I spotted a rare critter on the streets of San Francisco this week -- a smiling, optimistic businessperson.

Then again, Ron Kenedi is in the solar panel business. 

"The big news as I see it is the demand -- demand keeps growing everywhere," says Kenedi, vice president of Sharp Solar, the renewable energy arm of the Japanese conglomerate. "What really amazes me every day is how much demand has grown throughout the world."

Kenedi is not one for Pollyannaish optimism -- he started in the business around the time Ronald Reagan took down Jimmy Carter's solar panels from the White House roof.

"I used to have to go out there with a sandwich board on to get people interested in solar," he says. "Now I can't even walk down the street without people talking to me about solar and wanting it on their home and businesses."

That's because there's a boom in so-called distributed generation under way -- placing solar panels and pint-sized photovoltaic farms at or near where electricity is consumed.

Until very recently, distributed generation just couldn't compete on cost with Big Solar -- massive megawatt solar thermal power plants usually located in the desert.

Big Solar has had the edge by the dint of the gigawatt-size deals utilities have struck with developers like BrightSource Energy, eSolar, and Solar Millennium. Large solar thermal power plants -- which use mirrors to heat liquids to create steam that drives a generator -- could make electricity cheaper than photovoltaic panels, which produce electrons when the sun strikes semiconducting materials.

Now that's all changing. Over the past year, a number of Big Solar thermal projects have become mired in disputes over their impact on fragile desert ecosystems and the lack of transmission lines to connect them to cities. In December, California's powerful Democratic senator, Dianne Feinstein, introduced legislation to ban renewable energy development on more than a million acres of the Mojave Desert she wants to protect as national monument.

Photovoltaic module prices, meanwhile, have plummeted by about 30 percent over the past year thanks to an oversupply of modules and the rise of low-cost Chinese manufacturers. Thin-film solar companies, which make solar cells that use little or no expensive polysilicon and which layer or print them on glass or metal, began to produce solar modules for less than a one dollar a watt -- long considered a key milestone for making solar competitive with fossil fuels. Though less efficient than conventional crystalline solar modules, thin-film solar cells can be manufactured more cheaply, making it particularly suited for use by photovoltaic power plants.

Distributed solar's new competitiveness can be seen in a spate of deals and initiatives over the past few weeks as utilities turn to small-scale solar to help meet mandates to obtain a growing percentage of their electricity from renewable sources. As of today, 1,300 megawatts' worth of distributed solar will be installed over the next five years -- at peak output those arrays will generate as much electricity as a big nuclear power plant.

California regulators two weeks ago approved Southern California Edison's five-year program to install 500 megawatts of solar arrays on commercial rooftops. They also recommended that PG&E, the big Northern California utility, be given the go-ahead for its own 500-megawatt distributed solar program to place small solar farms near substations and cities that can plug directly into the grid.

And both utilities revealed additional distributed solar deals this week. Southern California Edison agreed to buy 50 megawatts from three small-scale solar farms to be built by San Francisco's Recurrent Energy in Kern and San Bernardino Counties in the eastern part of the state.

On Monday, PG&E filed a request that regulators approve a contract with Eurus Energy America, a joint venture between Tokyo Electric Power and Toyota Tsusho, for 50 megawatts of solar electricity from three power plants to be constructed near Fresno.

"We're seeing the rest of the industry cotton on to what we've been saying, distributed solar done at the right size can scale," says Arno Harris, Recurrent's chief executive. "Distributed solar is faster on permitting, on environmental issues, and interconnection to the grid."

For Sharp Solar, the biggest demand for its thin-film panels comes from utilities. "That's what's opening up the utility sector for Sharp -- it's a very robust market," says Kenedi.

(And lest you think this is just a California phenomenon, the New York Power Authority last week announced a program to install 100 megawatts of photovoltaic panels on rooftops and at ground stations over the next four years.)

The Sacramento Municipal Utility District showed, just last month, how fast the distributed generation market is growing when it put up 100 megawatts of photovoltaic projects up for bid and sold out the allotment in one week.

But the shocker of the SMUD deal is that the utility is not paying a premium for solar electricity, according to Adam Browning, executive director of Vote Solar, a San Francisco nonprofit that promotes renewable energy (and an occasional Grist contributor).

I'll spare you the utility industry calculus of "time differential avoided costs," but Browning has run the numbers and believes that SMUD will pay essentially the same price for solar electricity as it would for fossil fuel-generated power when demand peaks. (Solar farms typically supply peak power as their output coincides with the time of day when demand spikes.)

"The point here is that this is an entirely revenue neutral investment for SMUD," Browning says. "They got solar electricity for what they would have paid for fossil, which is a significant milestone."

SMUD officials did not return requests for comment so I could not verify those numbers with the utility, but given that solar developers must put down a deposit of $20 a kilowatt for winning bids -- that's $100,000 for a five-megawatt project -- it seems unlikely there were many speculators in the bunch willing to walk away from a six-figure commitment.

Truth be told, we're going to need every kilowatt of green electricity we can wring from Big Solar, distributed solar, wind, waves and geothermal. But the rise of distributed solar generation will help ease the load as well as the environmental pressures from developing other forms of green energy.

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Dear Umbra,

I have been looking high and low regarding ongoing tax credits and incentives for solar installations on private residences. I may be looking for something that doesn't even exist, but the rumors certainly do. Is there some website I can confer with to see if there really is such a thing?

I have already received the initial installation credit, but, as I said, I have heard of new tax laws regarding ongoing, slowly decreasing credits. I can't take this to my tax lady without having SOME KIND of something or other in black and white for her to see. PLEASE HELP!!!

David Draper
Bakersfield, Calif.

Dearest David,

Just as an aside to everyone else, I did not answer this question because of the use of all caps and excessive punctuation, so don't go getting ideas. I simply wish to borrow David's question to follow up on some of the recent solar info and start talking about financial support for solar installations.

Tracking the flight of the solar dollar.

There are arguments about whether solar is financially feasible or competitive or worth it, and from what I can tell, the argument is only possible due to the existence of state, federal, even city and county financial incentives.

The comprehensive compilation of financial incentives for renewable energy is at the Database of State Incentives for Renewables and Efficiency. Despite the name -- and an acronym that sounds like a parfum -- DSIRE also tracks federal incentives for consumers (not manufacturers). DSIRE allows you to check for renewable-energy incentives, or energy-efficiency incentives, or both. If you wish simply to see all the photovoltaic incentives in the United States, you can access that chart at the Solar Energy Industries Association.

Since David lives in California, let's use that state's current incentives to show all of us what might be possible if we start our own solar dreaming. For a random mooring in numbers: GE tells us that you can multiply your daily kWh use by 0.25 to get the ballpark watt size of the PV system you need, and Southern California Edison tells us that a PV system might cost $7 to $10 per watt. So, a 2 kWh system might cost us $20,000.

One type of financial support available to help us manage this huge sum is a rebate. California offers rebates for home PV installations, $2.50 per watt for residential systems less than 100 kW; various utilities in the state also offer rebates, and one county does too. Often with rebates there is a little cap: customers in Riverside, for instance, can receive $3 per watt up to $15,000 or 50 percent of the project cost, whichever is less.

Loans are also available to finance solar installations, and (David, this perhaps is useful to you) the interest paid on these loans is tax deductible. Property tax exemptions are also mentioned for the Golden State, for solar systems and their related components. The state offers loans to institutions, and a utility offers one to individuals. Santa Monica County offers plain old grants for buildings meeting certain renewable-energy criteria.

Net metering is, of course, available in sunny California and is, in its own way, a financial incentive. There and in most places net metering is used as a storage system for your solar power, obviating the need for pricy batteries and giving you an out if you exceed your solar capacity. Your excess electricity will run the utility meter backwards; when you are using more power than you create, the meter will run forward as your electricity comes from the grid. People characterize it as "selling" your electricity back to the utility. But at the end of the year, if you have "sold" more power than you have "bought," in most states you don't get any cash. The financial incentive works for both parties, I guess.

At the federal level, there is a tax credit for solar electric and solar hot water. DSIRE relates that there may be a personal tax exclusion for subsidies paid from utilities, as above. Friends, I feel I may have helped a few of you over the years by explaining complicated subjects in my jolly, sloppy fashion, but I falter on tax law. I think what DSIRE refers to is that you may not be taxed on the rebates, and -- on a related topic -- they also imply here that there may be tax advantages to conservation credits on your utility bill. Then again, I may be misreading the text. Have a look, obtain the SEIA guide to federal tax incentives for solar (again, David, this would be helpful to you), and hire a professional.

In short, money is available to help with the costs of solar, but the amount is quite dependent on your state and locality. Solar itself is dependent on your locality, in fact. How's that for a deep thought?

IRSly,
Umbra

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