Area businesses rush to cash in on solar power

Jay Cooper considers himself a conservative businessman, yet he has blackened the roof of his Auburn Honda dealership with one of the priciest green energy technologies: solar panels.

Hundreds of them.

"Obviously, it came down to dollars and cents," Cooper said.

After decades as a small-is-beautiful technology aimed largely at virtuous homeowners and off-the-grid types, solar is suddenly going large and at a price that makes business owners salivate.

Cooper's Pacific Gas and Electric Co. bill used to average about $8,000 a month. With the solar panels, which began generating electricity last fall, his power costs dropped instantly to $5,000.

That bargain is made possible by federal and utility subsidies, the sale of green energy "credits" and, critically, the recent development of financing schemes backed by big institutional investors. Together, those can drive down the effective price of solar-generated electricity more than 70 percent, developers say.

But the sort of deal that Cooper got could be short-lived. The federal tax credit that made it possible, which went into effect in 2006, is set to expire Dec. 31, though it may be renewed by Congress. Without the credit, those in the industry say, solar power will again be uncompetitive with grid electricity and sales are almost certain to plummet.

"For commercial solar, the … tax credit is the reason solar happens. It's totally required," said Todd Michaels, director of business development for Solar Power Partners, a solar developer based in Mill Valley.

For now, Northern California solar installers are reporting orders jumping fivefold or more in the last year. Safeway Stores Inc. plans 23 solar systems for its California supermarkets this year, up from zero in 2007. Wal-Mart has 22 similar projects in the works. Dozens of smaller businesses are piling on.

Rising costs for material and demand for solar systems have pushed panel prices to a five-year high. But sales aren't slowing.

The Sacramento Municipal Utility District says businesses, nonprofits and governments have registered to install 17.1 megawatts of solar power in the utility's service area in 2008, more than 30 times what's been built in any previous year.

On the gravel roof of the Safeway store off Missouri Flat Road in Placerville, a 250-kilowatt array of panels wraps around the building's big air-conditioning units, covering nearly every square foot of unshaded space. On summer afternoons, the system will meet nearly half the store's power demand.

Safeway buys grid electricity at a discount, so the store's panels won't yield the huge savings that Cooper is seeing.

Still, said George Waidelich, Safeway's vice president for energy operations, even if Safeway pays a slight premium today, the panels are a good deal because the company has locked in a predictable monthly payment for its electricity for the next 15 years, regardless of what happens to the price of electricity from the grid.

What's more, the project allows Safeway to accumulate carbon credits, which it is using to help meet a self-imposed target for reducing greenhouse gas emissions.

The role of big investors in the solar boom illustrates the importance of financial sophistication in making green technology viable. Here's why:

The chief federal incentive for solar power provides a tax credit equal to 30 percent of the cost of a non-residential installation, which ranges from about $1.5 million to $20 million and up.

However, for a variety of reasons, many businesses can't take full advantage of such a large tax credit. And a government or school that pays no income tax gets no benefit at all.

But big investors – the Citigroups and Wells Fargos of the world – have a virtually bottomless appetite for tax credits. And starting in 2006, several California firms began to figure out how to package solar projects to be attractive investments for Wall Street.

"In 2007, the floodgates opened," said Matt Cheney, chief executive of MMA Renewable Ventures in San Francisco.

About the writer:

• Call The Bee's Jim Downing, (916) 321-1065.