Why is it so hard to get solar power in San Francisco?
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Like a lot of San Franciscans, John Murphy wants to put solar panels on his roof. He's worried about the environment, but it's also about money: "I want it to pay for all my electricity," he said one recent evening as we chatted in front of his house.
Murphy pays top dollar for power from Pacific Gas and Electric Co., every month hitting the highest tier of energy use and getting spanked 34 cents a kilowatt hour for it. He's tried to cut costs by switching to energy-efficient appliances and light bulbs with motion sensors — with little incentive from PG&E's billing department.
Murphy thought installing solar panels would be worth the up-front cost, especially if federal and state rebates made it more feasible. His roof — sturdy and pitched toward the south, unshaded by trees or other buildings, and located in the fogless hollow of the Mission District — seemed perfectly suited for solar energy.
So last fall he invited a representative from a local solar installation company to the house for a free consultation. He was told his roof could only fit a 2.8 kilowatt system, which would cover about 60 percent of his energy needs — and cost about $25,000.
Murphy is apoplectic about the results. "What's 60 percent? That's like going out with her for three-quarters of the night. I want to take her home," he said.
While the federal incentive shaves $2,000 off the cost, the state rebate program — in place since January 2007 — is a set allocation that declines over time: the later you apply, the less you get. Today Murphy can get about $1.90 per watt back from the state, whereas at the start of the program it was $2.50 per watt. To him, the upfront costs are still too steep and the results won't cover his monthly PG&E bill.
"The snake oil salesmen of yesterday are the solar panel installers of today," Murphy said.
But Murphy still wants to install panels — and he's not alone. The desire for clean, green energy runs deeply through San Francisco and the state as a whole. After the launch of the California Solar Initiative, the number of solar megawatts, represented by applications to the state, doubled what they'd been over the last 26 years. Almost 90 percent of the installations were on homes, indicating that citizens are jumping at the chance to decrease their carbon output.
Yet in San Francisco, where environmental sentiment and high energy costs ought to be driving a major solar boom, there's very little action.
Back in 2000, then-mayor Willie Brown announced a citywide goal of 10,000 solar roofs by 2010. That would add up to a lowly 5 percent of the 200,000 property lots within the city of San Francisco.
But even that weak goal seems beyond reach: it's now 2008, and the number of solar roofs in San Francisco stands at a grand total of 618 installations by the end of 2007. In terms of kilowatts per capita, the city ranks last in the Bay Area. The city's total electricity demand runs about 950 megawatts; only 5 megawatts is currently supplied by solar.
Well, it's not the weather. While heavy cloud cover can hinder panels, fog permits enough ambient light to keep panels productive. San Francisco's thermostat isn't much of a factor either — panels prefer cooler temperate zones, not blazing desert heat.
It's also not for a lack of political ideas — Mayor Gavin Newsom is pushing a major solar proposal and several others are floating around, too.
But Newsom is clashing with the supervisors over the philosophy and direction of his plan. It's complicated, but in essence, the mayor and Assessor-Recorder Phil Ting put together a task force that included representatives of solar installers and PG&E — but nobody from the environmental community and no public-power supporters.
The plan they hatched gives cash incentives to private property owners, takes money away from city-owned solar installments, and does nothing to help the city's move to public power.
While all this plays out, the solar panels so many San Franciscans want aren't getting installed.
What makes solar work, according to local solar activists, is a combination of sun and subsidies. "Almost every area in the United States has better sun exposure than Germany, and Germany is leading the solar market worldwide today," said Lyndon Rive, CEO of Solar City, a Foster City-based solar installer.
The price per kilowatt hour, with current state and federal subsides, is about 13 cents for solar, just two cents more than PG&E's base rate for energy produced mostly by nuclear power and natural gas.
Still, the average installation for the average home hovers between $20,000 and $30,000. For many, that kind of cash isn't available.
"The biggest reason for lack of adoption [of solar energy] is that the cost to install in San Francisco is higher than neighboring cities," Rive said. It's about 10 percent more than the rest of the Bay Area, according to a December 2007 report of the San Francisco Solar Task Force.
Why? According to Rive, system sizes are smaller. Solar City's average Bay Area customer buys a 4.4 kilowatt system, but the average San Franciscan — with a smaller house and smaller roof — usually gets a 3.1 kilowatt installation. The smaller the system, the more the markup for retailers amortizing certain fixed costs such as material and labor. On top of that, San Francisco's old Victorians can have issues — weak rafters need reinforcement; steep roofs require more scaffolding; wires and conduits have to cover longer distances. It adds up.
"There's an extra cost to doing business in San Francisco," said Barry Cinnamon, CEO of Akeena Solar and a member of the SF Solar Task Force. "I can expect $100 in parking tickets for every job I do."
That was the motivation for Ting to establish the Solar Task Force in 2007, with the goal of creating financial incentives, including loans and rebates, to bring down the costs of San Francisco solar. The 11-member task force came up with an ambitious program that involved a one-stop shop for permits, a plan to give property owners as much as $5,000 in cash subsidies, and a system to lend money to homeowners who can't afford the up-front costs.
The task force said installing 55 megawatts of solar would combat global warming, improve air quality by reducing pollution caused by electricity generation, and add 1,800 green collar jobs to the local economy.
The streamlined permit program is in place. None of the rest has happened.
The first obstacle was the loan fund. Newsom and Ting wanted to take $50 million currently sitting unspent in a bond fund for seismic upgrades on local buildings. Sup. Jake McGoldrick wanted to know why the money wasn't being used to upgrade low-income housing; the city attorney wasn't sure seismic safety money could be redirected to solar loans.
Then Newsom decided to take $3 million from the Mayor's Energy Conservation Fund to pay for the first round of rebates. Over the next 10 years, that could add up to $50 million. McGoldrick balked again. That money, he said, was supposed to be used on public facilities (like solar panels at Moscone Center and Muni facilities and new refrigerators for public housing projects). Why should it be diverted to private property owners?
There's a larger issue behind all this: should the city be using scarce resources to help the private sector — or devoting its money to city-owned electricity generation? "In 10 years, there could be $50 million in the fund," McGoldrick said. "That's a lot of money, and it's power the city could own."
Sup. Chris Daly agrees. "I would support this program if we were running out of municipal [solar] projects," he said. "But we're not."
In addition, the progressive members of the Board of Supervisors, who have all advocated a citywide sustainable energy policy known as community choice aggregation, or CCA, weren't represented on the Solar Task Force.
The fund Newsom wanted to tap for his project is also the source of funding for the community choice aggregation program, which the progressive supervisors see as the city's energy plan, which in turn constitutes a far more comprehensive response to climate change, with a goal of relying on 51 percent renewable energy by 2017.
Sup. Gerardo Sandoval is working on a loan program that would allow residents to borrow money from the city for renewable energy and efficiency upgrades for their homes and pay it back at a relatively low interest rate folded into their monthly tax bills. (See "Solar Solutions," 11/14/07.) Sandoval's plan would enable loans of $20,000 to $40,000 at 3 percent interest to people who voluntarily put solar on their homes.
The city of Berkeley is pursuing a similar plan. But the task force never consulted Sandoval — in fact, he told us that he had no idea Ting's task force was meeting until a few months ago.
The supervisors' Budget and Finance Committee is slated to review Newsom's plan April 16.
Solar installers aren't happy about the delays: "I'm on the disappointed receiving end of that start and stop," Cinnamon said.
While city officials duke out where the money should come from and who gets it, San Franciscans interested in purchasing panels are left in limbo. Jennifer Jachym, a sales rep from Solar City who used to handle residential contracts in San Francisco, said, "I have worked all over the Bay Area and I'd have to say it seems that the delta between interest and actual purchase is highest here.
"It was hard to get people to pull the trigger," she continued. "What the San Francisco incentive program basically did was bring the cost incentives here to where they are everywhere else."
The holdup has dispirited customers and solar companies. Cinnamon said he wasted 10,000 advertising door hangers because of the delay. Solar City also put on hold a handshake deal with the Port of San Francisco to rent a 5,000-square-foot warehouse in the Bayview District for a solar training academy that could turn out 20 new workers a month.
"As a San Francisco resident, I really want to see it happen there, but as a business, I have to think about it differently," said Peter Rive, chief operating officer of the company. "Almost every city in the Bay Area is aggressively trying to get us to build a training academy in their city."
Another reason we don't see more panels on San Francisco roofs is that most San Franciscans are renting and have no control over their roofs. "The landlord doesn't care. They don't pay the electric bill," Cinnamon said. When asked if there were any inroads to be made there, he said, "Nope. That's not a market I see at all."
In spite of that, solar companies still are eager to do business here, which means there's either enough of a market — or enough of a markup.
Rive wouldn't tell us their exact markup for panels, but said, "The average solar company adds 15 to 25 percent gross margin to the installation. Our gross margin is in line with that."
Rive's company has another option for cash-poor San Franciscans, a new "solar lease." In this scenario, Solar City owns the panels and leases them to homeowners for 15 years. The property owner pays a low up-front cost of a couple of thousand dollars and a monthly lease fee that increases 3.5 percent per year.
For Murphy, the price would be $2,754 down and $88 a month. The panels would still cover only 64 percent of his energy needs, so he would owe PG&E about $70 a month. Because he would be using less energy, PG&E would charge a lower rate, which is something Solar City typically tries to achieve with a solar system.
However, people can't make money off their solar systems. "People ask about it all the time," Jachym said. "Especially people in San Francisco. They say 'I have a house in Sonoma with tons of space. Can I put panels there and offset my energy here?'"
The answer, unfortunately, is no, which means San Franciscans have no incentive to put up more panels than they need and recoup their costs by selling the energy to the grid. Unlike Germany, for example, where people are paid for the excess solar energy they make, California's net metering laws favor utility companies. If you make more power than you use, you're donating it to the grid. PG&E sells it to someone else.
If the law was changed — which could be a feature of CCA — citizens could help the city generate more solar energy to sell to customers who don't have panels, helping the city to meet its overall goal of 51 percent renewable by 2017.
Under Solar City's lease program, the company gets the federal and state rebates. If Murphy leased for 15 years he'd have an option to buy the used panels, upgrade to new ones, and end or continue the lease. If San Francisco launches the incentive program, the $3,000 from the city could cover the up-front cost and he could get the whole thing rolling for almost no cash. It sounds like a sweet deal.
Except it's not going to work. Solar City only leases systems of 3.2 kilowatts or more, and only 2.8 could be squeezed onto Murphy's roof. "I think it's Murphy's Law," Jachym says wryly. "If you have a house that wants solar, a whole row of houses on the street nearby are better suited for it."
She says the 3.2 cutoff has to do with the company's bottom line. "If it's any less than 3.2 the company is losing money." Ironically, she tells me, "the average system size in San Francisco is even smaller" — usually less than 3.1. Solar City has set the bar high in a place where many people like Murphy are prevented from leasing.
He tells us he isn't interested in a lease anyway: "I don't own that." He's now more interested in a do-it-yourself situation and wishes the city would put some energy toward that. "If they were serious they would have a city solar store," he said, imagining a kind of Home Depot for solar, where one could buy panels and wiring, talk with advisors, contract with installers, or just fill out the necessary paperwork for the rebates.
Some people are going ahead anyway, without city support. Nan Foster, a San Francisco homeowner now installing photovoltaic panels and solar water heating, says her middle-class family borrowed money to do these projects, "because we want to do the right thing about the environment and reduce our carbon footprint. It would be a great help to get these rebates from the city.
"The public money for the project would increase the spending of individuals to install solar — so the public funds would leverage much more investment in solar on the part of individuals and businesses," Foster argued.
There's another approach that isn't on the table yet. Eric Brooks, cofounder of the Community Choice Energy Alliance, told us that the city, through CCA, could buy its own panels to place on private homes and businesses, giving those homes and businesses a way to go solar — free.
"Clearly there would be a much higher demand for free solar panels over discounted ones that are still very expensive," he said. "And because the panels would be owned by the city, all of the savings and revenue could be put right back into building more renewables and efficiency projects, instead of going into the pockets of private property owners."
Proponents of the mayor's plan argue that the city can build more solar panels — faster — by diverting public funds to the private sector. "While on its face this is technically true, it is actually a dead-end path," Brooks said. "Yes, a little more solar would be built a little more quickly. However, once those private panels are built the city will get nothing from them."
Full disclosure: Murphy is Amanda Witherell's landlord.