PHOENIX – After years of rapid growth, residential solar power installations in Arizona are likely to slow down some in the near future as prices tick up and utility incentives shrink, experts say.
For 2012, Arizona was the nation’s second-largest market for residential and commercial solar growth, adding 710 megawatts worth photovoltaic panels to rank behind only California, according to the Solar Energy Industries Association.
Consumers have benefited from oversupply as companies rushed into the market, but the recent collapse into bankruptcy of Suntech Power, a Chinese firm, is a symptom of the industry shaking out due to competition, said Stephen Goodnick, professor of electrical engineering at Arizona State University’s Ira A. Fulton School of Engineering.
That’s likely to lead to slight price increases for solar installations as the supply of components contracts, he said.
Suntech announced plans to close its manufacturing facility in Goodyear in April, citing global oversupply as well as U.S. import tariffs and higher production costs.
“I wasn’t surprised in general that a number of companies were having financial difficulties because of so many competitors in the same market,” Goodnick said. “There are several Chinese companies that are in a similar situation to Suntech.”
Harvey Bryan, senior sustainability scientist with ASU’s Global Institute of Sustainability, said consumers are benefiting from oversupply.
“I think it’ll be good for consumers,” he said. “It will probably be sort of neutral for installers and probably a bad year for producers of panels.”
Bryan said deep reductions in solar rebates offered by utilities regulated by the Arizona Corporation Commission may make panels look less attractive to some homeowners.
For Arizona Public Service and Tucson Electric Power customers, residential solar incentives went from 75 cents per watt in 2012 to 10 cents per watt today. For a typical five-kilowatt system costing around $27,000, that’s a drop from $3,750 to $500.
Members of the commission said they wanted the solar industry to sustain itself and not have to rely so much on ratepayers.
Salt River Project, which isn’t regulated by the commission, offers a solar incentive of 40 cents per watt.
Bryan said the commission should have avoided making deep cuts to residential solar energy incentives.
“They should have looked at the market and looked at gradually bringing them down rather than so abruptly from where they were,” Bryan said.
Rob Dallal, CEO of Natural Power and Energy, a solar installation company in Scottsdale, said lower utility incentive won’t deter consumers from adopting solar panels and that the market could survive without them.
“At 10 cents it’s virtually worthless,” he said. “If you’re thinking about residential, it definitely has a future; it’s that segment of the market that still makes sense even without rebates.”
Meanwhile, Arizona offers a one-time 25 percent tax credit for solar systems with a maximum of $1,000. Homeowners can receive a 30 percent federal tax credit applied to the total cost of their residential solar systems, effective until 2016.
Goodnick said timing is critical for those looking to install solar panels on their homes.
“The effect of oversupply is driving the cost down, so that’s making it attractive,” he said. “At this time it’s probably a good market for people to buy.”