Xcel's Subsidy Cut: More Bad News for Solar

The battered solar sector has received some more alarming news, this time from the Minneapolis-based utility Xcel Energy (XEL). According to the Denver Post, the company on Friday cut the credit offered on a typical household photovoltaic system to $6,750 from $11,250.

The Post noted that in a letter to the Colorado PUC, Xcel said it was cutting its solar subsidy because Congress voted to lift the $2,000 maximum on the federal solar investment tax credit. Essentially, Xcel said that because customers will get a bigger boost from Uncle Sam, it could cut its own discount without much of a change in overall consumer system costs. The story notes that Xcel now estimates that a typical rooftop solar system of 4.5 KW will cost customers $14,175 after all credits and rebates, versus $13,750 before Xcel’s credit reduction. While not a big change in overall costs, the move does have the effect of sharply increasing upfront costs, since the tax credit is not received immediately.

In a research note this morning, Hapoalim Securities analyst Gordon Johnson asserts that if Xcel’s move starts a trend, “there could be material retrenchment in residential solar demand.”

Comments

[Tony Petroski:]

Since global warming will cut the costs of heating in Minnesota, the customers will have a further reduction of costs there.

2008 Oct 28 05:27 PM

[bmerson:]

The inability of American companies to take a big-picture view is just stunning. Instead of growing the pie, we invariably worry only about growing our little piece of short-term profits. If energy companies (and renewable) companies are really interested in driving up demand for solar, then they should be increasing their rebates, not decreasing them. Now, when energy is a topic of discussion, is the time to drive demand for the industry. Instead, what do they do? Put short-term up-front profits ahead of long-term sustainable business growth. Foolishness.

2008 Oct 29 08:21 AM

[John Cordes:]

Another arguement against privately held utilities.

2008 Oct 29 08:59 AM

[Road Runner:]

As much as I hate to say it, this could be a trend. Being on the green bandwagon before the housing crisis was good for a utility's image. But now, the utilities have 2 good excuses to reduce expensive subsidies, the slowing economy and the higher federal subsidies. Plus, the public is less focused on long term "be a good world citizen" stuff and more on short term survival. They care less about the bigger picture of global warming and national energy independence so they will let utilities “slip” on the good citizen stuff. Also, with oil, gasoline, and natural gas prices back down, it gives a false sense that there is no energy crisis.

I just hope that we have built enough momentum toward solar and wind that when this crisis is over and energy prices start moving higher (which is inevitable with the emerging markets), that we can resume the push toward solar and wind. And, hopefully, cost and technology improvements continue during this dry spell so that when the push resumes, solar and wind will be move competitive with other sources of energy.

P.S. I wonder what Obama and the Democrats are going to do to promote wind and solar. They will do something because that is part of their platform, but when, where, and how much are big question marks in the current financial crisis.

2008 Oct 29 11:30 AM