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Heyday for solar?

New law could spur solar boom here, but many greenies wary
by: JONATHAN HOUSE, Solar panels atop Multnomah County's Yeon Building in Gresham, one of the largest solar installations in Oregon.

A new solar energy law could quadruple the solar power produced in Oregon, but many renewable-energy advocates say the law is flawed and may be counterproductive.

House Bill 3039, signed into law July 22 by Gov. Ted Kulongoski, introduces a 'feed-in-tariff' funding system, which vaulted Germany into world leadership in the use of solar power and solar-components manufacturing. The law also makes Oregon the first state in the U.S. to require utilities - Portland's Pacific Power and Portland General Electric - to procure solar energy from large-scale facilities akin to power plants.

Some solar promoters say the law augers a leap forward by requiring utilities to buy solar power, at above-market prices, produced from photovoltaic panels on homes and other buildings. That in turn would boost the state's burgeoning solar manufacturing industry - on the world map since Germany-based SolarWorld opened the nation's largest solar-panel plant in Hillsboro last year.

The new solar law, combined with the state Business Energy Tax Credit and a 2007 renewable-energy mandate for utilities, is 'another tool in the toolbox to take it to the next level,' says Desari Strader, executive director of Oregon Solar Energy Industries Association.The tax credits and renewable-energy mandate 'jump-started' wind power production in Oregon, Strader says.

'Now it's our turn.'

Yet some environmentalists and solar-panel installers asked the governor to veto rather than sign HB 3039. Jockeying over the bill during the 2009 legislative session caused a rift between wind and solar energy advocates and a split within Strader's solar trade group.

'It's a black eye for the solar industry,' says Steve McGrath, president of Sustainable Solutions Unlimited, a Portland solar installer. Doing nothing would be better than what was included in the final bill, McGrath says.

Solar growing, but slowly

Photovoltaic solar panels remain an expensive way to provide electricity. But the sun provides unlimited potential for clean, reliable energy, and most see it as a vital piece of the future energy supply.

Oregon has nurtured solar energy with upfront subsidies and tax breaks, including federal and state income tax credits and rebates from the Energy Trust of Oregon - a Portland nonprofit funded by a surcharge on utility bills.

After a generous boost this year in the federal tax credit, a typical three-kilowatt, $28,500 rooftop solar system would cost a Portland homeowner $9,225 after using the tax credits. But it still might take 15 years to recoup the upfront costs via lower energy bills.

Solar advocates say the subsidy system isn't spurring solar energy as fast as needed to reduce carbon dioxide emissions and avert climate change.

Since the recession hit, more homeowners lack the upfront cash needed to install rooftop solar electricity, or they lack the income to benefit fully from the tax credits.

Small businesses, nonprofits, local governments and schools are taking advantage of other programs to add solar. But many complain the process is intimidating, or they wind up spending too much money on lawyer fees.

Portland's First Unitarian Church found it was so cumbersome and expensive that it gave up plans to add solar panels, says Judy Barnes, an activist with Oregonians for Renewable Energy Payments who attends the church.

Solar installations have increased significantly since the Energy Trust started granting cash incentives in 2003. The trust subsidized 152 solar electric systems in 2008.

But despite generous subsidies, ample publicity and huge enthusiasm for green energy here, the total capacity of all of Oregon's photovoltaic solar panels is only about 15 megawatts of electric power - enough to power 1,650 homes annually, according to the Energy Trust. In comparison, the first phase of PGE's Biglow Canyon Wind Farm in Sherman County is listed at 125 megawatts, enough to power 34,000 homes a year.

Successful model

In hopes of replicating the successes of Germany, Spain, Japan and other nations, HB 3039 requires a five-year pilot test of a feed-in-tariff.

The law calls for 25 megawatts of new solar electric systems at homes and small-scale commercial systems in five years. That should boost monthly installations of rooftop systems from about 40 a month to 120 a month, Strader says, mostly in PGE and Pacific Power service territories.

The law also requires the two big electric utilities to develop or purchase the equivalent of 20 megawatts of solar power annually within a decade.

To put that in perspective, 342 megawatts of new solar electric projects were added in the United States last year, according to the Solar Energy Industries Association. That was one-fourth the amount installed in Germany and one-sixth the amount added in Spain.

How it works

Under a typical feed-in-tariff, homeowners or other entities make money by selling electricity from their rooftops. The local utility is obliged to buy all the solar electricity they produce. The price is guaranteed for 20 years, at a rate high enough so the homeowner earns a profit on their investment. It's much like a regulated utility getting a guaranteed rate of return.

'In Germany the return varies anywhere from 5 to 9 percent,' Barnes says.

Homeowners buy power back from the utility, as needed, at the regular price.

The system enables homeowners, small businesses and others to get a loan to install their solar systems, knowing they have guaranteed revenue for 20 years to pay their costs and make a little money. A landlord would have an incentive to turn their apartment or commercial-building rooftop into a profit center.

Under Oregon's pilot program, as in other nations, utilities will boost their overall power rates to recoup extra costs paid to solar energy providers. PGE and Pacific Power rate increases are capped at 0.25 percent.

In effect, other ratepayers are subsidizing the development of solar energy instead of taxpayers. Many say that's a more financially sustainable model, given pressures on government funds.

'We hope it will become a model for renewable energy development going forward,' says Dave Van't Hof, Kulongoski's sustainability adviser.

The second part of the law will prod utilities to invest in large-scale solar installations, much as they have invested in windmill farms. There are no large-scale solar plants now in Oregon, though some are being planned.

Advocates divided

It's mostly the second part of the law that has many greenies, wind advocates and solar installers fuming.

Along with the new mandate, Pacific Power and PGE can continue getting state tax credits to subsidize the costs. McGrath calculates those solar projects will cost $140 million, but the utilities could recoup $70 million in tax breaks. Both utilities also get to double-count the new solar energy when it comes to meeting terms of the 2007 renewable-energy mandate. That mandate requires 25 percent of the utilities' energy portfolio to come from renewable sources by 2025. Wind advocates and solar-panel installers say double counting means there'll be less renewable power produced in Oregon, not more.

Strader, of the solar trade group, argues that solar is still costly and needs the extra subsidies to get kick-started. The relatively small amount of solar to be developed will have a minor effect on the renewable energy requirement, she says.

Strader boldly predicts that solar will become cost-competitive with other forms of energy here in as little as five years.

Many feed-in-tariff boosters say the bill wound up being toothless. Lawmakers declined to set a guaranteed price utilities must pay for the rooftop solar electricity, delegating that to the Oregon Public Utility Commission.

'The feed-in tariff is set up to fail in our opinion,' Barnes says.

The PUC, Barnes notes, has a mission to assure Oregonians have low-cost energy. And utility commission Chairman Lee Beyer publicly stated that the feed-in-tariff rate should be set so solar investors recoup their costs but not make a profit.

Critics worry that a poorly designed five-year pilot will waste time, delaying the introduction of a truly effective solar financing system in Oregon.

Beyer says the PUC will set the payment level as low as possible to meet the goals set out in HB 3039, and will raise the payments if needed. But the goal of the new law is still to quadruple solar production in Oregon in the coming decade.

'The PUC will do its damnedest to make it work,' Beyer says.

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Bill brings turmoil, split to solar group

In early May, members of Oregon's solar energy trade group gathered at the group's Northwest Solar Expo trade show and voted 13-2 to oppose a pending bill in Salem aimed at quadrupling the use of solar energy here.

Later, the trade group's board of directors cast an equally lopsided vote to endorse the legislation, House Bill 3039.

HB 3039 provides a new 'feed-in-tariff' incentive for homeowners, small companies and non-profits to add rooftop photovoltaic solar panels - a financing system that caused solar power to flourish in European and Asian nations. It also requires Portland General Electric and Pacific Power to procure electricity from large-scale solar facilities, which could lead to the state's first massive solar power complexes, akin to windmill farms.

The fight over the bill exposed a rift in the Oregon Solar Energy Industries Association, the state's 19-year-old solar trade group.

The bill 'really benefits only the utilities,' says Steve McGrath, president of Sustainable Solutions Unlimited, a Portland solar panel installer.

'It's really an affront to the solar industry. It's not solar-centric; it's more utility-centric,' says Andrew Koyaanisqatsi, president of Solar Energy Solutions, another Portland solar installer and a 10-year board member of the trade group.

After Koyaanisqatsi raised a stink about the bill, fellow board members voted to remove him from the panel, and another board member quit.

'I will be canceling my membership in OSEIA because OSEIA no longer represents the industry; it represents the utilities,' Koyaanisqatsi says.

Desari Strader, hired as the trade group's executive director last year, says the dissidents tend to be solar panel installers, who helped found the trade group. The organization has evolved, coinciding with the rapid development of solar-components manufacturing in Oregon. Under Strader's influence, the board added representatives of the solar manufacturers, Pacific Power, labor and higher education.

There is a 'vocal minority' of solar installers who have a philosophical position that solar should be a small, decentralized energy source produced independently of utilities, says Strader, who also is a Washington County commissioner. 'They feel very attached to the old ways.'

The industry needs both small-scale and large-scale solar, she says.


The price of solar power

A feed-in-tariff system could lead to explosive growth of solar energy in Oregon, but it won't come cheap. Portland General Electric's average electricity price is 10.3 cents per kilowatt hour. Here are some comparable prices for feed-in-tariff systems, per kilowatt hour:

• Payments to solar power producers under Gainesville, Florida's feed-in-tariff plan: 32 cents

• Payments to solar power producers likely needed for an Oregon feed-in-tariff program, as initially estimated by the Oregon Department of Energy: 35 to 45 cents

• Germany's payments to new solar power producers: 59 cents

• South Korea's payment rate: 77 cents

• France's payment rate: 82 cents

Sources: Oregon PUC Chairman Lee Beyer, author Paul Gipe