Tuesday, January 16, 2018
Business

Solar energy positioned to boom in Florida

The Sunshine State has long been a solar energy laggard, trailing such gray-sky locales as Massachusetts and New Jersey. That might be about to change.

Changes in solar business models, federal tax credits and plummeting equipment prices are opening a new market that some believe will bring a sea of sun-absorbing solar panels to Florida.

"It's the solar tsunami," said Jim Fenton, director of the University of Central Florida Solar Energy Center. "The waves are on their way."

• • •

Solar has failed to blossom in Florida because it has made little financial sense, thanks to electric rates that are much lower here than up North.

In addition, Tallahassee gives little support to solar, unlike other states that set goals or mandates for renewable energy.

Instead, Florida law hinders development of solar.

Where some states allow solar companies to sell electricity directly to consumers, Florida prohibits the practice. Under Florida's monopoly system, only utility companies, like Duke Energy and Tampa Electric, can sell electricity to consumers. Solar companies must sell electricity they generate to a utility at wholesale prices, which makes it difficult for them to turn a profit.

It is legal for Floridians to pay to have solar installed on the roof of a home or a business, which will reduce power bills. But solar's considerable up-front costs — $15,000 on up for a homeowner, $1 million or more for a business such as a Publix supermarket — discourage widespread use of the technology.

"We need innovative technologies as well as leadership," said Scott McIntyre, president of the Florida Alliance for Renewable Energy. "It's about making Florida a leader in renewable energy."

• • •

Solar firms think leasing offers a way for potential customers to avoid large up-front costs for new equipment and boost corporate profits — while not running afoul of Florida law.

On the residential front, SolarCity, a national leader in small-scale solar installations, announced its second project in Florida last month with the Del Webb communities in Orlando and Ocala to lease solar panels on new home construction.

SolarCity does not sell the power generated by the panels it puts on the new homes, an arrangement that does not conflict with state law. Instead, the company hopes to profit from the lease payments, while guaranteeing that customers will save money.

Municipalities can already set up their own utilities but face the same problem with up-front costs that homeowners do.

Here, too, leasing can help.

Last month, the city of Winter Park contracted with Cape Canaveral-based Clean Footprint for its own solar array.

The city pays nothing up front and will pay the company a fixed rate for solar for 25 years, just a half-penny above the city's current lowest-cost power source.

Solar will provide just a small portion of the city's power needs, at least at first. But the system can be expanded. And it offers the city a hedge against rising power costs for decades.

"It's no risk and it's the lowest-cost solar power in the market place," said Jerry Warren of the city's utility department. "That savings will definitely benefit our customers."

"That's pretty much a game changer," Fenton said of the lease agreements.

• • •

Here's how leasing will work with the new homes in the Del Webb communities.

Home buyers have a choice of a 20-year lease on a small preinstalled system, listed as 2 kilowatts, or they can upgrade all the way to an 8-kilowatt system that would generate roughly the 1,000 kilowatt hours used by the average Florida utility customer each month.

SolarCity says the Del Webb customers will save at least an estimated $300 a year in electric costs.

For instance, a typical three-bedroom house might have a current electricity bill of $200 a month. SolarCity says a medium-sized solar system would generate enough electricity to lower the $200 utility bill to $60 per month.

The solar lease would require nothing down and about $110 per month. So the homeowner would pay a total of $170 a month ($60 for the power bill and the $110 lease payment) saving about $30 per month from day one.

The solar company makes its money strictly from the lease payment. Profit margins are razor thin, which accounts for SolarCity's focus on new home developments where it can benefit from the large volume of installations. Roofs can be designed specifically with solar in mind up front, saving on the cost of installation.

The leasing companies also perform maintenance and repair panels throughout the length of the agreement.

"We believe the model we've adopted and many other companies will adopt in Florida is the most efficient way to scale solar in Florida," said John Porter, managing partner of Clean Footprint, which is focusing on business and government retrofits with solar.

"There is some risk for the customer," Porter said. "But we shoulder most of the risk."

• • •

The risk, Fenton says, will diminish over time.

Right now, solar installations currently benefit from a 30 percent federal income tax credit that remains in effect through 2016, plus an early depreciation benefit that expires this year.

But even without the tax benefits, Fenton said economic trends — including a steady drop in up-front costs — show that solar will become increasingly affordable.

Currently, it would take Florida residents as long as nine years worth of lower electric bills to "pay off'' the up-front costs of a solar installation, according to the Solar Energy Center.

By 2025, that will drop to as little as a two years.

Fenton projects solar will be almost half the average cost of electricity from Florida power companies in 2025 as power company rates continue to rise and solar costs decline.

With solar's cost reaching all-time lows, Fenton said, a flood of solar installations will hit Florida.

While Fenton sees a solar tsunami in Florida, other experts say in the short term it might feel more like a ripple — at least until the state makes changes to the law.

Because of the lack of political support for solar in Tallahassee, the Sunshine State has fallen well behind states such as California, Arizona, Massachusetts and New Jersey.

So far, Florida's solar-generation capacity is just 150 megawatts. California generates 2,559 megawatts of solar connected to the grid, about the output of two large nuclear reactors; New Jersey gets 956 megawatts from solar. These numbers exclude power from privately owned panels that do not feed excess power back into the electrical grid.

McIntyre, of the Florida Alliance for Renewable Energy, said since profit margins on leasing are so slim, it will remain difficult to implement leasing programs like SolarCity's unless a company links up with a home builder for large-scale projects.

"The numbers are so tight, it's very difficult to do," McIntyre said. "It will not rapidly employ solar across the state."

McIntyre said he is trying to work with utility companies to help them find a way to profit from the growing focus on solar.

And solar's potential impact on their business is not lost on the utilities.

"The solar market is rapidly developing with both utility-scale and (small-scale) solar applications growing in states across the country," said Sterling Ivey, a Duke Energy spokesman. "With or without subsidies, solar … will increasingly be part of our resource mix as customers demand greater use of this technology."

Porter is among those who believe that solar is key to retaining the roughly $50 billion that leaves the state every year to pay for the coal, natural gas and gasoline to run Florida's power plants and cars.

"The big idea," Porter said, "is that someday in the future, Florida is going to produce all its own energy and store it."

Ivan Penn can be reached at [email protected] or (727) 892-2332.

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