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A solar panel on every home?

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In mid-2011, Australian homeowner Rowan Ford equipped his home for solar energy. 

Ford paid AUD$13,500 ($12,578) cash upfront for his solar power system and estimates he makes around AUD$2,800 ($2,608) profit per year — the Australian Capital Territory’s generous solar scheme pays homeowners about AUD$0.46 ($0.43) per kilowatt-hour of solar energy generated.  He'll have the benefits for up to 20 years.

But, only three weeks after his family signed up, the incentives program closed to new applicants.  The program was controversial in part because all residents had to pay for it through a levy on electricity bills, whether they were solar users or not — a figure that could add up to around AUD$100 ($93) per year. A similar controversy has risen over generous benefits in Germany.

As prices for solar panels have fallen worldwide to around 50 cents per watt in countries like the United States, and controversies over who benefits have come to the forefront, other regions in Australia as well as countries like Germany and Italy have pulled back on their solar energy incentive programs. 

But the picture for solar hopefuls isn't entirely cloudy. If you’re thinking of converting to solar, some governments continue to offer programs to reduce the cost — albeit less generous ones — and some companies offer leasing programs to pay off the units long-term.

Prices Falling

Part of the rationale for reducing the benefits is that prices for residential solar power systems have dropped dramatically, with the cost of production for solar hours decreasing 80% over the last four years.

Darren Gladman, policy manager for the Melbourne-based Clean Energy Council, said in October the average price was AUD$3,567 ($3,327) for a 1.5-kilowatt system, the typical size needed to power a small, two-person home. Four years ago, the same 1.5-kilowat system might have cost up to AUD$30,000 ($27,996), making it necessary for the government to both give rebates of about AUD$8,000 ($7,466) to make the purchase of the system more affordable and to institute the levy, or tariff, for all residents.

Falling prices didn’t just reduce the lucrative incentives for people to equip their homes with solar panels. The price slump also has driven many solar panel companies out of business, including American company Solyndra in September 2011. Despite receiving $535m in federal loan guarantees from the US Energy Department, the company closed. In Germany, Q-Cells, Solon and Conergy have all filed for insolvency.

Gladman, however, said this solar slump applies mainly to manufacturers, not installers like those in Australia that import products. For solar-energy hopefuls, that means there’s more competition—and better pricing—for installing systems. And with many governments still offering incentives for solar use, it could still be worthwhile to examine whether solar is a good—and cost-saving—alternative.

A Lease on Solar Life

Brokerage companies like Solar Choice make it easy to find an installer that meets the needs of different homeowners. They provide information on company ratings and comparison price quotes. In Australia, there are approximately 4,500 solar installation companies. According to the Solar Energy Industries Association, there are 6,100 solar businesses in the US.

And others are entering the market. California-based solar giant SunPower plans to launch a leasing program in Australia in January 2014, the company’s chief executive Tom Werner said. This will allow consumers to purchase solar systems with no up-front cost in the form of a long-term repayable loan of up to $35,000. Ostensibly, the loan is repaid monthly using the money saved on energy bills.

In the US, SunPower currently has 20,000 customers on a similar leasing program, Werner said.

Most federal energy departments and environmental councils offer free online solar guides on topics like energy audits, local codes for installation and available incentive program applications.

Programs that subsidize green energy tend to spark debate over how much and whether to subsidize. Generous benefits over the last five years helped spur the installation of in-home solar power systems, but at great cost. For instance, Down Under, their number has grown to one million today from 8,000 households in 2007. But the program cost the government more than AUD$1 bn ($933.2m).

“(Solar) is an expensive way to make electricity and that’s the problem at the moment,” Ford said. “As price continues to decrease, it makes green energy a more attractive option.”

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