Solar power under scrutiny

Industry, regulators meet to weigh Md.'s options for reaching renewable energy goals in 2022

October 19, 2007|By Paul Adams | Paul Adams,SUN REPORTER

Maryland's goal to produce 2 percent of the state's electricity from the sun will be under scrutiny today by regulators and solar industry officials who are charged with reaching the target by 2022.

The two sides are meeting to discuss how to implement legislation passed last April that puts Maryland among just a few states to set such a high target for development of solar power. If successful, Maryland's plan would put enough solar panels in the state to generate 1,500 megawatts of power - roughly the equivalent of a large nuclear power plant, or three traditional fossil fuel plants.

Solar is one of several forms of renewable energy state officials are promoting to reduce greenhouse gases. But the industry has long grappled with how to get homeowners and businesses to embrace solar energy when it typically costs several times more than electricity off the power grid. A typical residential system can cost $20,000 at the low end and take a decade or more to pay for itself through energy savings.

The law addresses the cost issue in part by establishing a trading system for renewable energy credits that homeowners and businesses can sell to help pay for new solar energy systems.

Utilities must purchase a certain amount of the credits in order to meet their obligations under the state's renewable energy portfolio standard program passed in 2004. That program requires 9.5 percent of the state's energy to come from various renewable sources - including solar, wind and biomass - by 2022. Utilities that don't comply face stiff penalties.

"It doesn't matter what you really do, solar is going to be more expensive than any other source, so it's got to be either subsidized or you have to force people to do it," said E. Tyler Claggett, an energy and finance expert at the Perdue School of Business at Salisbury University.

The Energy Information Administration, the statistical arm of the Energy Department, estimates that solar power produced on an industrial scale still costs two to three times as much as electricity available on the Mid-Atlantic grid - even during the most expensive time of day in the summer. Costs are somewhat lower in states like California, Arizona and Nevada, which have aggressively pushed solar energy with various rebates and tax credits.

Despite its less predictable climate, proponents say the Mid-Atlantic could match or surpass the growth of solar in western states if the right incentives are in place.

"It's an ambitious target," said Oguz Soysal, a renewable energy expert at Frostburg State University. "However, solar energy is something underestimated, in my opinion, for this region."

Maryland has previously promoted solar power with grants of up to $3,000 to help offset the cost of a system. Federal tax credits can shave another $2,000.

Annapolis resident Spencer Nitchie installed a $20,000 system on his roof in June. As a small business owner, he was able to take advantage of state and federal programs that cut his net cost to about $12,000. Over the course of a year, he figures he will reduce his electric bill by about a third and recover his investment in eight to 10 years.

"I watched my [electric] meter go backward on many days, so for a couple of hours every day, I'm selling power back to the grid," Nitchie said.

Maryland's plan is to adopt a renewable energy credit system similar to that of New Jersey. Builders of solar energy plants will earn credits to sell to utilities, which will purchase the power through 15-year contracts. Income from the credits provide a guaranteed flow of income to help finance and pay for the systems.

Critics say the system of credits favors deep-pocketed solar developers, who often contract with big-box retailers and manufacturers to build large solar plants. But industry officials say Maryland's law leaves room for homeowners to take advantage of the same credits, which some estimate could defray up to half the cost of a new system.

Sun Edison, the Maryland-based developer of industrial-sized solar arrays, said Maryland's program doesn't aim high enough. Currently, the law calls for development of 2 megawatts of solar power by 2008 - a target Sun Edison says the industry could meet with one project.

"The pie is smaller than it could be for all those who are eager to participate in Maryland and provide solar here," said Chris Cook, the company's senior vice president of regulatory affairs.

The Public Service Commission is holding the meeting at 10 a.m. on the 16th floor of the William Donald Schaefer Building in Baltimore.

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