This is part one of a two-part solar blog series.

In light of all the solar activity and discussions recently in Philadelphia, this post will highlight what the Office of Sustainability and our City partners have done to promote solar, streamline City permitting processes and lower the cost to install solar in Philadelphia. We’ll also provide an overview of current market conditions for solar power in Pennsylvania.

The City’s Solar Progress

The City of Philadelphia has taken steps to provide a solid foundation for solar development. In 2008, Philadelphia was named a Solar America City, a U.S. Department of Energy project that works with municipalities across the country to remove regulatory barriers and reduce soft costs of solar development. With funding from this project, the Office of Sustainability worked with industry stakeholders to develop a guidebook outlining a streamlined permitting process for new projects.

In 2012, our office worked with City Council to pass legislation that significantly reduced the cost of solar permitting by excluding the costs of solar panels and inverters in calculating fees. The City continues to work with solar developers and PECO to ensure that existing policies and processes are up-to-date, and is currently pursuing a SolSmart (formerly SPARC) designation through the Department of Energy, a national recognition and a no-cost technical assistance program for local governments designed to drive greater solar deployment.

In addition to reducing barriers for private developers, the City has worked to include more alternative energy projects in city facilities, including solar. In 2011, the City unveiled its first solar photovoltaic system, located at Philadelphia Water’s Southeast Water Pollution Control Plant. The 250-kilowatt solar array consists of more than 1,000 panels covering 60,000 square feet, and its electricity helps power the energy-intensive task of water treatment. The project’s total cost of $1.7 million was funded jointly by a Recovery Act Energy Efficiency and Conservation Block Grant and Philadelphia Water.

Pennsylvania Solar Market Snapshot

The cost of installed solar continues to drop nationwide as solar gains mainstream acceptance, is recognized as a cost competitive source of electricity, and companies develop improved methods to interact with customers.

Throughout the nation, state level policy drives local solar markets and Pennsylvania’s solar industry has lagged in recent years due to inconsistent market signals from Harrisburg and an end to incentive programs. The state has traditionally had two programs that have helped to encourage solar development.

First, the state’s Alternative Energy Portfolio Standard requires utility companies to purchase Solar Renewable Energy Credits (SRECs), which helps entities re-coup initial investments. Prior to 2010, SREC prices in Pennsylvania were high enough to make investments in solar attractive across the state. However, prices have cratered in recent years from highs of around $400/MWh to a low of $10/MWh. As a point of comparison, New Jersey, which has a similar market, retains SREC prices around $285/MWh, while Pennsylvania’s are in the $15-$16/MWh range. State action is needed to increase the competitiveness of Pennsylvania’s SREC market.

Secondly, the state’s previously robust rebate program ended and has not been re-capitalized. Launched in 2009 under Governor Rendell, the PA Sunshine Rebate program provided $100 million in rebates for solar panels on homes and small businesses. Currently, there are no state incentives available.

Another challenge to the local solar market is low energy prices. Regional electricity prices are near 12-year lows, making payback on solar investments more challenging. Large institutions like the City of Philadelphia and the School District purchase electricity in bulk and pay lower electricity prices compared to the residential marketplace, making the economics of investments more challenging.

The combination of low electricity prices and limited state incentives can make it hard to economically justify solar projects over short terms. Don’t fear though! Projects can still make economic sense over longer time horizons if customers are comfortable with a longer term investment.

Stay tuned for part two of this blog series, which will explore future opportunities for solar on municipal buildings.