$68m in solar rebates goes fast
Massachusetts is burning through money for solar projects.
A $68 million state fund to provide sizable rebates to homeowners and business owners who install solar panels was expected to last three or four years. But the program - offering homeowners rebates that averaged more than $13,000 - proved so popular that the $68 million was tapped out in October, just 22 months after the program began.
Pleasantly surprised by the overwhelming demand, Massachusetts officials are developing a successor to the original program, dubbed Commonwealth Solar, and hope to have it ready by Jan. 1. Officials are trying to make the new subsidies as generous as the original ones.
“There’s a lot of folks that would just like more rebates,’’ said Philip Giudice, head of the Massachusetts Department of Energy Resources. “This is really about finding ways to make this work by using public dollars as preciously as we possibly can.’’
Details on the new program may be available as early as next week, as state officials wrap up four months of hearings and meetings with solar installers, environmental activists, utility companies, and others about the terms. Among the last matters to be decided is how much utilities will be required to help finance the subsidies.
Commonwealth Solar was the first phase of Governor Deval Patrick’s initiative to have 250 megawatts of solar-generating capacity installed in Massachusetts by 2017 - enough to power at least 37,500 homes. The rebates were financed by surcharges utilities and electricity customers pay to the state.
With some applications still being processed, the first program will end up subsidizing the installation of more than 1,200 solar projects that, when complete, will be able to generate as much as 29 megawatts of electricity - much more than originally expected.
A rooftop solar system is expensive - the average for a home in Massachusetts is around $33,500 - so the subsidy was the deciding factor for many.
“The project is really not doable for the typical homeowner without the rebate,’’ said Joel Frisch, who is planning to install a 4.8-kilowatt system at his Clinton home, funded in part with a $15,120 rebate approved by state officials last week.
Frisch’s solar project would cost about $32,000, but with the rebate and federal and state tax incentives, he is hoping to bring his out-of-pocket costs down to around $12,000. At that amount, his installer estimated his payback period - the time it takes to recover his expenses through reduced electricity bills - will be nine years.
“I’d like to reduce my utility costs, and I thought solar was a really good way to do it,’’ said Frisch, an environmental scientist.
Liz Augustine used the rebate to install a solar system at her Maynard home this spring. “On a really sunny summer day, it will pay for all the electric use of the house,’’ she said.
In general, installers said a typical system will provide about 50 percent of the electricity a household uses over the course of the year, taking into account weather variations, size of the house, and how many appliances and electronic devices are running.
The size of the residential rebate fluctuated, depending on an applicant’s income, home value, and additional criteria, such as whether the system used components that were made in Massachusetts. Homeowners account for the majority of funded projects, with the typical system ranging from 3 to 5 kilowatts.
Meanwhile, bigger installations at business and industrial sites account for a large percentage of the electricity that will be generated by the program. These systems can cost hundreds of thousands of dollars. By early October, Commonwealth Solar had funded 208 commercial projects, or 10.3 megawatts worth of generating power, with an average rebate of $138,455.
North Andover installer Nexamp received a roughly $250,000 rebate to install 550 solar panels on the roof of NewStream LLC’s industrial recycling building in Attleboro several weeks ago. Nexamp owns the panels and is selling NewStream the power they generate. The 110-kilowatt system is expected to provide the recycling company with a third of the power for its wastewater cleansing process.
Without the rebate, NewStream president Michael Spoor said, “The economics wouldn’t have allowed us to do the deal.’’
Nexamp vice president Jon Abe said he expects to recoup the project costs in five or six years. The estimates on payback periods vary, from a handful of years to more than a decade. Massachusetts has high electric rates, which helps accelerate the payback time for an alternative source of power. But this is also a northern climate, with limited sunlight and a long winter providing fewer solar opportunities. A spate of bad weather will reduce the system’s efficiency.
The next state solar program will differ from the first in one important way: It will include a credit-based system, in which utilities will be required to buy electricity credits from residents and businesses with solar panels. The price of credits will help determine the subsidy. Massachusetts officials also expect to provide a traditional rebate for homeowners, to be financed by surcharges that electric customers already pay to a state renewable energy fund.
Solar installers say a credit-based system is more predictable than a rebate program, which can run out of money. Unlike one-shot rebates, credits renew each year, providing solar owners with ongoing funds to reduce their costs. Installers said they have often seen ambitious solar programs in other states run out of steam once the government exhausted its rebate money.
“It is a tremendous success that Massachusetts has created a good volume of solar deals faster than they thought they would,’’ said Jeff Wolfe, of Vermont-based installer groSolar. “The unfortunate thing is that what happens a little too often is that as the solar industry is really getting going and having a great success - wham! Funds are expended.’’
Not so with a credit system, which installers say is unlikely to disappear unexpectedly. “If it’s all done right,’’ Wolfe said, “it should bring stability to the market place for a number of years.’’
Erin Ailworth can be reached at firstname.lastname@example.org.