6:00am

Wed January 4, 2012
Business and the Economy

New Business Model for Solar Energy

In December, billionaire Warren Buffet made his first move into solar power, buying one of the world's largest solar farms, which is in California. Market watchers wondered if this was a sign that solar was coming of age, that it was no longer a "feel good" nod to environmental correctness but a sensible investment. Still, California isn't Kentucky and Buffet is hardly an average ratepayer. So, we looked at how solar was faring in the Commonwealth.

For many, solar just makes sense. Every day enough sunlight falls on the earth to provide energy independence for years. Solar promoters say it's just a matter of capturing that energy and turning it into power that can run everything from light bulbs to play stations. Of course it's not as simple as it sounds. In Kentucky, it's even less simple. After all, people reason, this isn't the Southwest where the sun shines all year round.  And coal has long provided us with some of the cheapest electricity in the world.

Still, solar is beginning to make its mark here and advocates predict there's more to come. Matt Partymiller a gray beard of Kentucky's solar energy industry, having started his solar energy solutions six years ago…

"We started out with two of us part time and six years later there are now ten of us full time and we hope to continue to develop that. If we continue to develop the way we have we'll be at 20 next year and that'll be great."

Partymiller says solar’s more competitive, even in Kentucky.

"We are seeing the cost of solar come down, we are seeing the speed at which solar is installed improve and we are seeing electric rates going up. It's just a matter of time before we as an industry end up competitive."

During his six years in the business, Partymiller says the cost of solar panels has been cut in half. 

His firm has just completed installing a unique solar system in Berea. The city-owned electric utility built a solar farm and offered shares to its customers.

In the first phase, an array of 60 solar panels was installed outside the municipal utility building.  For $750, utility customers can buy all the power generated by a single panel for 25 years.

Berea's the first community in Kentucky and one of the first in the nation to offer this approach. It has several advantages for solar-inclined ratepayers. First, it doesn't matter if a house has good sun exposure. Second, it's cheaper because there’s an economy of scale.  The cost is about $3.30 a watt compared to $5 to $6 if installed on a home.  Third, if ratepayers move within the utility's service area, the credit on their bill moves with them. Fourth, if they move outside the area, they can simply sell the balance of their leases to other customers.

No one was prepared for the reaction when the leases went on sale. Josh Bills, who’s a consultant with the Mountain Association for Community Economic Development, helped Berea design the system.

"It was really quite shocking to everybody involved, the utility, the contractors, the public, the council that the system leased out so quickly. There are 60 modules, there's a limit of two modules…..and in four days all 60 leases were subscribed."

The first array, as a group of solar panels is called, cost about $64,000 installed and was financed in part with federal stimulus money. Encouraged by the strong sales, Berea used the money from those leases to begin construction on a second array that is also selling rapidly.

Cool as this all sounds, customers are still bidding on a long payback. Assuming electric prices increase at the rate of 10 percent a year, it will take Berea ratepayers 23 years to recover their $750. For companies and individuals who can take advantage of tax breaks or subsidies on their projects, the payback could shrink to 8 to 10 years. With no moving parts, solar installations have limited maintenance, so the cost of electricity remains virtually the same over the entire life, which can be well over 25 years.

John Cotten directs marketing for Alternative Energies Kentucky.  It’s a Danville firm that manufactures and installs solar panels.

"It isn't dirt cheap, we're not going to tell anybody it is. You are making a longterm investment. It's no different if you were building a room addition on your house, you're not going to get the money back until you sell your house. In this case, though, you are going to start getting a return as soon as we turn the power back on….and that investment is going to last 25 to 50 years."

Cotten says the long payback is not as big an issue as whether there's enough sunlight in this sometimes gray state to make solar worthwhile.

"There is plenty of sunlight in Kentucky. That's a really large fallacy. We could probably retire with our company for every time we've heard that from different people but it's really not true. …actually the largest solar nation in the world right now is Germany. Germany's productive sunlight average per day is about 2.2 to 2.8 hours a day, Kentucky's runs anywhere from about 4.5 to 5.5 hours a day."

The problem in Kentucky, many experts say, is that we’re energy hogs. Conservation, they say, is the first and cheapest approach to reducing energy costs.

Steve Whitman, who’s the project manager on the Berea project…

"The first thing I tell everybody is do the easy things first. Tighten up your windows, get your insulation where it should be in your attic and your walls, do the caulking, do the steps that you should take to improve your energy efficiency. Then, if you have funds left over, this is one of the best longterm investments you can give to yourself." 

For Whitman, it's all about taking control of your energy future.

"I've been an electrician for over 35 years and I've been involved with solar for a little over a year….i think the key for the future is energy conservation…American's like to be empowered. If you realize that you could install a solar system and tie it into your home and see the savings and see the other ways you can save, I just think it's a way to empower people to do what you should be doing anyway."

To learn more about the Berea solar farm, go to http://bereautilities.com