The San Francisco Bay area has historically been a leader on emerging technology, yet despite the unprecedented interest in solar power in California and beyond, Pacific Gas and Electric Co., has just 30,530 solar installations in its territory, which stretches from Eureka in the north to Bakersfield in the south. That's just 1 percent of the total number of residential rooftops that could install solar panels and reap their benefits. How could that be?  

According to most in the residential solar business, the problem boils down to money. For most people, installing solar panels comes with a hefty upfront cost. According to PG&E, it costs about $36,000 to install a four-kilowatt photovoltaic system, which is enough to power the average home for a family of four with a monthly electrical bill of $100 to $200. It would reduce carbon emissions equal to driving 12,000 miles in an average passenger car.

Rebates and tax incentives bring the cost of installing solar down by $10,000 or so. Though the money saved on electricity bills is real, a decade is a long time to wait to recover the initial set-up costs. Saving the environment is one way to sell solar power, but even in the ultra-progressive Bay Area, it's just not enough.   

[[ At right: The sun sets over a solar-paneled roof in Berkeley, California.
Photo: PG&E]]

Local entrepreneurs have begun to step in, finding ways to make solar power more palatable to cost-conscious consumers. Some are aggregating buyers to help them find better deals through group purchasing, while others are applying leasing models similar to those used in the commercial power sector [see OnEarth's Spring 2009 cover story, "Selling the Sun"]. In other cases, local governments are setting up financial arrangements that enable homeowners to install solar power without the hefty price tag.  

Lyndon Rive is the CEO of SolarCity, a Foster City-based solar installer that offers an alternative to those who want to use solar power but don't want to front the cash to purchase photovoltaic panels. Leasing is how SolarCity is trying to solve it, and SolarCity customers who don't want to buy can choose a 20-year lease. When it expires, they can either renew their lease or buy their system outright. By then the technology may have improved enough to warrant upgrading to a new system, and in that case, they could upgrade to lease a more efficient setup.

Industry experts anticipate that the percentage of homes with solar installations could climb to 10 percent over the next five years. When Solar City started its leasing program in April 2008, customers were quick to get on board. Last year, more than 75 percent of the company's residential customers chose the leasing option. This year things are changing a bit -- purchasing has become more popular thanks to bigger state tax breaks -- but Solar City's leasing program continues to thrive. About half of the company's residential customers now choose to lease their solar systems.   
 
Monica Sheridan of Walnut Creek was sold on the leasing idea recently for the home she has lived in for 16 years. She has a swimming pool in her back yard that pushes her electricity bill to $300 a month in the summer when the water pump is running.   

Heavy electricity users like Sheridan are most likely to benefit from making the switch to solar because of the way PG&E prices electricity: the more you use, the more you pay per unit of energy. While it takes an average of 10 years for typical homeowners to recoup the upfront cost of their solar system, based on electricity bill savings, it can be much less homes that use a lot of electricity, Rive says.

Leasing the solar panels for 20 years will cost Sheridan $1,000 at the time of installation, and a few dollars a month thereafter. If she were to buy the system, it would cost $20,000, even after receiving federal and state tax credits. For her, leasing was a no-brainer. She expects that her solar system will provide enough energy to cover two-thirds of her home energy consumption. 

Sheridan expects to see her average $170 monthly electric bill drop to $70 now that her solar system has been installed. While she also says she's happy about the environmental benefit of her new panels, the immediate financial benefit was the deciding factor. Sheridan's solar panels will still be cranking out electricity in 20 years, and with California electricity rates going up around 5 percent a year for the last 10 years, they'll provide her with a nice hedge against future energy price increases. "That's the primary reason to switch to something that nature is already providing," she says. "It's a way to kind of lock in your energy costs," she says.   
 

Group purchasing offers savings 

Sheridan got connected to SolarCity through 1BOG.org, or One Block Off the Grid, a San Francisco-based company that gets homeowners together to qualify for a group rate on solar installation. Dave Llorens, general manager and co-founder of 1BOG, says participants can save 17 percent through 1BOG.   

SolarCity signed on as the installer for 1BOG's second neighborhood installation in the Bay Area. 1BOG signed up 100 homes in San Francisco on its first campaign. This time around, the company is aiming for 75 homes.  

Llorens, who used to be a salesman for a solar installer, says he heard many myths and excuses for not getting solar: Waiting for technology to change, payback takes 40 years, not enough sunny days in San Francisco, and of course the top hurdle - sticker shock.  

"It's very difficult to look 10, 20 years down the road" and see that the upfront cost will pay off, says Llorens, wearing a T-shirt emblazoned with the phrase "Renewable energy is homeland security."   

Solar always loses out to other home improvements, he says. At least with a roof or kitchen remodel, homeowners can ask their neighbor what they paid and get a recommendation. Because fewer people are familiar with solar power and even fewer actually have it on their roofs, it's difficult to find out what's a fair price. 1BOG tries to take away that unknown. "That's our special sauce," Llorens says. With the group discount, "everybody knows what everyone else is getting."   

Llorens says most people don't know that solar gets cheaper the more of it they buy - and its not likely individuals could leverage that knowledge on their own. Buy bringing together many buyers, "we take that concept and make it scalable," he says.   

Installers like the plan, too: they save money on sales and marketing costs. In return, 1BOG gets a small profit from the deal -- 25 cents per watt installed. (That's about $100 for an average four-kilowatt system.)  

New approaches using public financing

In Berkeley, the city itself is experimenting with ways to put solar power within the reach of more homeowners through a public financing program that folds a solar project's installation bill into the home's property tax bill. The pilot program, called Berkeley FIRST, launched in the fall of 2007 and is currently full. 

The city created a special "Sustainable Energy Financing District," from which property owners essentially borrow the upfront cost of installing a solar system on their home. The owners then repay that loan over 20 years through an annual tax on their property tax bill. It requires little up-front costs and the tax obligation will move to the new owners if the house is sold. 

The program is no longer taking applications, but the 38 households that were accepted are now being monitored by the city and its partners; if successful, the program could be expanded for a second round - and adopted more widely throughout the region.   

In the interim, locked-in energy costs, a lighter environmental footprint, and the joy of having the hippest home on the block will have to be enough to entice Bay Area residents to put solar panels on their rooftops.   

Editor's note: This story was produced in conjunction with Spot.Us, a crowd-funded journalistic enterprise based in the San Francisco Bay Area. Spot.Us invites reporters to pitch ideas and allows the public to contribute money to the stories they want to read. In this case, one of Aaron Crowe's sources contributed funds to the story without Crowe's knowledge. The contribution amounted to 6 percent of total funds raised. The OnEarth editors share this information in the spirit of full disclosure and journalistic integrity. We welcome your feedback on this matter as we look to support innovative models for nonprofit journalism.