Americans Love Green Energy, but Will They Pay for It?

When it comes to environmental consciousness, Jordan Thau considers himself above average.

Raised on the gospel of recycling, the 40-year-old father of three schleps his own bags to the supermarket, avoids buying water in plastic bottles, tries to purchase locally produced food and wine, and raves about his 2007 Nissan Altima Hybrid.

But he balked at the idea of spending $10,000 or so on solar panels when he recently added a second story to his Los Angeles home. In the end, Thau opted not to cut the check -- at least not yet.

"The unknown quality and early-adopter fear took hold," says Thau, who estimated that the payback on the investment would've been about six years. "Are these good systems, or will they improve significantly in three-plus years?"

A Wait-and-See Approach

Thau represents a growing group of Americans who are becoming more supportive of alternative sources of energy in a theoretical sense. But they're still taking a wait-and-see approach when it comes to major purchases as the federal and state governments sort out their tax incentives and providers of solar energy bring costs down.

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More than three-quarters of Americans have a favorable impression of solar energy, making this renewable energy source more accepted by the American public than wind power, hybrid cars, electric vehicles and biofuels, Pike Research said in a report released earlier this month. Solar gained most favor among older, more educated people, while the under-30 contingent and those with less education were more skeptical, Pike Research said, citing its poll of more than 1,000 U.S. adults.

When that optimism turns into action, however, remains to be seen. Despite being based on a technology that's more than five decades old, the residential solar panel industry remains nascent as high costs, capacity limitations and mixed political support have kept it from going mainstream.

Granted, the residential market for photovoltaic -- or solar -- panels doubled in 2009, and the amount of electricity that could be produced from solar panels jumped more than fourfold between 2001 and 2009, according to the Washington D.C.-based trade group Solar Energy Industries Association (SEIA). Still, that cumulative capacity was only enough to support 350,000 homes. By comparison, Americans bought about 560,000 hybrid vehicles in the past two years.

No-Money-Down Leases

In fact, among countries with the largest photovoltaic industries, Germany and Italy have each overtaken the U.S., and Germany's 9.4 gigawatts worth of photovoltaic installations this year will be more than quadruple the U.S.'s 2.1 gigawatts, research firm iSuppli said in a report released last month.

That U.S. number will likely rise substantially, though, as more solar-panel leasing companies crop up to take advantage of Americans' more open attitude toward solar energy. These companies offer potential customers a no-money-down option to lease photovoltaic panels. San Mateo, Calif.-based SolarCity calls itself the largest U.S. solar service provider and says it has 10,000 projects either completed or in progress.

Still, while it's a guilt-free way to go green, you get what you pay for, as the lease payments pretty much eat up almost all of what you'd save on your electric bill, although the company says savings will increase as electricity rates go up.

Moving Solar From Fringe to Mainstream

What may ultimately move solar energy from fringe to mainstream, however, is a combination of government intervention and good old-fashioned capitalism. As the solar industry market has expanded in recent years, prices have come down because of economies of scale.

"Over the last two years, the prices of actual solar photovoltaic panels have declined by 40%," says Peter Asmus, senior analyst at Pike Research. "Before this drop, prices had been escalating due to surging demand outstripping supply and a silicon shortage."

Additionally, for those buying a solar-energy system, federal tax incentives can eliminate about a third of the costs while incentives in states like California can cut another third. And while the future of the federal tax credit remains in question, progressive states are unlikely to remove their credits any time soon.

"With federal incentives less likely to be renewed in the near term following a shift to a more conservative U.S. Congress, power now will reside more with individual states to carry out initiatives," iSuppli said in its report. "Just the same, the recent defeat in California of a statewide ballot to repeal renewable energy targets will ensure that solar support continues in the United States' largest photovoltaic market."