While the sun's rays still produce a teeny-tiny sliver of the overall electrical power pie, several segments of the solar market are worth watching.
If you wrote off solar energy years ago as a source of sales or power for your business, it may be time to recalibrate your assessment. Changes in how utilities produce power; lucrative state and federal incentives that cover a portion of the cost of photovoltaic (PV) installations or provide attractive tax incentives for new systems; stock business from electrical contractors wiring PV installations; or potential alliances with PV specialty distributors are fueling new business opportunities for electrical distributors, independent manufacturers' reps and electrical manufacturers.
Let's get something clear right off the bat: Electrical distributors or independent manufacturers' reps won't start stocking PV panels or inverters (which convert the DC power that the panels produce into AC power) anytime soon. There's a small but dedicated network of PV distributors and dealers that are light-years ahead of electrical folks in terms of the knowledge and vendor relationships needed to sell PV panels and related products. But these distributors need a surprising amount of electrical products to offer a complete PV system, and they are either selling these products directly to the electrical contractors doing the installations or these contractors are already buying the equipment from full-line electrical distributors (See sidebar on page 40 for a sampling of the electrical products needed for PV installations). Another interesting twist in the solar game is that some of the larger PV specialty distributors have their own dealers. The PV distributors tend to carry a more extensive line of PV products, while the dealers, in addition to providing installation services, may carry a more limited line. The dealers typically buy many of their PV products through their distributors.
Anoosh Mizany, founder of Solar Depot, a Petaluma, Calif.-based PV distributor who was the subject of EW's Sept. 2007 cover story, “Growing Toward the Sun,” says electrical distributors can play in the solar space. “We actually buy a fair amount of what we call ‘balance of system’ products from electrical distributors to incorporate into our systems,” says the 27-year-veteran of the PV field. “In a way, they have already been benefiting from our industry. But there are ways of forming relationships and alliances that would be beneficial to both electrical distributors and solar wholesalers.”
While Mizany says it's possible that an electrical distributor could develop a specialty in PV products, it would require quite a bit of technical knowledge on how PV products function, sizing systems and applying them for specific applications. Because of this knowledge required, PV distributors have developed a small but profitable niche.
“It would require quite a bit of effort and a good deal of experience to compete with the existing distributors of PV equipment.” Mizany says. “One good way to work with PV distributors would be for them to form an alliance or relationship where they might get a referral fee if their customers are inquiring about solar.”
As a guy with several decades of experience in what has been to date the biggest market for PV equipment, Mizany has a good read on the fortunes of the PV market. Indeed, according to the Solar Energy Industries Association (SEIA), Washington, D.C., in 2007, the Golden State accounted for 58 percent of all PV power generated through the utility grid. The state's share of PV-generated power has historically been even higher (73 percent in 2006), but several utility-scale generating facilities came on line last year in Colorado and Nevada.
Ron Haedt, principal, Electrorep Inc., Sausalito, Calif., has watched the growth of his state's PV market with interest, too. He says several northern California distributors have been selling products for PV installations for some time, but that no electrical distributors or reps in California are yet selling PV panels or inverters.
“There are distributors that are strictly solar distributors for the purposes of panels and inverters,” he says. “No one is repping any of that stuff. For me to go out and find a line of PV panels, it isn't there — not yet. That doesn't mean there won't be, because I think there will be an opportunity, and we are going in that direction. Right now we are concentrating on the goods necessary to convert DC to AC and the products necessary to mount on the roof or wherever else they are installing the panels.”
Haedt has another business interest in the PV field. He is working with a company to install a PV power system on the roof of his office building. That company is absorbing the initial costs of the design and installation of the PV system and will lease back the equipment to Haedt and provide him with a big discount on the cost of the electricity it generates. “They said, ‘Ron, it is going to cost you $100,000 to install this on your roof.’ And I go, ‘Wow. I can't afford that.’ They then said, ‘We will design it, and we will put it up there and you can lease the equipment from us. We can reduce your power intake by 50 percent.’
“Then what they do is take advantage of the money being given back by the state in a credit form. They sell the excess power from the building that I am not using back to the power company, plus they get a lease from me for the equipment they have installed. The big money now is in the financial side of it. They have the authority to sell what we don't use back to the power company.”
California's union electrical contractors can learn PV installations at a new training facility in Los Angeles. Run by the Los Angeles chapter of the National Electrical Contractors Association (NECA) and International Brotherhood of Electrical Workers (IBEW) Local 11, the training facility has two complete electrical systems which together consist of 2,610 individual solar panels. The system is capable of providing close to 900,000 kilowatt-hours of electrical usage per year. During times of surplus production, power flows out into the utility grid, turning the meter backwards, and providing a cost credit. Apprentices, journeyman electricians and contractors are able to access current and historical data on how much power the system is producing.
Powering Up the Market
What will it take for the solar/PV market to really take off and (perhaps) provide new sales to electrical distributors, reps and electrical contractors? To answer that question, you really have to break the market down into several different pieces. Certain aspects of the PV market are ready for prime time, while others are still not cost-competitive with traditional fuel sources.
When the average guy or gal on the street thinks about solar energy, they think about the PV panels mounted on a roof or in a field array that provide power to a home or business. While this is the most common application for photovoltaics, in most applications the PV panels do not yet produce electricity that's cost competitive with conventional sources of power. Right now PV panels need utility rebates or other financial incentives and local, state or federal credits to attract homeowners and businesses. Power produced by PV panels typically costs 18 cents to 23 cents per kilowatt-hour compared to 5 cents to 10 cents per kilowatt-hour for conventional power.
That's why PV manufacturers are working 24/7 to develop more efficient panels. There have been some intriguing breakthroughs in what's called “thin-film” technology. Instead of using the conventional but expensive amorphous silicon technology to create PV cells, thin-film PV cells use a cadmium-telluride manufacturing process that makes PV cells at a much lower costs. Much of the excitement on Wall Street on solar stocks is based on the innovative thin-film manufacturing processes being developed by companies such as First Solar and Evergreen Solar. Instead of producing panels on delicate layers of silicon, newer technologies utilize less-expensive materials. Adding to the cost of conventional PV panels is the current silicon shortage, which is driving up prices of the finished panels.
Another reason more homeowners and businesses don't go solar is the fact that most of the costs of the systems are front-loaded. A research report published by the Western Governors' Association compared purchasing a PV system to “paying cash for a car and all of the fuel necessary to run it for 25 years.” Indeed, for an average-sized home, a PV system can cost between $20,000 to $40,000, depending on the amount of electricity it produces.
State and federal financial incentives
That's why state and federal financial incentives are now so critical to the PV industry. The best-known of the state incentive programs is California's two-year old “Million Solar Roofs” program, which provides $2.2 billion in incentives over the next decade for existing residential homes and existing and new commercial, industrial, and agricultural properties. The program's incentives include, but are not limited to a $2.50/W incentive for systems up to one megawatt in size; higher incentives for solar installations in existing and new low-income and affordable housing; and a pay-for-performance incentive structure to reward high-performing solar projects.
More recently, New Jersey's Public Service Gas & Electric (PSE&G) launched a program that can pay for a whopping 40 percent to 60 percent of the cost of the installation of PV panels. Currently only available to non-residential customers, PSE&G would provide loans to developers or customers to cover approximately 40 percent to 60 percent of the cost of a solar installation project, depending on the projected output of the solar energy system and the cost of the system. The borrower would repay the principal, plus interest, over 10 years for residential customers and over 15 years for all other borrowers, a considerably longer investment timeframe than traditional lenders are willing to provide for solar installations. The remaining project cost would be funded by the owner of the solar installation.
Congress is now working to extend the federal tax credit for installing both residential and commercial solar energy systems. The SEIA is optimistic that the law will be passed, and says the legislation that would remove the current $2,000 cap on tax credits for residential systems is of particular interest to homeowners.
An area of the solar market that may one day have a massive impact on how we generate power are utility-scale solar power plants (See “Thinking Big,” EW — April 2008, page 23). These plants utilize either centralized PV (solar fields with tens of thousands of PV panels) or solar thermal technology, which produces electricity using parabolic mirrors or lenses to focus the sun's rays on a liquid or water that's turned into steam to power turbines. Industry experts say when used in large centralized plants, solar thermal technology can produce electricity for less than 10 cents/kilowatt-hour, which is cost-competitive compared to conventional power plants.
The SEIA says passage of the renewable energy legislation now on Capitol Hill would speed the construction of several massive centralized solar power facilities. California's Pacific Gas & Electric (PG&E) has proposed purchasing 553 MW of power (equivalent in size to a typical natural gas or coal plant) from what will be the world's largest concentrating solar facility in the Mojave Desert. SEIA says a new solar power plant located 70 miles southwest of Phoenix and scheduled to go into operation by 2011 would not go on-line without the benefits of the investment tax credit. The 280 MW facility is expected to generate revenue of around $4 billion, bringing over $1 billion in economic benefits to the state of Arizona and enough electricity to power 70,000 homes.
It's tough to imagine many electrical distributors or reps getting involved in these large-scale solar power plants. But sales opportunities already exist for them if any electrical contractors in their markets are already wiring PV installations. Electrorep's Ron Haedt says the PV market in California is still evolving. “There are a lot of lone rangers out there. I see some similarities between PV and the dot-com bandwagon. Everyone is jumping on the whole green concept. There was 600 million square feet to 700 million square feet of office space that dot-coms walked away from. But now that industry has come back with a very solid business model with companies that you can see are going to be around for a long time.
“Right now we are in a gunslinger mode, and we don't know where this is going to go. It may implode or just take off. But we can't continue with the way fuel costs are. We must find alternative sources. Right now it is a renegade scenario.”
Do You Sell any of these Products?
Solar/photovoltaic products require lots of conventional electrical products to get tied into the electrical grid. If you haven't yet sold any of these products, you may in the near future.
- Strain-relief fittings
- Wire and cable
- Mounting brackets and fasteners
- Bi-directional meters for net metering
- Junction boxes
- Power blocks
- Ground-fault circuit protection devices
- Terminal strips
- Grounding electrodes
- Backup generators
- DC-rated and listed fuses and circuit breakers
- Charge controllers
- Load centers
- Disconnect switches