How has the solar industry fared in the down economy? During today's OnPoint, Rhone Resch, president of the Solar Energy Industries Association, releases SEIA's new first-quarter data. Resch discusses the climate for bringing renewables online and the competition that exists between renewables and natural gas.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Rhone Resch, president of the Solar Energy Industries Association. Rhone, thanks for coming back on the show.
Rhone Resch: Thank you for having me, Monica.
Monica Trauzzi: Rhone, you're releasing the solar industries Q1 data today. What does it tell us? Have you seen growth?
Rhone Resch: It's a great new story, 2010 was a record year for the solar industry. We grew by over 100 percent in the United States and we're keeping that trend going in the first quarter. We've seen installations grow by 66 percent over where we were last year, manufacturing is up by over 30 percent and we're on track to hire somewhere between 25 and 50,000 new employees in the solar industry this year alone.
Monica Trauzzi: Are certain regions seeing more growth than others?
Rhone Resch: You know, it's interesting, people tend to think about California and the Southwest as being the biggest solar market in the country. But the reality is between Washington, D.C., and Boston is actually a significant market, larger than California. So we're seeing New Jersey continue to grow at record paces, Pennsylvania, New York, Massachusetts and a lot of other states, like Arizona, Colorado and, of course, California.
Monica Trauzzi: The report highlights the fact that technology costs have come down. How has that happen? How have you gotten to that point and how does that sort of impact the numbers a bit?
Rhone Resch: Well, it is also a great new story. I mean people have always said, well, solar is too expensive to invest in. But the reality is, over the last year, the cost of solar to the consumer has come down by over 15 percent. We're seeing the module prices come down, we're seeing inverters and the balance of systems equipment continue to decrease in price and we're seeing more competition on the installer side. So now you have, as a user of electricity, you have the choice of going to maybe 10 or 15 different installers who are all competing for your business. All of these factors are driving the cost down to the consumer and I think one of the other big developments that we've seen in the last couple of years are kind of no money down solar, solar leases for homeowners. So you can enter into a contract where you actually lease the equipment on a monthly basis and have to put no money down. And those leases tend to be lower than what your electricity bills would be from the utility.
Monica Trauzzi: It always comes back to policy. Since costs have come down so much, will you continue to need support from the government in ways like tax credits?
Rhone Resch: Absolutely. What we've seen is that these tax credits are working. The 1603 Treasury Program, which was put in place a couple of years ago and extended at the end of the year, is the most significant piece of legislation for supporting renewable energy in general here in the United States. What we've seen through the 1603 program is not only a massive ramp-up in solar installations, but the creation of literally tens of thousands of new jobs and it's really having a major impact in the industry. What the 1603 program does is it just creates flexibility in how you finance the solar project that you're developing instead of using the tax credit. The key here is we have such a strong economic downturn and Wall Street really hasn't come back into the tax equity markets, that the reason why this policy was created still exists today. So we're looking to continue the 1603 program out through the end of 2016 and we're confident that solar will be able to lower our costs so that we'll be the lowest cost of electricity by the end of 2016.
Monica Trauzzi: What's the benchmark then for no longer needing that kind of support from the government?
Rhone Resch: You know, I think ultimately it's important to look at how government treats energy in this country. We have always provided support and subsidies for all energy technologies. Oil and gas has enjoyed it since 1913, the coal industry since the 30s, the nuclear industry since the 50s and the solar tax credits were only created in 2005. And even then they were only created for two years and capped at $2000. So getting some certainty, some kind of duration that allows us to scale up our industry and drive down costs is critical. Having those tax credits in place through 2016 is extremely important and I think what we'll do is have a chance to evaluate all energy tax credits in the future and to see which investments by the taxpayer make the most sense. And I would argue right now that, from a job creation perspective and a tax revenue perspective, the 1603 program provides the greatest return for taxpayers of any energy policy in place today.
Monica Trauzzi: So, if you can simplify the numbers a bit, you've told us that there's been growth in the industry. We've heard talks about 20 percent renewable electricity standard, goals of 20 percent electricity created through renewables. What percentage of our energy is coming from solar right now?
Rhone Resch: You know, I think most people would be amazed to hear that less than 1 percent of electricity generation comes from solar today. But when you look at the available roof space on homes and buildings, both in Washington, New York City and other cities, you can find that you'll be able to generate 25 to 30 percent of the electricity for those cities by just using the available roof space if we were to go solar. So there's a tremendous opportunity to grow just by let's say tapping into the wasted space that sits on roofs. But then you combine that with utility-scale solar, concentrating solar thermal projects in the Southwest, large PV farms, also in the Southwest and in other places, and you can easily see solar providing, in some key markets, 20 to 25 percent of the electricity generation in the next 15 to 20 years.
Monica Trauzzi: And do you feel that utilities really need a mandate in order to do that or are they working on their own and implementing renewables on their own?
Rhone Resch: You know, I think a mandate certainly gets utilities to focus on renewable energy. And without those RPS standards at the state level, we would not be nearly as far along in the solar market or in the wind markets. I think what you're now finding is that utilities see the economic value of solar, not only in that it's cheaper than peaking natural gas electricity generation, but that it also can be distributed generation. And you can put solar at the point of consumption where grid transmission and distribution congestion is greatest, so it actually helps improve energy security. So you are seeing utilities start to move and appreciate solar more and more, but we have a long way to go.
Monica Trauzzi: And utilities are also converting to natural gas. How much of a competitor is natural gas to the solar industry?
Rhone Resch: Well, I think there's actually a lot of complements between natural gas and solar. Solar we get the maximum generation from 8 a.m. to 8 p.m. every day, almost perfectly coincident with peak load in this country. But then by using natural gas as the backup to solar, you're really creating a baseload much cleaner product than what you have today in the generation mix compared to just coal. However, natural gas is also used for peaking and what we're finding is that the peaking units, both from a heat rate, as well as the cost of generation in most markets is much higher than what solar is. So that utilities are looking around and saying, you know, these large solar thermal plants and large PV plants are cheaper than natural gas, peaking plants. We're going to go in that direction. And I think the other thing that utilities recognize is that any time you have electricity generation from a commodity, like natural gas or coal, you're going to see price fluctuations and those price fluctuations are going to impact the consumer in the long run. By going with solar, you're locking in your electricity rates for the next 20 years from a generation perspective. You'll avoid those fluctuations and you can give the consumer a real price point.
Monica Trauzzi: We're just about out of time. I want to get this last question in. House Republicans have introduced four new bills relating to the permitting process that we have for renewable energy. How much regulatory red tape does your industry face?
Rhone Resch: A tremendous amount. You know, it's only been in the last six months that we've seen permits offered for large-scale solar projects on federal land. Just to give you a perspective, over 75,000 oil and gas permits have been issued in the last 20 years and now we've only received nine in the solar space. So it takes a long time, but it also is education of the Department of Energy and the Bureau of Land Management about what the technology is, how it's implemented, the impact it may or may not have on the environment. So, what we're finding is it's a combination of both education as well as streamlining the regulatory process in order for us to really unleash the potential that solar has in this country.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show again.
Rhone Resch: Thank you for having me.
Monica Trauzzi: Thanks for watching. We'll see you back here tomorrow.
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