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Cutting solar panels' high price tag

Industry luminaries will meet this week at the annual Solar Power 2007 to celebrate booming business. But high costs remain a barrier to wider adoption.

For all the technical advances in the thriving solar power industry, the large up-front costs of solar electricity in the residential market remains a stubborn barrier to wide adoption.

A number of companies, from installers to panel producers, are taking different routes to try to improve the economics of purchasing rooftop solar panels.

Bringing down the high costs of solar compared to other forms of power is one of the big areas of discussion planned for the Solar Power 2007 conference in Long Beach, Calif., which starts Tuesday.

Installer Akeena Solar on Monday announced Andalay, a panel that it says is more attractive and quicker to install. It is scheduled to further detail the panels, which use 70 percent fewer parts, at the conference.

Panel manufacturer Sharp Solar, too, is expected to detail a mounting and panel system meant to streamline the process of installing panels, and thus lower the costs. Similarly, solar companies are working with builders to pre-install panels or power-producing roof shingles on new homes.

In addition to hardware improvements, solar companies are trying out new business models to make the jump to solar power easier on the pocketbook.

A San Francisco-based start-up, Sun Run, is borrowing a financing model commonly used in the commercial market and applying it to residential customers. On Monday, it announced that it has signed on REC Solar as another installer.

Sun Run's business model is structured around owning the panels on people's homes. So instead of paying all the money to install panels, the homeowner pays for the electricity they produce at a fixed rate.

"We've found that most people are really interested in going green but they also have economic focus in doing it," said Sun Run President and Chief Operating Officer Nat Kreamer, who founded the company earlier this year.

Even though much of the media coverage around solar power focuses on the incremental improvements of converting sunlight to electricity, the actual work of installing photovoltaic panels remains 30 to 50 percent of the total cost.

Sun Run's contract--called a purchased power agreement--won't eliminate the initial cost of getting solar electricity. But it will reduce by about 60 percent the pain of shelling out anywhere from $20,000 to $35,000 for solar panels, according to the company.

Working solar incentives
Sun Run is focusing specifically on California, where people pay different rates depending on how much they consume. But financing is increasingly being recognized as an important part of the solar power puzzle.

Sun Edison and MMA Renewables are two companies that specialize in providing financing and solar power installations for commercial customers.

Other installation firms with similar models have recently received venture capital funding, including Solar City, Tioga Energy and, according to reports, Solar Power Partners.

Solar City's twist on solar installation is group buying. The company canvasses residential neighborhoods. When it gets 50 or so committed customers, it purchases the panels and then sends out teams of five or so installers to erect them. Volume discounts and concentrated installation leads to a reduction of about 20 percent in the overall cost, according to the company.

Purchase power agreements are mainly used in the commercial world. Companies that offer them own and maintain solar photovoltaic panels on customers' rooftops and sell the electricity back to the customer.

In addition to avoiding a large capital outlay for the solar panel installation, customers fix into an electricity rate and thereby get a hedge against rising prices.

"Any way you can use renewables to guarantee stable power prices, allowing homeowners or large industrial customers to fix their power and fuel costs, is a good step forward and an effective way to bring renewables to a broader market," said Alex Klein, an analyst at Emerging Energy Research.

Sun Run's Kraemer said that his company's attempt to bring purchase power agreements to the residential field has met with a good amount of skepticism.

That's in part because electricity is so price sensitive that it leaves little room for a profit margin. Skepticism may also be fueled by the experience of Citizenre, a company that has been signing on homeowners for solar panels with a nominal up-front fee but has yet to deliver on its promises.

Panel producers and installers, meanwhile, are trying to make the job of climbing up on a roof and connecting panels quicker.

Akeena Solar's Andalay panel is supposed to cut installation time from four hours to 30 minutes. It's also meant to be more attractive and look like a skylight.

Sharp Solar, the largest solar panel maker in the world, has started to promote a pre-fab solar system to the U.S. market.

First developed in Japan, the OnEnergy system essentially integrates everything--the solar panels, the racks on which the panels sit and the inverters (which convert DC current to AC current that can be used in a home)--into one package tailored for the home.

Contractors measure the roof and study the installation site, and then place an order with Sharp. Sharp then cuts the panels and pieces of the frame, drills the appropriate holes and then ships the kit for the contractor to assemble.

"They don't have to cut anything on-site," said Ron Kenedi, vice president of Sharp.

The savings come from the fact that the installer will spend 15 to 30 percent less time at the job site. Sharp talked about bringing the program to the States at last year's conference and will discuss how it is rolling it out more formally at this year's event.

Another way to reduce costs, of course, is installing the solar systems during construction of new homes.

Several home developers--including Centex, The Grupe Company and Lennar--have built homes with integrated solar panels. The homes have sold well, according to sales representatives for these companies. How much does it save? It's hard to say, but contractors say it takes less time to install a system during original construction, and time in this business is directly related to cost. Developers also can get group discounts by buying and shipping in bulk. (Because they are made out of glass, solar panels are expensive to ship.)

Some of these homes have used solar roof tiles. Solar roof tiles are integrated into the roof of the home and are aesthetically pleasing. However, they aren't particularly economical, points out John Berger, CEO of installer Standard Renewable Energy. The panels are more expensive to make and can be more complex to install.

CNET's Michael Kanellos contributed to this report.