By Don Parker
POSTED: 05/13/2011 01:00:00 AM MDT

The photovoltaic (PV or solar electric) industry in Colorado has been through quite an upheaval with Black Hills in Pueblo suspending rebates indefinitely and Xcel in the metro area suspending its Energy Solar Rewards program suddenly in February, then bringing the program back in a different form in March.

At our company, several potential customers “pulled the plug” on photovoltaic installations when they learned that the upfront costs of installation would be about 27 percent higher than originally anticipated.

And who could blame homeowners and small business owners? They had been looking at costs of $6,000 to $18,000 (after the 30 percent federal tax credit) for a 4-10 kilowatt PV system; then without warning, they suddenly found their up-front cash outlay more in the range of $7500 to $23000.

All the other reasons to buy a PV system for a home or a business still existed, including the environmental benefits, lower utility bills, independence from inevitably higher future rates, and even the fun of having this amazing technology. But a reasonable rate of return is also important to most buyers.

Fortunately, there is a silver lining (as owner of Golden Solar I like to say “Golden Lining”) in the new Xcel rebate system. Because Xcel is now paying a new, back-end subsidy based upon the production of a PV system over 10 years, the return on a PV system actually just increased from around 8 percent to at least 9.5 percent. This is certainly a higher return on investment than CDs and most other safe investment strategies.

As a result of Xcel’s new Production Based Incentives, even though the cash outlay for a homeowner or business buying a PV installation is a few thousand dollars more than it was in February, the return on investment is now at or close to double digits. And the return goes up as electric bill savings increase with rising future electricity rates.

All of us in the solar installation business, who really sweated and swore when the rebates were suspended, have been somewhat relieved since the rebates returned. Of course, there is a residual loss of trust and other emotional feelings about Xcel and even the Public Utilities Commission for approving the lower Xcel payments. Business for many other installers as well as businesses that lease solar panel installations slowed dramatically during the suspension period, workers were laid off, and a few PV businesses closed. But business has improved as our customers are starting to understand the new Xcel rebates and the higher rates of return.

A 30 percent federal tax credit is available to both business owners and homeowners alike. In addition, there is a current Xcel payment of $1.75 per peak watt and 4 cents per kWh produced for residential and small business-sized PV systems. However, payments from Xcel will end in the next couple of months, so consumers may want to take advantage of current rebates while they last.

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