California Offers Up $2.5 Billion Solar Power Subsidy
California regulators approved a $2.5 billion US solar-power subsidy, the largest ever in the U.S., offering more business to solar-panel makers such as SunPower Corp. and Evergreen Solar Inc. that already are struggling to meet demand.
The state plans to spend that money over 10 years starting in 2007 on rebates for consumers and businesses. It may be several years before manufacturers can meet rising demand for solar panels. The subsidy will add to a Backlog of orders from Germany and elsewhere in Europe.
“All of the manufacturers are selling everything they can make today,” said David Edwards, an analyst from American Technology Research in San Francisco, who has a “buy” rating on Evergreen and a “hold” rating on Sun power. ” They have to ramp up manufacturing even faster.”
Global production of solar panels grew. 33 percent in 2005, according to Piper Jaffray estimates.
The incentives in California aren’t likely to increase earnings at solar power companies in the next few years because of their inability to fill additional orders, said Michael Horwitz, an analyst with Pacific Growth Equities in San Francisco.
“They can’t meet the current market, let alone what California just added to it,” Horwitz said. “This is a completely sold out market as it is.”
Opponents of the state’s plan, including University of California professor Severin Borenstein, say solar power is too costly. Based on his analysis, a $24,000 residential solar system amortized over 25 years will produce electricity at about $.25 per kilowatt hour. PG&E Corp.’s Pacific Gas & Electric utility charges residential customers rates ranging from $.11 to $.33 for those who consume the most electricity.
“Solar power is nowhere near economic,” said Borenstein, director of the University of California Energy Institute in Berkeley. He says the state would be better off spending the money on energy conservation, wind power wart research and development for solar power.
This article appeared in the Edmonton Journal, January 13, 2006 taken from the Bloomberg News feed.