March 11, 2015

Greetings,

Welcome to the inaugural issue of Kiplinger's Energy Alerts, a digital heads-up on coming trends and breaking developments in the energy industry. Energy Alerts will come to you by e-mail every other week. This week's issue features a special report on the rapid emergence of solar power -- which may come as somewhat of a surprise -- and provides some early intelligence on storage batteries, microgrids, what's ahead for subsidies and more. At the tail end, you'll also find pricing tips on heating fuel. Future issues of Kiplinger's Energy Alerts will touch on a wide variety of subjects -- fuel price outlooks, global oil & gas drilling trends, innovations in energy efficiency, regulations and much, much more.

Know, too, that you have a standing invitation to e-mail me anytime with questions on any aspect of energy you're interested in -- no matter how large or small the issue -- and I'll run down the answer for you. Replying to individual reader queries -- at no extra charge -- is a long-standing tradition with The Kiplinger Editors. We've always been more than just a group of publications -- we're a service.

Without further ado, check out these exciting developments in solar power.

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Solar power, once little more than a technological novelty, is suddenly becoming a mainstream energy source. And that spells big changes for electric utilities and the nation's power grid.

Electricity generated from the sun is still a tiny slice of overall U.S. energy demand. But it's growing fast-- in 2014, the amount of electricity generated from solar power was more than double what it was the year before. And it will double again in both 2015 and 2016.

New solar capacity added by 2017 will eclipse everything built thus far.

The cost of solar panels and other equipment is plummeting -- down by half from 2010, and likely to drop 20% more by 2020. Plus installers are operating more efficiently, allowing them to hook up more homes and businesses faster, for less. And, of course, subsidies from both the federal government and many states further cut the cost of going solar.

Though that's good news for folks turning to solar power, utilities have to make sure those customers can still rely on the electric grid when the sun isn't shining. And in most states, the utilities also have to buy back any surplus solar power generated when the sun is shining. In essence, they "use the grid as a battery," instead of simply buying power around the clock, says Richard McMahon of the Edison Electric Institute, which represents investor-owned electric firms. At the end of the day, utilities get less revenue but still have to serve the same number of customers.

That problem will worsen as solar power grows in the next few years. But talk about solar "disrupting" the electricity industry and putting utilities out of business is overblown. Here are three reasons why.

Better Batteries

A major limitation of solar power is its intermittence: Lots of generation in the summer, less in the winter and none at night. So utilities have to cope with big spikes and drops that don't always match how demand for electricity rises and falls.

But batteries to store surplus solar power during the day and discharge it at night are on the way. SolarCity, a major solar installer, is readying a compact battery that, coupled with its rooftop solar systems, can store enough power to run a typical house for up to two days, says spokesman Will Craven. Look for it to go on sale late this summer.

As the cost of potent lithium ion batteries falls over the next few years, battery storage will become increasingly commonplace among solar-equipped homes and businesses.

Microgrids

The ability to store energy from the sun opens up the possibility of turning buildings or communities into "microgrids" -- miniature power networks that generate, store and consume their own energy. NRG Renew, a subsidiary of power producer NRG Energy, is already designing solar- and wind-powered microgrids for islands in the Caribbean and more remote areas where electric service is expensive and unreliable. The setups "provide more value" for solar-equipped customers, says NRG Renew Vice President Randy Mann; batteries and the electronics to control them turn solar into more of an around-the-clock energy source.

Islands make the most sense for microgrids, since utility-supplied power tends to be so expensive there. But even in the continental U.S., big solar users, such as warehouses and college campuses, will increasingly turn to microgrid technology, both to save on energy costs and to go green.

As miniature power networks proliferate, they'll help stabilize the larger electric grid by storing energy during periods of low power demand and then quickly discharging it where and when the grid needs it. Even SolarCity, a big believer in solar-powered microgrids, doesn't expect its future customers to cut the cord from the power company and go it alone. Instead, they'll work with the grid by absorbing or delivering extra power as electricity demand ebbs and flows.

Falling Subsidies

Electric utilities often complain that their solar competitors benefit from tax credits and "net metering," the practice of letting solar customers sell back their surplus energy to the grid at high prices, whether it's wanted or not.

But the financial breaks that solar customers get won't last forever. The federal tax credit that businesses and homeowners qualify for when they install solar -- which now covers 30% of the system's cost -- drops to 10% for commercial customers in 2017 and 0% for residential buyers. Likewise, a number of state-level credits phase out or decline over the next several years. And state utility regulators are rethinking their net metering rules.

That'll level the playing field between utilities and solar power. But the solar industry believes that tax credits, which were vital to ramping up solar adoption earlier, aren't essential. Kelcy Pegler Jr., president of NRG Home Solar, is confident that his company will continue to expand its rooftop residential solar business after Uncle Sam's tax credit drops in 2017. Equipment costs are falling fast enough to make up the difference, and consumer interest in solar keeps rising, he says.

NRG Home Solar expects particularly strong interest from tech-crazy millennials who will be buying their first homes over the next few years -- and expecting built-in solar power when they do.

If you're considering installing solar --

• North Carolina State University maintains a handy database that shows each state's financial incentives to install solar power as well as other types of renewable energy and energy efficiency investments.
• The Department of Energy's National Renewable Energy Laboratory offers an online tool to help users assess how much power and energy savings they could generate from a solar system, based on their region's typical sunshine, electricity costs and other local factors.
• ENF Solar provides an online database of solar installers that displays companies located closest to a given address.

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Heating Fuel

A quick note on heating fuel prices as winter draws to a close. Readers who rely on heating oil or propane often ask whether the price they're paying their current provider is reasonable, something that can be hard to judge without local market data. Fortunately, the Department of Energy publishes a little-read report on retail (and wholesale) propane and heating oil prices during the winter months. Find it here. And to check on average prices in your specific state, just click on the "plus" symbol next to each region of the country. That should give you a rough idea of whether your price is in line with what nearby users are paying, and a reason to call around to other suppliers if it isn't.

I hope you find this information useful. Again, feel free to shoot me an e-mail about what you've read here, or about any other energy-related topics.