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Some Positive Trends:

• System prices continue to drop
• Maryland meeting its solar energy goals
• Maryland Solar Industry exceeding 2200 jobs

The Challenges:

Industry consolidation can be disruptive

Residential solar leasing is fast outpacing cash sales in many of the more developed states, like Maryland. It’s what many Americans want so it will continue to drive the market. It seems to work for more of America.   After all, we do like instant gratification and if I can save $10/month immediately, and feel good about it, where do I sign? While SES is typically strongly advocates for cash sales to our customers who are able, no one can argue the enormous impact and value that the various residential and commercial financing options have delivered. Getting solar access to the mainstream will be the most critical piece to advancing the development of distributed solar. It really has been transformational so far.

There’s other good news. System Pricing, though leveling off somewhat, has dropped dramatically in the past 5 years. While incentives decline as planned, the industry continues to drive down installation costs to maintain the impressive paybacks and internal rates of return.

Beneficiaries of solar price reductions include states like Maryland, who had the foresight to seed this industry over the last 6 years. Government and industry partnership in Maryland has built an economic environment that supports solar development and as a result, it is sustaining 2200 jobs while Maryland continues to meet its solar RPS goals. That’s right, our industry delivers over 2200 paychecks in Maryland. In fact, there is now a solar thermal equipment manufacturer in Baltimore. Much to be pleased about.

There’s also a darker side. Bankruptcies and consolidation of solar companies have carried the headlines quite a bit in the last year especially. While a natural part of the tech/business evolution cycle, consolidation and shake out are always disruptive, not only to industry members, but also to consumers of these solar energy products and services. As a result, all of the solar “investors” are asking lots more good questions – particularly about the longevity of the manufacturer and the installer. Popular questions, particularly in the solar PV panel world, are “Who will be here to support my warranty?” and “What is the design track record of these systems?”

The beneficiaries of these trends will be those with a proven commitment to the industry either through time or capital. It’s that commitment that gives customers confidence of future support if and when it is needed. Whether it’s an installer with 35 years experience or a manufacturer like SunPower that has 25 years in business, longevity is a key indicator of future availability to support the install base.

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Solar water heating has quite a long history. In the United States alone, the industry has boomed and busted 3 times in the last 130 years – each time displaced by cheap energy. Many are surprised to know that the first US patent for a residential solar water heater was issued in 1891 to Clarence Kemp, a Baltimore inventor. That’s right, 1891.  In the 1920’s, 30% of the homes in Pasadena, CA had solar water heaters.  With the discovery of natural gas resources in the region, the industry evaporated almost overnight.  Solar thermal technology is mature and efficient; the problem lies with allowing our commitment to solar to dissolve in favor of decreasing natural gas prices.

In these previous industry “busts”, energy became cheap and we were lulled into a false expectation of stable prices. Each time, not long after the industry was dismantled, energy prices began to creep back up, making us long for that clean and cheap solar energy again. So today Solar Water Heating is on the rise again. Will it be different in the 21^st century or are we doomed to repeat the same cycle? What was it that Winston Churchill said about failing to learn from history….?

The recent surge in US solar water heating deployments began in 2008. This resurgence, especially at the commercial scale, has helped to drive up adoption rates while scaling down installation costs. Several factors are converging in recent years to bring about this renaissance:

• Engineers, architects, and contractors are becoming increasingly familiar with this mature technology – improving costs with increasing experience
• Regional incentives are bolstering the existing federal incentives to reduce the capital investment.
• The federal government has mandated that a minimum of 30% of water heating must come from solar for new construction or major renovations on federal buildings.
• Project Developers like Skyline Innovations (http://www.nextility.com/) have introduced new business models to help deploy these systems for those without available capital.
• Property owners increasingly want to have more control over their energy budget
• Various societal pressures continue to reward solar adoption
• An improving economy has allowed property owners finally to reinvest in their buildings

Remarkably, much of this has occurred despite a backdrop of rapidly falling natural gas prices (the primary heating fuel for commercial water heating), decreasing drastically from 2008 to 2012. However, in the last 18 months, natural gas prices are climbing again in a trend that is likely to continue: gas exportation; deployment of energy intensive manufacturing in the US; diversion of more natural gas to transportation (locomotives, trucks, fleet vehicles and eventually automobiles); conversion of more power plants and residential heating to natural gas.In light of these trends, property owners are rapidly moving forward to install solar water heating systems before the financial incentives expire. Business owners with substantial hot water loads in Washington DC and Maryland are able to achieve simple ROIs of 2-7 years. This approach requires them to take a slightly longer perspective, recognizing that they are buying 30+ years of energy up front for a fixed price (with generous subsidies). Whether financed independently or through the bank, building owners are able to lock in their energy prices and hedge the inevitable increase in fuel costs while leveraging all of the other benefits of renewable energy.

If you have any doubts about this trend, visit our commercial solar water heating page and take a look at the photos of just a subset of the projects we’ve been deploying in the region (https://solarsaves.net/commercial-solar-water-heating/).

If you want to know more about the history of solar water heating, check out this excellent book: The Golden Thread: 2500 Years of Solar Architecture and Technology, coauthored by Ken Butti and John Perlin.

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Many of our prospective customers have been waiting to buy their panels in the hopes of significant advancement. “I want the technology to mature ” they say, “ and be state-of-the-art”. Well, the closest you can get to those standards with a production panel is with SunPower.

Ask around, do some Google searches. You’ll learn quickly that SunPower is considered the best with very little debate. In fact, it’s by far the best. This American born company launched out of the US university research system (the founder was a Stanford professor) has sustained a 23 year run to be acquired recently by a global energy company.

At Solar Energy Services we’re excited to report that we are now a SunPower certified dealer. We’ve always wanted to offer the very best PV product and now we can. SES is proud to tie our 35 year commitment to the industry to the world leader in solar panel manufacturing.

Many are aware that the cost efficiency of installed solar has improved dramatically in the last 5 years due to efficiencies gained through price competition, distribution improvements, development of installation techniques, and other process improvements. However, the physical efficiency of solar cells has advanced more slowly than most have hoped. The standard Chinese panel being installed by the majority of installers today (especially the large leasing firms) are in the 14-15% efficiency range. A few solar manufacturers have been able to stay notably ahead of the pack. SunPower remains out front with their standard 327 W panel (E20) at 20% efficieny. Sunpower’s new “X” (E21) is 21% efficient! That’s right, over 40% more efficient than the average panel out there. The X begins to ship in April 2013 – next month.

SunPower’s Maxeon cells are the industry leader in reliability and durability also. They’ve had only180 defects out of 7 million panels. That’s right, 1 in 39000! The Maxeon cell has redundancy in contacts, accommodating wear from thermal expansion. It has backside contacts that provide increases collection on the sunny side. They are highly durable with the best impact resistance ratings. They are backed by a solid company with great support and a bright future.

To recap, the physical efficiency of solar cells has been relatively stagnant, with the exception of a few leaders that have developed slow and steady progress. SunPower has led the way. The company has been around for over 23 years. They have the most durable solar cell in the industry and the highest performing. I must confess, the 3 year old solar PV system on my roof has panels made in China. If I were installing today, there is no doubt I’d choose SunPower…

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[vc_row][vc_column][vc_column_text]Many of our prospective customers have been waiting to buy their panels in the hopes of significant advancement. “I want the technology to mature ” they say, “ and be state-of-the-art”. Well, the closest you can get to those standards with a production panel is with SunPower.

Ask around, do some Google searches. You’ll learn quickly that SunPower is considered the best with very little debate. In fact, it’s by far the best. This American born company launched out of the US university research system (the founder was a Stanford professor) has sustained a 23 year run to be acquired recently by a global energy company.

At Solar Energy Services we’re excited to report that we are now a SunPower certified dealer. We’ve always wanted to offer the very best PV product and now we can. SES is proud to tie our 35 year commitment to the industry to the world leader in solar panel manufacturing.

Many are aware that the cost efficiency of installed solar has improved dramatically in the last 5 years due to efficiencies gained through price competition, distribution improvements, development of installation techniques, and other process improvements. However, the physical efficiency of solar cells has advanced more slowly than most have hoped. The standard Chinese panel being installed by the majority of installers today (especially the large leasing firms) are in the 14-15% efficiency range. A few solar manufacturers have been able to stay notably ahead of the pack. SunPower remains out front with their standard 327 W panel (E20) at 20% efficieny. Sunpower’s new “X” (E21) is 21% efficient! That’s right, over 40% more efficient than the average panel out there. The X begins to ship in April 2013 – next month.

SunPower’s Maxeon cells are the industry leader in reliability and durability also. They’ve had only180 defects out of 7 million panels. That’s right, 1 in 39000! The Maxeon cell has redundancy in contacts, accommodating wear from thermal expansion. It has backside contacts that provide increases collection on the sunny side. They are highly durable with the best impact resistance ratings. They are backed by a solid company with great support and a bright future.

To recap, the physical efficiency of solar cells has been relatively stagnant, with the exception of a few leaders that have developed slow and steady progress. SunPower has led the way. The company has been around for over 23 years. They have the most durable solar cell in the industry and the highest performing. I must confess, the 3 year old solar PV system on my roof has panels made in China. If I were installing today, there is no doubt I’d choose SunPower…

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What Does the Future Hold?

Solar Renewable Energy Credits (SRECs) have played a large part in the financing of solar energy systems in Maryland since the RPS (Renewable Portfolio Standard) was enacted in 2005. These market-based, tradable credits are the property of the solar system owner to resell, typically to brokers who bundle them for final resale to competitive energy suppliers in the interest of meeting their solar compliance goals. In Maryland (as well as Washington DC), these credits are generated by both solar electric (PV) and solar water heating systems.

The price of SRECs is supposed to reflect the over or under supply of these credits in the marketplace. Both Maryland and DC have very aggressive solar goals (2% by 2020 in MD and 2.5% by 2023 in DC) with steep adoption curves so we need lots of SRECs to meet compliance.

Maryland:

That said, the solar industry boomed for several years recently and we are currently going into an oversupply phase in Maryland. This has the effect of pushing down prices on SRECs in the near term.   There are many contributors to the oversupply and the industry and legislators are frequently working hard to promote policies that help to smooth out the supply, but in the end, SRECs are a market mechanism that is subject to “animal spirits.”

As solar prices decline it is fitting that SREC prices are declining too – after all, we should need less incentives as solar costs come down to “grid parity.” When Maryland’s SREC market was conceived, the designers planned for a declining value as more solar got on to the grid. In fact, the Alternative Compliance Payment (ACP) schedule – the amount energy suppliers have to pay if they cannot buy SRECs – is designed to decrease over time. The ACP is considered to be the maximum that an SREC would cost in a rational market. Recently SRECs have traded on the order of 35% of the ACP, but as high as 75% a few years ago. In Maryland, the ACP is scheduled to drop from $400 to $350 in 2015 and then down to $200 in 2017, $150 in 2019, and so on.

DC

Washington DC is a different market and one that is much better insulated from the shocks of large utility scale systems that flood SRECs onto the market. The sheer geography in DC does not lend itself to 10 MW solar farms and thus the SREC supply curve is a little smoother due to the requirement being fulfilled primarily with many smaller systems. As a result, DC SRECs have shown more consistency and maintained a higher price, benefitting system owners and prospective system owners.

What now?

Regardless of the trends for solar return on investment (ROI), we all want to maximize our incentives for our own benefit. SRECs are no different. While there are many more new solar customers every day, there are also many solar system owners now approaching the end of 3 or 5 year SREC contracts (aka “strips”) and they too need to decide how to proceed going forward. Do I want to sign up for another strip (3 or 5 year term contract) and accept a large discount on my SREC price for that price security or do I want to maybe float with the market for a while? I’ve got no crystal ball, but I do know that there are many efforts underway in Maryland, some legislative and some not, to help to smooth the SREC supply and thus maintain a reasonable value for SRECs to continue to help incentivize solar. For that reason, I believe we will see some recovery of SREC prices in Maryland in the next year or two and thus maybe it is better to hold off on a term contract. In DC, I would personally opt for more surety and take a term contract with the discount price, but that is my risk averse nature. Others might like to bear more risk and float in hopes of higher SREC values in the future.

Either way, we are lucky to have these incentives in Maryland and DC. They are working to increase solar installations and jobs and they are also helping to drive down the installed price of solar in our region.

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[vc_row][vc_column][vc_column_text]Listen to NPR’s January 2012 Interview with Rick Peters

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Your recent editorial (The Capital, April 18) suggested Gov. O’Malley should put more emphasis on the distributed approach to renewable energy, where solar and wind power are generated by smaller systems throughout the state. In fact, the governor intends to sign legislation next month to do just that. Delegate Sally Jameson and state Senator Robert Garagiola sponsored what is essentially budget-neutral legislation (HB/933/SB717) to open up the state’s solar goals to include solar water heating, a very mature and efficient technology, first patented in Baltimore in 1891.

This family friendly technology currently saves a typical family of four about $500 per year on electric bills by obtaining 75 percent of their annual water heating energy from solar. The new law will allow system owners to sell green credits to help utilities comply with the state’s solar goals. Consequently, homeowners will now see simple paybacks on these affordable systems shortened from five to eight years to a very manageable two to four years, on a 25-year lifespan.

Aside from advancing our solar goals, and allowing modest-income homeowners to participate in the benefits of solar, there are significant economic benefits too. Solar water heating is a labor intensive installation, which keeps dollars recirculating in the community. It requires trades people to install it, a group much in need of work.

The components are low tech, but heavy and bulky , so there is strong incentives to manufacture domestically, if not locally. A typical residential system only requires 40 to 80 square feet of sunny roof, drastically increasing the potential pool of participants.

As a daily consumer of solar-heated water himself, O’Malley is well aware of the opportunity for Maryland. I commend him and our legislators for their leadership on this issue.

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O’Malley backs Md.’s solar-power water heating market

The legislation would boost a type of renewable energy generation that hasn’t received the same cachet as photovoltaic solar panels but can be significantly cheaper. Solar panels have long been supported by the solar credits, which help add extra pay-back to the technology aside from reduced utility bills. Now the same benefit will be afforded to owners of solar water heating systems, and it could spark new jobs for solar companies.

“It’s fantastic, ” Dimitris Spiliadis, co-owner of the Black Olive Restaurant and the soon-to-open Inn at the Black Olive hotel, said of the legislation.

Spiliadis recently completed construction of a solar water heating system on the roof the Fells Point hotel, and he said the technology’s efficiency and energy savings rivals that of solar panels. “Recognizing that in Maryland would be something that would put Maryland on the forefront of renewable energy promotion, ” Spiliadis said.

While the details of the legislation haven’t been revealed, the idea behind solar credits is that the owner of a solar system accuries one credit for each megawatt hour of solar power generated. The credits can be sold in a marketplace to utilities or other energy companies that are looking to buy credits if they haven’t generated enough solar power on their own. Prices vary but can reach $300 a piece.

Solar hot water heaters do not use solar panel technology; instead, a system of tubes through a copper plate heat water. There is also an electric-powered backup system for use as needed at night and during winter.

O’Malley said Jan. 12 a bill making solar water heating systems eligible for generating solar renewable energy credits would be part of his legislative agenda. His spokesman Shaun Adamec would not provide any further details but said the bill would likely be unveiled Jan. 24.

A smiliar bill nearly became law in 2010 but fell short in the House of Delegates despite a fervent lobbying effort from members of the industry such as Mike Healy, owner of Skyline Innovations in Washington, D.C., and Rick Peters, president of Solar Energy Services in Millersville. The governor’s backing and the extra time lawmakers have had to study the issue boost the bill’s chances in 2011.

That could mean Maryland will soon a similar flurry of jobs that companies like Skyline have seen in Washington, D.C., where solar water heating projects are already eligible for the credits. The added cash flow from sale of the credits provides an extra incentive and also makes it easier to finance the projects.

Healy said his company has done about 10 jobs in Washington since November 2009 and has another 1- under contract, compared to one completed job in Maryland. A typical job has a crew of four to six and costs anywhere from $8000 to $10,000 for a residential system to 10 times as much for a large apartment building or hotel, Peters said.

Adding the ability to sell credits could expand that audience of customers. For the typical home a solar panel system can cost three to four times more than a solar water heating system.

“We expect it will allow many more folks to participate in renewable energy further down on the income spectrum, ” Peters said.

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BROOKLYN PARK TOWNHOMES INSTALL SOLAR TO PRE-HEAT WATER

BROOKLYN PARK,  MD:  Solar Energy Services, Inc. has been contracted by Furbish Company, Inc. to install eight separate solar water heating systems on a housing development in Brooklyn Park, MD.

Each townhome will be outfitted with its own 80-gallon Vaughn Solar Sepco tank.  These solar water heaters will act as a pre-heat to the home’s conventional system, offsetting their utility bill by around 50%.

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Kratovil Jobs Tour Makes Stop in Severna Park; Witnesses Solar Energy Cutting Costs, Protecting the Environment, and Creating Jobs

Washington, DC – Today, Rep. Frank Kratovil continued his First District Jobs Tour with a stop in Severna Park, where he visited a work site with the owner of a local solar energy firm that has taken advantage of recent green energy initiatives to grow and hire new workers.

With Congress in recess this week, Rep. Kratovil has been touring communities throughout the First District, meeting with small business owners, visiting manufacturing hubs, and listening to the men and women on the front line of job creation to see firsthand the continuing challenges faced by small business owners and employees in the current economic environment. Kratovil has made job creation a top priority of his first term in Congress, introducing a number of proposals to empower small businesses to create new jobs here in Maryland.

This morning, Kratovil’s Jobs Tour stopped in Severna Park, where Rep. Kratovil joined local entrepreneur Rick Peters at a work site where his company had recently installed solar water heating panels to help homeowners reduce their energy costs. Mr. Peters is President of Solar Energy Services (SES), a small business located in Millersville that has added jobs this year as a result of the Recovery Act, and stands to grow even further if Congress passes energy legislation creating new incentives for renewable energy.

“Renewable energy is one of the most efficient and cost cutting ways to, protect our environment, reduce our dependence on foreign oil and create good jobs in an emerging field,” said Rep. Kratovil. “Instead of constantly focusing on big business and big banks, Congress need to focus on empowering small businesses like SES so that they are able to create more good paying jobs in our communities, and the families that install these new technologies will start to save on their energy bills.”

SES has grown its workforce by 25% this year, after benefitting significantly from stimulus funding that allowed Maryland to continue its solar grant program. SES would be able to expand even further and create additional jobs if the Senate acted to pass the American Clean Energy and Security Act, legislation that Rep. Kratovil backed in the House of Representatives to create new incentives for renewable energy and a more stable market for small businesses that focus on renewable energy solutions.

“Our small business has been able to grow because of the American Recovery and Reinvestment Act and Maryland’s solar grant programs. If Congress passes the energy legislation that Rep. Kratovil backed, we could create even more jobs and help even more citizens and businesses enjoy the benefits of solar energy – whether it’s solar water heating or solar electric. I would like to thank Rep. Kratovil for taking the time to learn about our small business and for his support of common-sense energy proposals that create jobs, save money, and encourage clean, domestic, renewable energy,” said Peters.

Kratovil has made small business job creation a top legislative focus in Washington, introducing a number of proposals to create incentives for entrepreneurs to create or expand small businesses. He authored the Small Business Formation and Job Creation Act, a bill to increase the tax deduction for small business startup expenses from $5,000 to $20,000, which has twice passed the House of Representatives as part of larger small businesses tax packages. Additionally, Kratovil authored the Small Business Property Reimbursement Act, which extended a key tax deduction for small business owners that invest in new equipment for their businesses and was signed into law as a provision in the Hiring Incentives to Restore Employment Act.

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