Sacramento area warms to home solar power

Falling prices, rising utility rates and new government incentives may finally be driving serious growth in California’s market for residential solar power, reports the Sacramento Bee.

In August, the Sacramento Municipal Utility District received applications for 422 kilowatts of residential solar-panel systems – more than three times as much as in any previous month, according to data from the utility. Pacific Gas and Electric Co. also had a record month.

SMUD territory has been a backwater for residential solar, mainly because its electricity rates are relatively low. Generating one’s own electricity is a better deal if the alternative is a big bill for electricity from the grid.

A year ago, a home solar system for a SMUD customer would typically take more than 20 years to pay for itself, installers say, compared with roughly half as long in PG&E’s service area.

But the economics of solar have changed significantly in the last year.

The global recession and a major tightening of government incentives in Spain, once a huge solar-panel market, have led to an industry glut, driving a price collapse that has cut the cost of an installed system by 15 to 20 percent.

At the same time, the federal tax credit for residential solar, which had been capped at $2,000, was increased this year to 30 percent of the cost of a solar system, which can cost over $100,000.

California’s $3 billion ratepayer-funded "Million Solar Roofs" program chips in another subsidy.

Electricity rates also continue to tick up, making solar comparatively more affordable. And solar installers are developing more sophisticated financing arrangements to cut the upfront cost of a system.

Now, installers say, the payback period for a system in SMUD territory can be 10 to 15 years, while some PG&E customers can make back the investment in five or six years.

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