metering unchanged and the federal tax credit firmly in place through at least 2020, installers have more time to drive prices down before solar is forced to fully stand on its own.
“The idea was never to have tax breaks and incentives forever, but rather use them to enter the market and begin to deliver until volume ramps up, and price reductions and economies of scale kick in,” said Mellow Honek, co-founder of the Las Cruces-based installation firm Sunspot Solar Energy LLC.
And, in the meantime, there’s still plenty of room to grow in New Mexico and nationally.
“We have less than 10 percent market penetration overall today,” Honek said. “There’s still a long way to go to hit our peak.”