in Houston, Texas

Federal stimulus plan for solar power will take decades to return investment, if ever

Photo by flickr user Wayne National Forest.
Monday, Apr 05, 2010, 01:50PM CST
By Mark Lisheron

If the people of Bedford, Texas, are still borrowing whatever they are calling books in 72 years, they may find themselves in the public library on the very day the energy saved by the library's planned solar power system finally equals the cost to build it.

The solar plant in Bedford, between Fort Worth and Dallas, would not have been built at all without a nearly $2 million Department of Energy stimulus grant.

The same could be said of nearly all the other 31 projects in Texas given approval for stimulus funding by the State Energy Conservation Office. Most of these projects, either started or just getting started, are 80 percent paid for by taxpayers, out of a pool of $52 million dollars, which is itself a small part of the roughly 290 million federal tax dollars given to Texas for various energy programs through the American Recovery and Reinvestment Act.

Factor in federal assistance, and the University of Texas-Southwestern Medical Center in Dallas can afford to build a solar array that won't return its investment for 72 years. As officials at Southwestern told the Dallas Morning News, they would not have been able to afford solar, either, without a lot of federal help. Austin Community College can equip two of its campuses with solar, and its savings will not offset costs for more than 52 years. 

Remove the assistance and the entire solar industry, not just in Texas but nationwide would be in jeopardy, says Mark Rangel, general manager for Texas Solar Power Co. in Austin. The hard truth is that the yawning gulf between the desirability and the affordability of solar power for businesses and homeowners has been filled year after year with billions of taxpayer and utility user dollars.

It is likely that none of the $52 million in state energy solar projects will be anything close to profit making. With the current technology, the life of a solar generation system is about 25 years. If a solar generation system has to be overhauled two or, maybe three times, the break-even point can never be reached.

"It would not be feasible for us to see our product competitively without all of the local and federal incentives," Rangel said. "There would be no way for the customer to reasonably recover their costs."

Don't get Rangel wrong. He wouldn't be in the business if he didn't think his company, the industry and the country needed the constant infusion.

Texas Solar Power has already won a couple of the smaller State Energy Conservation grants. They helped Austin Community College write their grant and are a likely candidate to do their project.

Rangel said he expects his company's sales to jump from about $8 million last year to as much as $13 million this year with the federal grants.

Because it has always been this way, Rangel and others in the industry are hoping the Department of Energy stimulus windfall will be a game changer for a source that provides a good bit less than 1 percent of all of the power used in Texas. More money means more research, more research means better and cheaper technology. Russel Smith, executive director of the Texas Renewable Energy Industries Association, said he is cautiously hopeful the funding will create a climate for government to ease the industry off of incentives.

Clearly, this was the goal of the Obama administration in directing unprecedented amounts of federal tax money to state energy programs. Recently, Robert Peck, commissioner of public buildings for the General Services Administration gave a U.S. House committee a progress report on those energy programs.

"The investments we made and continue to make in our public buildings are helping to stimulate job growth and retention in the construction and real estate sectors, reduce energy consumption, improve the environmental performance of our inventory, reduce our backlog of repairs and alterations, and increase the value of our assets," Peck said, echoing the president's goals. "In addition, our investments will help further developments in energy efficient technologies, renewable energy generation, and green building solutions."

Tucked into a glowing account of what this money will do was Peck's disclosure that, like the stimulus Weatherization Assistance Program, the vast amount of the money had yet to do anything at all. Through the end of February, a year after $5.5 billion was allocated for national energy programs, just $184 million had been spent.

In February, Energy Secretary Steven Chu told the Wall Street Journal he was frustrated by his department's inability to manage the complexities of the process and the inability of state and local entities to get on top of the federal requirements.

"We're not dilly-dallying," Chu said. "Many of these organizations aren't used to dealing with that magnitude of money."

According to the data provided through the office of the state Comptroller, Texas has spent just $716,000 of the $290 million for energy.

When asked to explain the program and how the spending worked, when asked to interview Lisa Elledge, stimulus program manager for the State Energy Conservation Office and when provided questions in writing days in advance, Comptroller's officials could not assist.

From Rangel's firsthand observation it appeared that the same bureaucratic delays that have staggered other stimulus programs were at work with the solar grants. The process has been slowed by paperwork at the state and federal levels, differing guidelines and federal fair wage standards for their crews.

"It definitely took a lot longer than I thought it would," he said. "It was the paperwork, educating people about the program, the whole ramp-up. It's pretty much what you'd expect when you try to get a federal program this size going."

While waiting to hear about their bids for millions in solar work, Texas Solar Power has already begun installing a 41.1 kW solar generator on the roof of a sewage lift station in Horseshoe Bay, northwest of Austin. At a cost of $373,676, $311,396 of it in federal tax money, and an annual energy generation of about $4,000, Horseshoe Bay will break even on the overall investment in 93 years.

SOME SOLAR PROJECTS ALSO AIMED AT EDUCATING PUBLIC

This is not at all the way grant applicants look at it.

Maria Redburn is the library manager in Bedford, where the city made national news in 2005 by closing its library in an unusual $3.5 million budget rollback. And although the city passed an $8.9 million bond in 2001 for a new library, officials sat on it until it made fiscal sense to move ahead. The people ofBedford are conservative, Redburn said.

It made fiscal sense when Bedford learned federal taxpayers would pay for most of a solar generation system - nearly $2 million of it - they could only dream of.Redburn said the state moved Bedford to the head of the line because the city already had its library bond in hand, a shovel-ready project in stimulus parlance.

Instead of the current 17,000-square-foot library, readers at the end of November will be able to spread out in a remodeled 40,000-square-foot Food Lion grocery store that will need just under 900,000 kilowatts of electricity every year. Solar power will cover a little less than 40 percent of that total.

But when Redburn does the math to figure how long it takes for the system to pay for itself, she factors in only what local taxpayers have contributed.

"For our city, this is a great deal," Redburn said. "We would not have been able to afford the solar without the grant. We just could not have afforded it."

What's more, this sort of simple cost and benefit analysis doesn't take into account a growing need to provide clean generating alternatives to oil, several of the grant winners said.

The Energy Conservation Office approved a package of 17 smaller solar projects around the state with a total value of about $3.8 million for the Texas Parks and Wildlife Department.

It may be 50 years or more for the energy saving to pay off at any one of them, but conservation is part of the department's mission, Scott Boruff, deputy executive director for Operations, said.

Boruff said most of their solar projects - for offices in state parks, fisheries and at the headquarters in Austin - are being designed so that the energy savings can be seen and described to visitors, an educational component that is another part of the Parks and Wildlife mission. 

Boruff could just as well have been speaking for all of federally-funded solar power. The parks projects make little sense as a pure return on investment,Boruff said.

"It's important to us, but it is subservient to the mission. Most of what we do is not profit-making."

Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org.

Photo of workers installing solar panels by flickr user Wayne National Forest, used via a Creative Commons license.

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Comments
Jim Fister
Tuesday, 04/06/2010 - 09:41AM

This is a nicely-written article. I've often looked at solar power for my home or for a future home. While the energy savings seem exciting, the cost (to the taxpayer, since I'd get breaks to do it) seems high to me. Is it really worth me getting the benefit when everyone else has to pay?

Saving the world from burning coal or whatever seems like a good cause, but I wonder at the real costs of making the move.

Bill R
Tuesday, 04/06/2010 - 11:12AM

If the project doesn't return the investment in money, it probably doesn't return the investment in energy either.

The economic activity that goes into building the solar plant represents energy investments. It takes oil, coal, and nuclear power to build solar cells, truck materials to the site, excavate foundations, build electrical infrastructure and do all the other work in a solar installation. The energy costs that went into building the trucks, factories and mines all have to be amortized. Even the offices where the engineers, bureaucrats, and grant writers sit in well lit and air-conditioned comfort all require a constant stream of energy.

If it doesn't make economic sense, it doesn't make environmental sense either.

John Walker
Wednesday, 04/07/2010 - 05:18AM

The equipment for a solar panel installation will not last 72 years, as noted in the article, given the necessity to replace and repair as required. This adds substatially to over-all costs. Many of the structures mounted with solar power technology won't last 72 years and therefore will never reach the break-even target.

Jim B
Wednesday, 04/07/2010 - 08:33AM

Respectfully, I think there are several flaws with the piece and thus the conclusion and/or comments.

1. The cost to generate electricity will not decline, so any return on investment must include a rising, not a static rate. This shortens the payback period dramatically. The example given of $4000 annually on a 41KwH array calculates to less than 6 cents per KwH. That seems awfully low. (80% efficiency and 6 hours of sun each day)

2. Subsidies for Oil and Gas, but not Solar? We've spent almost $1 Trillion dollars in the sands of the middle east since 2002. How high would the price of oil be without our troops in Iraq, (indirectly) defending the Saudi Kingdom? Alternative energy is a NATIONAL SECURITY issue. No politics please, just the truth.

3. There is no real 'net metering' where the retail electric providers must buy back my excess power generated while I'm at work during the day. This single change would flip the equation for residential applications. The simply won't do it even though it's mandated by statute. We would break even within six years.

ok
Saturday, 06/05/2010 - 11:00PM

this is unfortunately a very one sided written article and as the comments show some of the readers are already misguided by thinking solar or other renewable energies in general are not worth the cost.

The major part that this article does not consider is that we are the biggest polluter on this globe and our kids will pay the price. Because the price of energy has always been kept artificially low.(While the oil companies get billions in subsidies the alternative energies get peanuts) This is the real reason why solar is still almost nonexistent in this country.

Look at Germany,that country has gas prices 3 times of the US and is still very competitive in the world market as the second biggest exporter. Because of the high energy costs mixed with some great subsidies they created millions of jobs that are missing in this country because of artificially low energy prices.

Another thing not included in this report is exactly what at the moment is happening in the gulf with the major oil spill. The future price of oil will not be sett by how much the oil producers can pump. The future oil prices will go up because of major new regulations coming to everything from the deep see oil to the small pump, because future generations will no longer accept the price of thousands of sick people just to have cheap oil for some. Oil in that respect is the same like nuclear people say it is cheap but if you add all the pollution and risk wind and solar are much cheaper already today.

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