The solar energy industry is often criticized for not being a viable industry without incentives. Most of these critics don’t understand that essentially every energy industry would not work in the current market without some form of incentives. Gas, oil, nuclear, hydro and biofuel are all subsidized heavily with taxpayer dollars. What these critics don’t understand is that solar power, if factored over time, is the cheapest form of electricity. Factored over a decade, a solar electric system will be producing electricity well below the grid cost of electricity.

This is the dirty little secret the power companies don’t want homeowners to realize: If too many people switch to solar, it will cut into power company profits. It is much better for the profit margin of the power companies if the vast majority of homeowners continue to buy energy straight off the grid.

Just imagine what would happen if all the homeowners along the Front Range decided to install solar electric systems. Essentially, Xcel would go bankrupt. The Colorado Public Utilities Commission would like to see solar grow as a viable energy source for Colorado homeowners, so they work with Xcel to determine a reasonable amount of incentive to put into solar power without cutting too deeply into Xcel’s highly profitable, coal-based electricity model.

Over the past five years, solar-energy rebates in Colorado helped homeowners invest in a future of cheaper, cleaner electricity. In the residential community, solar energy became increasingly popular as an effort to reduce electricity bills and make a measureable impact on our global energy crisis, in part because rebates made an investment in solar power economical. However, the recent stir in the Colorado energy sector has made solar-energy rebates become sparse and caused significant changes to the currently available incentives.

In February, Xcel Energy attempted to cut their SolarRewards program by about 75 percent. The program had been set up to be reduced gradually, and its sharp sudden reduction would have had a devastating effect on the Colorado PV industry had it been allowed to go through. After negotiations between Xcel and representatives of the solar industry, the Colorado Public Utilities Commission has approved an agreement to offer a limited supply of incentives to Colorado customers for the remainder of 2011. Once these rebates have diminished, there will be nothing left until they re-evaluate the program in 2012.

The new rebate program is structured in tiers based on system size. Each tier has several steps in it, with different rebate rates. The rates are designed on a first-come, first-served basis. There are two parts to the rebates being offered for most residential systems less than 10kw. There is an up-front rebate that is issued upon system completion. There is also a performance-based incentive, otherwise known as a Renewable Energy Credit payment that will be paid out monthly according to actual system production. The current pricing and availability can be found at: www.xcelenergy.com.

Currently, residential rebates in Colorado are still in the first step, which provides a $1.75/W upfront rebate, along with a REC payment of $.04/kWh for the first 10 years of production. These rebates will slowly reduce as the maximum power generation in this step is achieved.

“There is a certain volatility in the Colorado PV market mainly centered around Xcel Energy’s service territory, the recent SolarRewards rebate and REC compromise negotiated between the Colorado solar industry and Xcel to finish out the 2011 year compliance plan,” said Dave Sanders, general manager for Lighthouse Solar. “However, this new structure should not be viewed as the absolute precedent for the 2012 compliance plan structure. Xcel Energy will be reviewing their current program again in 2012 to plan for future energy incentives for renewables in Colorado.”

With rapidly increasing prices for oil and other fossil fuels, as well as recent environmental disasters, transitioning to renewable energy is becoming imminent for our future energy demands. Solar energy has been proved to be a more cost-effective way of generating electricity over time than traditional sources, which makes it a viable option.

“Renewable energy is a fixture of our national electricity generation at this point,” Sanders said. “The industry may experience further hurdles on the road to growth, but all the markers point to a bright and limitless future for photovoltaic energy providers.”

Scott Franklin is CEO of Boulder-based Lighthouse Solar Inc. He can be reached at 303-638-4562.