The California solar rush

Photovoltaic panels are positioned on the rooftop of organic produce marketer CF Fresh to put sunshine to work.

In what has been dubbed the "solar stampede," –Californians are installing solar energy systems to power everything from Wal-Marts to wineries and offices to irrigation pumps, as business owners and residents take advantage of tax credits and rebates that significantly defray solar energy costs. Though few states offer as many enticements as California, going solar may make economic sense for others in other states, also.

However, time could be running short for businesses to utilize federal tax incentives. Congress must extend the solar energy tax credit—the ability to lop off 30 percent of the cost of a solar energy project—or the credit will revert to 10 percent after the end of 2008. For businesses, there is no cap on the total credit amount, and they have two years in which to take the credit.

California’s rush to solar is most evident in the wine industry, which prides itself on its sustainability and environmental stewardship.

Grape growers and vintners throughout the state are using photovoltaic panels, placed in vineyards and on winery rooftops, to reduce their power needs, with many receiving rebates from their electric company that, combined with federal incentives, reduce the cost by about half. Several wineries are powered completely by solar energy, with others receiving 30 to 50 percent of their energy from solar. In Paso Robles, EOS Winery recently completed a $3.8 million project that included ground-mounted panels covering two acres. Frog’s Leap Winery in Rutherford was so enthusiastic about its solar project that it hosted a "Solar Stampede" to educate and encourage other wineries to jump on the solar bandwagon.

While not all states offer more than $3 billion in solar energy rebates over the next ten years as California does, farmers and agribusinesses may still find economic and philosophical benefits to solar energy.

CF Fresh

CF Fresh, an organic fruit and vegetable marketer in Sedro Woolley, Washington, recently installed one of the largest solar energy projects connected with Puget Sound Energy. The 25-kilowatt photovoltaic system is expected to supply about 70 percent of the company’s annual electricity needs as well as reduce carbon dioxide emissions by 24 metric tons annually, according to CF Fresh.

Steve Mackay, controller for CF Fresh, said he was skeptical in the beginning. "To be honest, at first I thought it was really hokey. I had to really look beyond the concept to isolate the real costs and benefits of solar."

Mackay said he spent three to four months educating himself about solar energy, the longest part of the project, but noted that installation only took about three weeks.

"The solar energy vendors will give you all sorts of information, but it takes time to weed through it," Mackay said. As the company controller, he had to prove to himself that the project made economic sense and would pay for itself in the long term.

Incentives that CF Fresh took advantage of included the 30 percent federal tax credit and accelerated depreciation, a Washington State production credit that caps at $2,000 annually, and exemption from sales tax. The project also enhanced their building value. A formula developed by the building industry has determined that for every $1 saved in a building’s energy costs, the structure’s value increases by $20, Mackay explained.

Before any incentives, the solar project cost $185,000. The federal tax credit and depreciation brought the cost down to around $125,000. That doesn’t include the reduced energy costs or savings against future increases in energy. According to the building industry formula, they have improved the building’s value by $40,000 by saving approximately $2,053 in energy costs in the first year.

Cut in half

Mackay said that they installed a heat pump at the same time as the solar panels. Before the heat pump, he estimated that they would have cut their current electricity costs of 5,000 kWh per month in half. But with the heat pump, he’s not sure what their average electricity costs will be.

Net metering, which is offered by utility companies in most states, makes it easy for customers to install solar systems and feed extra power they generate into the utility’s electrical grid for distribution to other customers. Special meters track energy consumed and energy –generated.

"You can actually watch the meter running backwards when the solar panels are working," Mackay said.

He has no doubts that energy costs will continue to climb in the future. Some European countries are already paying 19 cents per kWh. "It only makes sense that the energy portion of our economy will be rising faster than inflation," he said. And while he values their current energy savings, which are based on 7.5 cents kWh, the ability to reduce power costs in the future—when electricity will cost more—is even more important.

Under Washington State’s green power credit program, CF Fresh could sell green credits to businesses and homeowners to offset their costs. But Mackay explained that it made more sense for CF to promote their efforts to their customers to show that they are committed to environmental stewardship. Later, if they choose, they can sell the green credits.

"It does take some time to recoup your costs," he said. Based on his calculations, Mackay expects the project to pay for itself in 10 to 12 years. The panels have a 20-year warranty, although they are expected to last longer because western Washington doesn’t have extreme temperatures that cause the panels to wear out faster.

"For us, it was a big investment," he said. "We’re not a big company. Because I’m the controller, I wanted to know that it made sense from the financial aspect. I thought that 10 to 12 years was a good payback."