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Solar Industry Powers Up Slowly in Washington by Jason Bacaj Seattle Times, July 7, 2010

Bruce Dean walked down his driveway, turned around and looked at the newly installed solar-power system resting on his roof, collecting rays from the seldom-seen Seattle sun.

"It has taken a while," said Dean, a retiree living in Ballard with his wife, Kaylee.

He is the first customer in Seattle to install a system that qualifies for the highest incentive available from the state's renewable-energy program -- five years after the program was created.

The incentives are to encourage steady solar-industry growth in the state, so the biggest payout goes to buyers of solar-power systems manufactured in Washington. But companies haven't exactly leapt at the opportunity -- only two build solar-power components in the state.

Silicon Energy of Marysville became in May the first Washington firm to make both major components of a solar system: the solar module, whose familiar panels turn sunlight into electricity; and the inverter, which turns the panel's direct current (DC) into standard, usable alternating current (AC).

Counting the Deans, the statewide number of solar-power systems using all Washington-made parts stands at only 15.

"We're going at it at a slow pace," said Mike Nelson, who's been involved in solar power since 1979 and is now director of Shoreline Community College's clean-energy program.

Even without manufacturers, though, Washington has doubled the amount of solar power generated each year since 2006.

The Legislature created the Renewable Energy Cost Recovery Incentives Program years ago. It pays people or businesses using renewable-energy systems -- such as wind, solar or anaerobic digesters -- a base rate for each kilowatt-hour produced by the system.

The rate increases if various parts are manufactured in Washington, up to 54 cents per kilowatt-hour.

There's also an incentive for solar-power manufacturers: They get a 43 percent break on their business & occupation tax.

Even though there are incentives for both manufacturers and consumers, the two combined aren't as attractive as subsidies in other states.

California has a $3.3 billion program aimed at generating 3,000 megawatts over the next 10 years. The state has installed nearly 40,000 systems since the program began in 2007.

It's focused on installation, but the volume of demand has spurred manufacturing growth in California.

Another hurdle here is the price of electricity.

Cheap electricity

Electricity in California costs 15 cents a kilowatt-hour, compared with 7 cents in Washington. Cheap hydroelectric power makes Washington "the last place in the world" where solar power will reach a competitive price, Nelson said.

Washington's small solar market, as well as bigger incentives elsewhere, means big multinational solar manufacturers aren't likely to move operations into the state.

"It really has to come from local entrepreneurship," Nelson said.

The Legislature created the state program's first incentives in 2005, but the details were uncertain.

Silicon Energy got into the solar-manufacturing business in 2007, initially as a division of advanced-power electronics maker OutBack Power Systems of Arlington.

Gary Shaver, the company's president, said it spent the next two years slogging through the "long and laborious and expensive" process of getting its components vetted by Underwriters Laboratories, an independent product-safety-certification organization.

OutBack then sold a majority stake to an investment fund called Spectrum Renewable Investments.

"We liked the thought of an American manufacturer of solar modules," said John Carroll, a vice president at Newport Partners, the California financial firm behind Spectrum.

Rather than see so much solar manufacturing go to China, said Carroll, he thought it could create jobs in America.

Newport also saw a quality product in Silicon Energy's solar modules -- one particularly suited for northern climates. A 300-pound man can jump up and down on the module and not break it, so it should withstand heavy snow and hail, Carroll said.

Since then, Silicon Energy has moved to a new facility in Marysville that's twice the size of the old one in Arlington. It also doubled its staff, from 10 employees to 20.

A second manufacturing facility in Minnesota is to begin operations early next year.

Shaver said it's taken several million dollars to get Silicon Energy this far in what he described as a very expensive industry. Now that the company is selling the only certified Washington-made solar-power systems, business is moving along briskly, he said.

At least two other companies are getting close to producing full systems in the state, said Shaver.

Getting plugged in

No home-improvement project is without its hangups.

The Deans planned to install their inverter before the end of June. But Silicon Energy ran into some trouble when it came time to ship the device.

Turns out that while the company was moving to its new facility in Marysville, the Deans' inverter got packed away and no one could get to it.

The inverter was installed just days ago, but Dean has to wait for a Seattle city inspector to approve it.

Dean pays roughly $840 in electricity bills each year but expects the 3.5-kilowatt system to generate about 4,500 kilowatts of electricity each year, enough to meet half his annual power needs.

Seattle City Light will pay him about $2,400 every year the system generates power.

With a 30 percent rebate from the federal government for installing a solar-power system, Dean expects to recoup the initial $27,000 investment in a little over seven years.

And he might be joined by others in his neighborhood. A few of the neighbors asked to have their roofs checked out to see if they could put in solar modules, said Kevin Ward, CEO of Revolution Green Power, the company that installed the Deans' system.

"Things look awfully exciting," Shaver said.

Residences or businesses with solar-power systems register the system with the state Department of Revenue and with the utility. The utility reads the system's meter along with the regular meter, then cuts the family or business a check for however much power their system generated.

The state reimburses the utility by knocking the same amount off the power company's public-utility tax.

The incentive is capped at the higher of either $100,000 or 0.5 percent of the utility's electricity sales each year.

Puget Sound Energy, the state's largest utility, serving about 4 million people, paid $170,000 to renewable-energy users in 2009.

So far the state has paid 20 utilities $340,000, but no utility is close to reaching its cap.