Warming to solar power

In August, the Sacramento Municipal Utility District received applications for 422 kilowatts of residential solar-panel systems — more than three times as much as in any previous month, according to data from the utility. Pacific Gas and Electric Co. also had a record month.

SMUD territory has been a backwater for residential solar, mainly because its electricity rates are relatively low. Generating one's own electricity is a better deal if the alternative is a big bill for electricity from the grid.

A year ago, a home solar system for a SMUD customer would typically take more than 20 years to pay for itself, installers say, compared with roughly half as long in PG&E's service area.

"That's what makes it so hard to sell solar here," said Mike Muchmore, an estimator with solar installer Werner & Sons in North Highlands.

But the economics of solar have changed significantly in the last year.

The global recession and a major tightening of government incentives in Spain, once a huge solar-panel market, have led to an industry glut, driving a price collapse that has cut the cost of an installed system by 15 to 20 percent.

residential solar, which had been capped at $2,000, was increased this year to 30 percent of the cost of a solar system, which can cost more than $100,000.

California's $3 billion ratepayer-funded "Million Solar Roofs" program chips in another subsidy.

Electricity rates also continue to tick up, making solar comparatively more affordable. And solar installers are developing more sophisticated financing arrangements to cut the upfront cost of a system.

Now, installers say, the payback period for a system in SMUD territory can be 10 to 15 years, while some PG&E customers can make back the investment in five or six years.

"People are taking it seriously now," said Dave Hood, who owns Coldwell Solar in Loomis.

Charles Yakabe, who began receiving power recently from the new roughly 2.5-kilowatt system on the roof of his Little Pocket home, said he'd been tracking the cost of solar, and the lower prices helped make his decision.

"We said, 'Well, why not give it a try?'" he said.

Yakabe, 69, isn't sure how long his $18,620 system will take to pay for itself. He and his wife use relatively little energy to start with, and so usually pay only SMUD's low Tier 1 rates, which solar still can't compete with.

Longterm investment

Yakabe financed his system with a loan from SMUD, on which he will pay $119.69 a month. After the Million Solar Roofs discount, the system cost $13,791. He will receive the 30 percent tax credit.

"I'm doing it, really, for the long term," Yakabe said. He expects electricity rates to keep rising, and he's glad to be trimming his greenhouse gas emissions.

While demand for residential solar appears to be picking up among SMUD customers, utility officials still have modest expectations for the technology.

By 2020, SMUD forecasts that roughly 3,000 of its ratepayers' homes will have been retrofitted for solar electricity. For comparison, the utility now has 522,000 residential connections.

Jim Barnett, who oversees a piece of SMUD's residential solar program, said a bigger market is likely to be new homes with panels installed at the time of construction. In addition, SMUD expects strong growth in larger arrays of solar panels built on vacant land or on the large rooftops of commercial and government buildings.

Barnett said the jump in interest in residential solar in August was probably partly due to a looming drop in the subsidy rate.

By committing to buy in August instead of in September, a homeowner saved $1,200 on a typical five-kilowatt system.