California's Financial Incentives Driving Solar Installation

A question that I get quite a bit is, "When is the best time to buy solar?" I especially get this from companies building new buildings or retrofitting existing buildings. Before I answer this question, let me go through a couple incentives that explain why solar has been adopted quite aggressively in California...There are two main reasons that have caused this adoption of the solar industry. The first is awareness. Awareness gets people to look at solar. What actually gets people to buy it and pull the trigger are the financial incentives.

There are three attributes that have caused solar to actually be financially viable. The first is net mirroring, second is state rebates, and third is federal subsidies. For those who don't know, net mirroring means the utility has to buy the power that you produce at retail. That's great. On hot, sunny days, electricity is the most expensive. So you sell high and buy low. That's a great incentive.

There are also state rebates available. The challenge of the state rebates is that they're reducing, and reducing fast. Today, the state rebate for commercial is around $1.90 per watt. There are also federal incentives. The federal incentive is currently scheduled to expire at the end of 2008. We hope that it gets renewed, but if you're thinking of going solar, you definitely want to catch this before it expires. There's also accelerated depreciation. When you combine all the centers in place, the government pays for about 70 percent of your solar system.

So, to ask the question again, when is the best time to buy solar? The best time is now. There's a lot of innovation occurring. The entire value change is working at reducing the cost of solar; with the value change there, everybody's working together to keep up with the subsidy reduction. The goal is, within a couple of years, that solar can be an unsubsidized market.

Panel Question: People want green homes and have adopted the idea of cutting down on energy, but you have to sell through the building industry. What kind of questions about solar are contractors and developers asking?

The solar industry has been around for a very long time. The struggle new developers face is whether or not that will they get a return on their investment. If they spend $40,000 on a solar system for a home, will they be able to sell it for an additional margin on top of that? It makes perfect sense for somebody who owns a home or somebody who owns a business-their return is going to be given to them over time.

A couple of statistical studies have shown, and the builders don't realize this, if you invest in a solar system, not only will you be able to get a high return, you'll be able to sell your property even faster. It's starting to create awareness now, and we're starting to see more and more new construction coming up with solar as the developers need to differentiate themselves and they need to be able to sell these houses a lot faster.

Panel: Are you at cost parity now? When do you think you can get rid of the price premium if you have one?

In the solar industry, we're definitely at cost parity with the subsidies. I want to offer the caveat that that is with the subsidies. There are even people today who will pay for the solar system and sell the electricity at a cheaper rate than the utility.

Panel: These are big projects. You have to go against large, multinational corporations. How do you manage this?

Even though the solar market has been around for about 30 years, the adoption of it is just over 1 percent now in California, and California is the leading state in the U.S. So the market potential is almost infinite. It's the energy market. We've grown from two to 170 employees in essentially 12 months of operation. We've now scaled all of California. The goal of the company is to continue to innovate ways to reduce the cost of solar so we can get the coal-polluting states to adopt solar as well.

Panel: What tax breaks and incentives are large cities using to bring solar to their buildings?

In this area, both San Francisco and San Jose have made a strong push toward solar. They want to see the existing buildings retrofit their roofs to solar systems. It will be a great sight, one day, when we're flying over the airport and we see solar on the roofs instead of big, empty warehouses. They have helped in the building departments in expediting the process.

Panel: Are you doing any projects where you're collaborating with other technology providers to provide solutions?

At SolarCity, we're definitely collaborating with our technology providers-the solar panels themselves. If we can redesign the panels to decrease the installation time, it will have a big impact.

David Abel: How does SolarCity fit into the chain of development of a city? Are you in new development? Are you an architect or contractor? Is your work residential, commercial, or industrial? How does SolarCity fit into these distinctions?

SolarCity mainly focuses on the retrofit environment, so it's learning from the existing city and trying to get the existing cities to go with green power or with solar. We'll go to residents and businesses.

DA: How does SolarCity come into a city? Is it by the invitation of a mayor or a utility?

It's actually citizen-driven. The citizens determine when they want to get solar in their community; they reach out to us and let us know that they have a good community for solar and sell themselves for why we should go to their community next. We evaluate the community, and we interview the residents to see if the mindset is correct, make sure everybody understands the concept of solar. If all the criteria are met, we'll go into their community and launch a community program.

DA: So SolarCity doesn't respond to a government invitation-it's a collective, organizational invitation by a group of homeowners?

Correct. Homeowners associations might reach out to us, saying that they're looking at going solar for their homeowners association and ask for help with this. We'll go out there, we'll evaluate the roofs, evaluate the building department and the permitting process, we'll evaluate the cost of electricity in the area, and then determine if it's a good community.

That being said, we often do get city support. The city hears that we're moving to the area, and then often the city council or the mayor will endorse the program and help us launch the program.

DA: Most of our readers are in Southern California. Have you been installing solar and launching programs in communities in Southern California?

We just launched a solar community program in Santa Monica. It won't be long before that program is very, very successful.

DA: Who is your partner in Santa Monica?

Local residents. It wasn't a specific homeowners association. It was one or two residents who were very passionate. They sent emails to their neighbors, those neighbors sent emails to their neighbors, and everybody just started getting together.

DA: California is your sole market at the moment. What does your business plan entail, going forward?

A year from now, we'll probably be in three or four different states. The most immediate state that we're looking at right now is Colorado. Colorado has good subsidies; there are good incentives in place, and the community knows that they need to do something about the air pollution. The local area is motivated to adopt solar.

DA: There are a lot of people in solar and photovoltaics. What is SolarCity offering that they're not offering? Are you using silicon? Do you offer unique financing? What makes SolarCity unique?

Today, our secret sauce is not so much of a secret. It's very public. Because we educate such a large community, we're able to offer the residents a 20 percent discount. There's a massive savings when everybody gets together and buys solar. The technology we use is proven technology, a commoditized version, with monocrystalline, polycrystalline solar cells. It's worked for 25 years. It's very stable and very reliable.

DA: What public policies-rebate programs, building codes-must be in place to make a community a scaleable project for SolarCity? Does it have to be a rebate program? Is there anything local that has to be in place?

The number one criterion for us is the rebate program-if there's no rebate in place, the justification for solar is really difficult. Maybe one or two have done solar for environmental reasons. Mass adoption has to make financial sense, so there needs to be a rebate.

If the building department is a nightmare to work with and we go to 100 homes, we're not going to get any efficiency. We have to work with a building department ahead of time to see if they want to see their business community, or at least the residential community, end up solar. Every building department that we've gone to, they've all been super enthusiastic to work with us, and they always streamline the process.