A combination of higher electricity costs and bigger tax credits is making Hawaii's solar business more lucrative.
It's also a good time for solar contractors to expand.
Bruce Ekimura, owner of Alternate Energy on Sand Island Road, opened a second location in Kahului, Maui, earlier this month to field additional clients. The 13-year-old business that provides solar water heaters, primarily for homes, will begin offering photovoltaics and court more commercial clients.
In addition to federal tax credits, new state legislation increases credits for those installing solar equipment in commercial buildings and homes. The bill passed by the Legislature and awaiting Gov. Linda Lingle's signature also makes the tax credits permanent.
Single-family homes installing photovoltaic energy systems would qualify for up to $5,000 in tax credits, up from $1,750. Commercial properties would qualify for up to $500,000 in credit, up from $250,000.
Homes investing in solar thermal energy systems would get either 35 percent of the actual cost back or $2,250.
The bill also establishes a "pay-as-you-save" program to be implemented by June 30, 2007. It would allow consumers to make incremental payments for a solar water heating system on their utility bills.
"The intent is to help people move away from dependence on fossil fuels and encourage the use of renewable sources of industry," said Sen. J. Kalani English, D-East Maui-Molokai-Lanai, sponsor of the legislation. "It helps encourage consumers and homeowners to invest in these types of systems."
Demand already is rising and solar contractors and solar-related companies are expecting the momentum to continue as state tax credits kick in.
Guy Akasaki is betting on integrated photovoltaic solar roofing as the hottest wave of the future. The owner of Commercial Roofing + Waterproofing Hawaii Inc. invested about $350,000 in solar panels and training. He will target commercial and industrial clients, particularly on the Neighbor Islands. Among potential clients are large firms, supermarkets and transportation companies.
A&B Properties Senior Vice President Paul Hallin said his company has been exploring its options.
"It appears this law -- with its tax credits -- would cause us to push even harder to cost-justify solar water heating or photovoltaic in both single-family residential and commercial construction," he said.
A&B Properties currently has residential and commercial developments on Maui, Kauai and the Big Island.
"It makes business sense," Akasaki said. "If it was only good for the environment and not economically feasible, we wouldn't do it. With the price of fuel increases, the feasibility of these systems will kick in."
The new state credits complement higher federal tax credits that went into effect beginning this year, offering 30 percent returns for solar water heating systems.
At the company's Upcountry Maui office, established two years ago, Poncho's Solar is hiring more help to meet the new demand there.
The average family home could invest $30,000 to $58,000 on solar equipment, depending on the size of the system, Apo said. But with all the credits available, they can expect more than half of the costs to be returned.
Homes on Maui and the Big Island can expect up to $1,000 in solar water heater rebates, compared to $750 on Oahu.
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May 29, 2006
Clean-energy industries will get more federal research support
Kent Hoover Washington Bureau Chief
Congress plans to increase funding next year for federal research in clean energy technologies, including biofuels, solar power and wind power.
Lawmakers are following the lead of the private sector, which already is putting more of its money into alternatives to oil and natural gas. The market for solar energy grew 55 percent last year to $11.2 billion, and the wind power market jumped 47 percent to $11.8 billion, according to Clean Edge Inc., a market research company.
Venture capitalists and investors also are bullish on alternative energy. U.S.-based venture capital firms invested $917 million in energy technologies last year, a 28 percent increase over the previous year. This represented 4.2 percent of total VC investments. That may not sound like much, but six years ago, VCs invested less than 1 percent of their money in energy technology.
Clean energy market
Source: Clean Edge Inc.
"I don't think it's a short-term fad," says Mark Heesen, president of the National Venture Capital Association. "This is something these guys are very serious about."
Meanwhile, solar companies accounted for the technology industry's three largest initial public offerings in 2005.
"If last year was any indication, the public markets are ready to absorb a good energy technology story," says Rodrigo Prudencio, principal of Nth Power, a firm specializing in energy investments.
Soaring utility bills and $3-a-gallon gasoline have caused the average American to focus on energy costs, but longer-term trends also are behind the new emphasis on alternative energy. The United States' dependence on foreign oil makes it vulnerable to supply disruptions, and the world eventually will run out of fossil fuels any way. Environmental concerns like global warming also may force changes in energy use.
That's why venture capitalists are so interested in alternative energy, Heesen says. It's one of the few areas where "life-changing-type technologies" may be created, he says.
Federally supported research key
The federal government will play a key role in the development of new energy technologies by sponsoring basic research, similar to the role it plays in life sciences, Heesen says.
President Bush called for a 22 percent increase in clean energy research at the Department of Energy, and House appropriators gave him much of what he wanted. Heesen welcomes the increased research budget, but he hopes the Department of Energy will "change its mindset" and realize that smaller companies, not big businesses, are better at innovation.
Alternative energy costs drop
A recent House hearing showed how much progress already has been made in alternative energy technologies, and how far they still have to go before they become mainstream.
Wind power, for example, already is a cost-competitive source of electricity in many areas. It eventually could generate up to 20 percent of the nation's electricity supply, says Dan Arvizu, director of the Department of Energy's National Renewable Energy Laboratory in Golden, Colo.
The cost of wind-generated electricity has declined by 80 percent since 1980 thanks to technology advancements, says Victor Abate, vice president of renewable energy for GE Energy. GE invests more than $70 million a year in wind turbine technology. Abate says making a federal tax credit for wind production permanent would ensure further progress.
Solar power also is much cheaper than it was in the past, although it still costs more than other sources of electricity. One problem is a shortage of silicon, the material now used for most photovoltaic cells. New technologies, however, could cut the cost of solar power dramatically.
"We believe revolutionary thin film technologies can unlock the sun's potential," says Troy Hammond, vice president of Plextronics.
Pittsburgh-based Plextronics uses a polymer technology created by a Carnegie Mellon University professor that absorbs the sun's light and acts like a semiconductor to generate electricity.
"These polymers are turned into inks that can literally be printed much like a newspaper is printed," Hammond says.
Solar modules using these polymers can be 10 times cheaper to manufacture than silicon-based modules, he says.
Biofuels, meanwhile, could replace 30 percent of current U.S. gasoline consumption, Arvizu says. The key is developing new technologies that will enable ethanol to be made from biomass like agricultural wastes, grasses, trees and municipal waste instead of corn, he says.
By 2050, alternative energy sources could supply half of the nation's energy needs, Arvizu predicts.
But, he says, it will take "a significant and sustained national effort."