Solar business owners face end of Xcel incentive program

Xcel Energy wants to end a solar energy incentive program in Minnesota by the end of 2013 that many in the solar business say has been the main driver of growth.

The utility is concerned that if the program goes away, it could uproot parts of a relatively new industry here -- including two companies that manufacture solar panels. But leaders of the two companies have different viewpoints on what might happen if the program ends.

Solar Rewards is a program that gives upfront rebates to homeowners and business owners who install solar panels. The idea is to create incentives that boost demand and bring down the costs. But Xcel says the $5 million annual program has met its goals. The company has proposed rolling back rebates next year and ending the program by 2014.

Two executives had differing outlooks on the propsed end of the program. Joel Cannon, CEO of Minneapolis-based solar panel maker tenKsolar, said: "It's definitely not what's keeping me up at night."

But Gary Shaver, president of Silicon Energy, said, "For us that will be damaging enough to where we consider whether or not it makes sense to manufacture in Minnesota."

His company is based in Washington state and manufactures solar panels in Mountain Iron, a town of around 3,000 people on the Iron Range.

Shaver worries that if Solar Rewards ends, the demand for panels will drop.

"We have an innovative product, but still, we're a small manufacturer," he said. "So to pull that out right now is to really destroy a business plan where you're talking about working at a local level to innovate toward the future."

Shaver says the rebates help because it's still expensive to produce solar panels in Minnesota compared with ones made in China, for example. Since Xcel's announcement, Shaver says the company went from 15 to 11 employees in Mountain Iron, because of the instability in the market's incentive programs.

While Silicon Energy is largely producing for customers in Minnesota, Cannon at tenKsolar says the company started up without an expectation of a local solar incentive program.

TenKsolar uses a hybrid-production model. In addition to its manufacturing plant in Minneapolis, the company relies on a factory in Shanghai to cut costs on some of the lower skilled labor.

Cannon says the company, with its 80 Minnesota employees, is focused on markets outside the state, places where solar is the most competitive.

Right now it's capitalizing on places where Cannon says energy costs tend to be higher and where there are incentive programs. The company is building projects in places like Tennessee, Massachusetts and California as well as in Japan and Romania.

"If all incentive programs everywhere went away we would have challenges. Right?" Cannon said. "But there's a variety of different solar incentive programs all over the world. But it can't be dependent on any particular one incentive."

For its part, Xcel is aware that the growth of Minnesota's solar industry is likely to drop off if the Solar Rewards program ends, including negative effects on the state's solar manufactures.

Laura McCarten, regional vice president for Xcel, says it was good to test the solar market in the state. But if Minnesota seriously wants to pursue solar, it needs a new model.

"From a public policy standpoint, it really needs to be looked at with a fresh eye," she said, "the regulatory framework, the incentive mechanism, and then how does this work and who should really pay for it."

The state Department of Commerce has to approve Xcel's proposal to end the Solar Rewards Program. But according to public comments filed with the department, the company clearly anticipates when it will end, not if. Xcel wrote to the agency that Solar Rewards is a voluntary program and that the company is not obligated under state law to continue it.

The agency is expected to make a preliminary ruling later this month, followed by more public comment and a final decision in October.

Even though Xcel wants to end Solar Rewards, the utility says a made-in-Minnesota rebate will stay in place. That program is a $5 million annual fund paid for by Xcel customers and covers up to 60 percent of a project that uses solar panels made in the state.