Who Buys Solar Panels?

Published on March 29, 2009 by Dave Llorens.
Categories: Solar Trends.

I remember when I got into the solar industry about 3 years ago. It all started when Dan harped about the solar energy subsidies in Oregon where he lived, and how there should have been a lot more solar but no one knew about the financial benefits. We had grandiose ideas of how to help, and I got a sales job in San Francisco with an installation company to dig in and see if we could change things. We abandoned our original idea, but I learned so much as a sales person because I got to see firsthand who buys solar and who doesn’t, and why. Here’s some of the interesting stuff I learned:

Disillusionment #1:  Solar Purchases are usually made for financial motivations, not environmental.

When I started my job, I envisioned that about half of my customers would buy solar panels for environmental reasons, and 50% would buy for investment reasons (saving money on electricity).  Initially it actually appeared as though this was the case.  However, I soon learned when it came down to signing contracts, it flipped to more like 95% financial motivations and 5% environmental factors. Bottom line? It has to pencil out to a wise financial move for people to pull the trigger. But hey, that’s the way it is and fighting that is a big uphill battle.  But working inside of that paradigm makes all the difference.  The subsidies available today make it a pretty wicked investment in a huge slice of the pie; it’s just an issue of getting that knowledge to be commonplace.  The rest of the work will come from smart financing like solar leases, PPAs, or municipal solar financing, bringing the cost of solar down with better manufacturing processes or community solar purchasing, and education (can solarpowerrocks.com get a ‘holla?’).

Disillusionment #2:  Really wealthy people are actually LESS likely to purchase solar energy

I remember putting door hangers on these giant homes in San Francisco thinking, “this is going to be like shooting fish in a barrel,”  because in California, the larger your power bill, the more solar makes sense.  The reason for this is that the utilities charge people more for energy as they use more, in a tiered rate structure, to “punish” heavy users. Because their power costs more, the solar systems pay for themselves much quicker. Ironically though, all I heard from these neighborhoods was crickets and tumbleweeds… nothing.  What the hell?  $30,000 to the owners of these homes is nothing… what’s the problem?

At the same time, I was getting a MASSIVE inbound response from certain other areas. But these areas were not full of rich people. I didn’t get it.  Over time, I figured out that the sweet spot is this:  areas that are heavily saturated with owner occupied homes and socially conscious demographics, but also people who are still concerned about their monthly expenditures and saving for the future.  Turns out, if you can write a check for your $800 power bill each month and not bat an eye, you’re less likely to be interested in solar.

Here you can see a map of where people get solar in SF.  These people signed up to get low cost solar panels in a group at One Block Off the Grid, which is what I’m working on now.  These were not targeted, it is who came to us, so you can where the real interest is.

Disillusionment #3:  It’s not as easy as I’d thought to convey the value proposition of solar in a financial “slam dunk” situation.

I did a site evaluation and proposal for a laundromat in SF once.  There was a new San Francisco solar incentive program that offered $10,000 cash. The state rebate offered about another $15,000, and the Federal Tax Credit about $20,000.  Then there was their advanced depreciation schedule which was another $15,000-ish.  Point is, sure they had to shell out a ton of cash to BUY the system, but their net cost for a capital improvement to their building worth near a hundred grand ended up costing them only about $10,000 net.  So not only do they get a capital improvement basically paid for straight up, the rest of the system PAYS FOR ITSELF by saving them money on electricity, in about THREE YEARS!!!  And after that it’s all gravy, and every time their electricity rates go up, their property becomes more valuable.  Easy sell, right?

No.  This particular business owner could have written a check for this that day and not flinched, yet he never did it, and this story repeats itself a dozen times. I guess I was just a crappy salesperson because I never pressured anyone.  I just assumed they’d see this and obviously do it but here’s the rub, and it’s two-fold:

1) This is in-home sales for a product that no one understands.  People have questions, I have all the answers, but I’m also trying to sell them something at the same time.  The result is that, almost universally, people will think the solar industry is trying to ‘dupe’ them into thinking solar is a wise investment, when in a lot of cases, like this one, it is not only a good investment, but an insanely good one.  If we can get people to stop thinking we’re just pretending it’s a wise investment, and actually believe it might be, we’ll see the tipping point in solar.

2) This is a long term proposition.  I heard a great analogy from Cisco DeVries, who created the municipal solar financing program for Berkeley.  He said, and I paraphrase, “If I tell you I’ll sell you your cell phone minutes for half price, up front, for 20 years… you’d never do that, right? Even if it made sense… and that’s what we’re asking people to do with solar.”  It’s a complicated proposition, and any doubt is amplified 20 fold by point #1 above.

First Feed-in Tariff Hits US in Gainesville Florida

Published on March 14, 2009 by Dan Hahn.
Categories: Solar Politics.

A lot of the feedback we get is that going solar is simply too cost prohibitive at the moment. You’ve got other things going on right now, the economy is shaky, and now is not the time for you to let go of thousands of dollars to do this, even if the system pays dividends immediately after you are tied back into the grid. There’s just not enough of a reason to climb up onto the counter and snag it out of the fishbowl. Sure is pretty to look at though.

Guess what? Your utility company has eyes to pounce solar energy out of the fishbowl and serve it up to you on a plate. Why? Sources close to me have confirmed higher renewable portfolio standards will be a reality for energy in the coming years. This means the cat above will be required to derive more of its energy mix from renewable sources by a certain year target than it does currently. It’s like lacing the fish and fishbowl with catnip.

Due to these standards, some municipally owned utilities are beginning to get creative. For instance, in Gainesville Florida, the municipally owned utility has guaranteed cash payments double the going rate of electricity to homeowners who install solar electric systems for the energy they produce- for 20 years. It’s called a “feed-in tariff”, the same mechanism which spurred relatively cloudy Germany to have the most solar installed per capita in the world.

The trickier question is, where does all the money, er.. catnip come from to do this? Certainly, it will not come from taxpayers. Instead, in the Gainesville case, ratepayers will foot the bill for the cash payments to those that go solar. The system they’ve rolled out increases ratepayer’s electric bills by 74 cents a month. Some people are displeased with that scheme, since the flat utility charge actually is a regressive tax of sorts. For instance, a homeowner using a lot of electricity – say $300 a month would now be paying $300.74 a month – not such a big difference. However, if you only use $35 a month and now pay $35.74 a month, this isn’t really fair. Perhaps other utilities will go with a per kilowatt-used charge in the future.

Feed-in tariff legislation is in the works in the states of Hawaii, California, Oregon, and Washington. Stay tuned!

Never heard of municipal solar financing? You probably will soon.

Published on March 4, 2009 by Dan Hahn.
Categories: Solar Politics, Solar Trends.

image courtesy of tsevis on Flickr

President Obama comprised of our state flags. I thought it was a little funny he’s just so.. Alabama? Well, if he was all Arizona, he’d look like a blueberry and that would just be silly.

As most of you are well aware, the President recently signed a $787 Billion dollar stimulus package. Many people I come across say seemingly the same thing when they learn I sell commercial solar energy systems: “That stimulus was good for you, huh?” All I can really mentally, logically muster is a, “Yeah, sorta”.

In all actuality there was no huge groundbreaking solar energy legislation included in this bill that will translate into an immediate “stimulus”. Most people seem to think solar energy companies would be in line to receive billions of dollars in funds in a similar fashion as Citibank, GM, etc. This was simply not the case, nor will it be the case. However, there was some positive to come from the bill:

First, the 30% federal tax credit for businesses was converted into more of a grant arrangement. This was crucially important because more and more businesses simply do not have the tax liability for the incentives to have much of an effect. Cash is now king, and legislators took note.

I’ve yet to see how this will actually work and I’ve heard rumblings the Fed will actually be cutting checks in the very near term. This is all new, so there’s a lot of new processes to be developed. No word yet on whether this grant money will be considered taxable income or not.

The main concern is, even if the government goes ahead and fronts 30% of the upfront cost, businesses by and large are not prepared to fork over the other 70%. Couple that with our banking system’s inability to lend out any new money for such projects, and you’ve got a somewhat ineffective “stimulus”.

Second, the IRS tax code was clarified to allow homeowners to take both the federal tax credit and participate in municipal financing arrangements for solar power. Now this could potentially be much more of an interesting development.

A few weeks ago I had a substantive phone conversation with Nina Erlich-Williams who represents Renewable Funding LLC. If you’re new to the idea of municipal financing for solar power like I was, (I had to back up the conversation a few times to really wrap my brain around the idea) you’ll want to perk your ears up a bit.

Here’s how it works: First, state legislatures enact a law which enables municipalities in the state to issue a bond for solar energy. Next, municipalities do a study to see how many of their residents would likely participate in the program. Then, municipalities announce to their residents they will cut a check for the total installed amount for a solar energy installation in exchange for a property tax increase which gets paid off annually for 20 years. The interesting thing is, there’s no credit application. The home is collateral and the homeowner is not saddled with the property tax increase if they sell their property before year 20 – the new homeowner is. Finally, the municipality sells the bond obligation to a company such as Renewable Funding to handle all of the transactions and provide administrative oversight.

Programs like these have launched already in the California cities of Berkeley, Palm Desert, San Diego, San Francisco, Santa Monica, Sonoma County and Solana Beach. The Colorado legislature also has made the necessary provision for municipalities in that state to do the same. Legislation to set up the program has been introduced (or is being finalized) in Oregon, Nevada, New Mexico, Arizona, New York, Vermont, and Texas. Other states that have expressed interest include New Jersey, Michigan, and Washington. If Berkeley was any indication for a success of the program, things are looking rosy for this type of funding mechanism. Berkeley’s multi million dollar bond allotment was all spoken for by residents in less than a week nine minutes.

Now, while billions of taxpayer dollars were not spent in this tax code clarification, that was sound legislation which will undoubtably lead to more jobs and solar on roofs. While many clamor for feed-in tariffs like those that were in place in Germany for the past decade, we’ll have to wait and see how this type of funding mechanism compares.

These are not bangzoom provisions for solar, but they are a definite help. I’m expecting bigger things from this administration and am confident in 2012 we’ll have cap and trade programs in place coupled with feed-in tariffs to really get our industry moving. If not, the idea of Obama being comprised of the Alabama state flag might not be too far off the mark.