Paying for the technology can exceed the price of a luxury automobile, putting solar power out of budgetary reach for most homeowners.
Solar advocates increasingly think that the challenge is no longer a question of technical feasibility, but rather a financial riddle that must be solved to unlock solar's potential to contribute meaningfully to the nation's energy mix.
The solar industry, encouraged by government policies that require public utilities to use more renewable energy, is working on a financing breakthrough.
In North Carolina, Duke Energy is developing a plan that could outfit thousands of homes and businesses with solar panels that would require little or no upfront expense from property owners.
That's a welcome alternative to the usual expense: Buying a solar power unit could set a household back $50,000 for the photovoltaic panels required to tap sunlight as an energy source.
Even with federal and state tax credits that can cut the cost of a solar unit by about 65 percent and a subsidy from the state's N.C. GreenPower program, it could take two decades to pay off a system and break even, an unreasonable time span for most people.
The payback can take longer in North Carolina, where solar power competes against some of the nation's cheapest electric rates.
One recent financing innovation steals a page directly from the utility playbook.
The arrangement is gaining popularity in California and other states, where private solar installers own the solar panels on a customer's rooftop and sell the power to the property owner, bypassing the local electric utility.
The solar panels are in essence a rooftop power plant scaled to serve a single customer. The customer contracts to buy 20 years of electricity at a set price, hedging against future price increases.
SunEdison of Baltimore offers contracts with zero upfront costs, primarily in California. The company typically matches or beats the utility rates in other states, said Jigar Shah, SunEdison's chief strategy officer.
"The other benefit is that the customer gets to lock in electricity rates for 20 years," Shah said.
Such private contracts are not allowed in North Carolina, where electric utilities hold monopolies over power sales. Electric utilities could offer such programs to their customers, and Duke is studying a variant of this approach.
Seeking state approval
Duke expects to present its solar proposal this year to state regulators. The details haven't been worked out, but one possibility is that Duke would cover the cost of installing the solar panels on customers' rooftops. Customers could be rewarded with a discount on their electricity bills.
"We are uniquely positioned to deliver something like this," Duke spokesman Tom Williams said. "One concept we're looking at is putting solar panels on rooftops -- installing them, maintaining them and operating them as we would a power plant."
If these financing models prove successful, some predict that public demand will increase for solar energy, reducing the need to build nuclear power plants and coal-burning power plants. They also would help Duke meet a state requirement to tap renewable resources to generate electricity.
Unlike states with deregulated power markets, North Carolina does not allow private energy companies to sell electricity to homes and businesses.
In California, by contrast, small private solar energy companies compete directly with public utilities.
But in North Carolina, where utilities operate as a monopoly, innovative financing breakthroughs will have to be worked out by public utilities.
North Carolina power companies are required to buy electricity generated by independent producers, but the utilities typically pay a wholesale rate for that power -- not enough to cover the operating costs of a solar power generator.
Independent generators have made up the shortfall with state and federal tax credits. Many also collect supplemental payments from N.C. GreenPower, a nonprofit organization in Raleigh.
Some homeowners with solar panels choose not to sell the power to a utility, and instead use the power themselves, striving to achieve energy self-reliance.
They supplement their energy needs with utility power as necessary. For many of these homeowners, the motivation for solar is more about environmental concerns than economics.
But for solar to break into the mainstream in this state, it will have to be converted from an esoteric hobby to a financially sound energy solution.
"Solar has great potential in the Carolinas, but it's too expensive," Duke spokesman Williams said. "It's come a long way, and we're very open to it."
john.murawski@newsobserver.com or (919) 829-8932
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