Solar energy has grown rapidly in Pennsylvania in the last few years as individuals and companies took advantage of incentives to install solar panels. Solar still represents less than 1 percent of the energy used in the state, but advocates say the new industry is creating jobs and cleaning up the environment.
Now, they say it is a victim of its own success.
Cashing in on incentives
In 2009, Wick Kraemer took advantage of a 30 percent federal tax credit and a state rebate program to install 24 solar panels on the roof of his home in West Mount Airy.
Based on the price of SRECS – Solar Renewable Energy Credits, which homeowners sell to utilities based on how much energy they produce – Kraemer figured his initial investment would be returned in seven to ten years.
When his panels were up and running, SRECs were going for between $300 and $350 each. But many people took advantage of the same incentives as Kraemer. In 2010, Pennsylvania’s rate of solar installation was sixth in the country, according to the Solar Energy Industries Association. That meant an oversupply of solar credits and falling prices.
“The market has plummeted,” Kraemer said. Recently, SRECs have gone for $10 to $20.
The seven to 10 years Kraemer was counting on to recoup his investment? Now, by his count, it will take 15 to 18 years.
“So almost doubling the time,” Kraemer said. “I’m just going to have to sit back and wait, there’s not much else to do about it.”
‘Perfect storm’ leads to oversupply
The market for solar credits comes from the 2004 Alternative Energy Portfolio Act, legislation that requires utilities to buy a small percentage of their electricity from renewable sources. State and federal rebates, as well as falling instillation costs, led individuals and companies to install three times more solar in Pennsylvania than utilities are currently required to buy, and the industry argues the quotas are set too low.
“Effectively what you did is, you generated a perfect storm,” said Gary Lakritz, president of Knollwood Energy, which buys credits from individuals and companies and sells them to utilities. He said similar solar growth occurred in New Jersey, but Garden State utilities are required to buy more solar energy, so the SREC price drop has been less severe.
A bill aimed at bolstering the solar industry in New Jersey failed to make it to a vote in the last day of the legislative session Monday, depressing spot SREC prices, but support from Gov. Chris Christie in his energy master plan still leads Lakritz to believe the future for solar in New Jersey is more certain than in Pennsylvania.
“When people come to me and say, ‘Where should we invest our capital? Which state should we invest in?’ currently I would certainly recommend New Jersey,” Lakritz said.
Slump threatens solar businesses
Andrew Kleeman, vice president with Mercury Solar Systems in Philadelphia, was greeted by a room full of empty desks on a recent visit to his company’s Philadelphia offices at 20th and Washington streets.
“Six months ago, 42 people (were) working from this office,” Kleeman said. “As you look around, it’s pretty easy to see that there are none today. “
Two people still work in the Pennsylvania market, but the rest of the sales force and installers were either laid off or relocated to offices in other states. Business plummeted by about 90 percent in the last year, Kleeman said.
“Right now, we’re largely in a holding pattern in Pennsylvania,” Kleeman said, “We’re still keeping the office somewhat alive on life support with equipment and utility connections and whatnot to see what might happen.”
Kleeman has been lobbying for a bill in Harrisburg that would bolster the market for solar credits. The bill would require utilities to buy a small percentage more energy from solar over the next few years. It also would bar Pennsylvania utilities from buying credits from out of state.
“If this bill dies, we will officially disconnect from the Pennsylvania market until the market revives itself, probably in 2015 or 2016,” Kleeman said.
PECO opposes the bill because solar is more expensive than many other energy sources.
“Our concern with a large increase in solar particularly would be the resulting effect have on customer’s bills,” PECO spokeswoman Cathy Engel Menendez said.
In 2011, Engel Menendez said the average PECO residential customer paid about 9 cents per month extra to foot the bill for all the renewable energy the utility is required to buy. The additional cost to customers of increasing the solar requirement would be a fraction of that, but Engel Menendez said in a newly competitive market, every penny counts.
“When you’re looking at being a responsible steward to 1.6 million electric customers, every tenth of a penny counts on their bill,” Engel Menendez said. “And certainly, in today’s economy, there are customers that are struggling right now to pay their bill. Any sort of increase for those customers could be more than they can bear.”
The bill does not increase the amount of energy that comes from renewables, just accelerates the increase already written into the legislation for the portion that comes from solar. So Engel Menendez says there is no net environmental gain for the price increase.
Proponents of the bill argue it is a small price to pay to preserve the new solar jobs in Pennsylvania and keep the industry going until it they say it will be able to stand subsidy-free.