Adopt feed-in tariffs to create demand. It’s not enough for people to want alternative energy; it must be economically viable, as well. No matter an individual’s level of belief in clean energy, global warming, or carbon footprint reduction, as long as entry costs remain prohibitive, most small investors such as homeowners will stay out of the market. Only by offering financial incentives to surmount those entry costs will governments, local or federal, entice homeowners into investing in their own solar panels or rooftop wind turbines, which will create long-term demand, increase production over time, and lower the entry costs naturally.

Accomplishing this goal in Europe, particularly Germany and Spain, has been the feed-in tariff, which mandates payments for homeowners who generate sufficient electricity from their RES-e systems to sell it back to the power companies. Using this system, in Germany between 2000 and 2007, the installed capacity of RES-e more than doubled, including within residential areas, meeting the 2010 goal (12.5% of electricity derived from alternative sources) three years ahead of schedule. At the same time, the entry cost of such systems fell 20% and 10,000 manufacturing and maintenance jobs were created, giving the RES-e industry viability and sustainability.

Aesthetics must be recognized as a luxury item. With homeowners associations (HOAs) wielding the power to refuse urban and suburban residents the ability to utilize solar panels, solar water heaters, or light-colored roofing materials for aesthetic reasons, RES-e production won’t extend into the most heavily populated parts of the nation, which is where the energy is most needed. The same holds true for local governments, which often block adoption of RES-e by refusing to issue building permits for such projects or by charging such high fees to issue permits that again the entry cost is raised beyond the small investor’s reach.

If RES-e production is going to survive and thrive, this trend must be reversed, and state laws and subsequently state courts are increasingly becoming battlegrounds between aesthetics and science. Currently eight states have enacted laws giving homeowners teeth against HOAs and local governments, while four more are considering them. Perhaps most well known is California’s “solar rights” law, which bars restrictions against solar panels and water-heating systems by HOAs and other public entities on the basis of appearances.

Additionally, similar bills have been introduced in both houses of Congress to move homeowners’ RES-e rights to the federal level. Although these bills received little support to date, the new administration’s drive toward green power could change that rapidly.

Not a luxury is the electrical transmission grid. Already aging, subject to brownouts and blackouts in some regions, and in desperate need of upgrades, the grid that stretches across the U.S. and Canada will control the rate of advance for RES-e systems.

Many transmission nodes within the grid require additional depth to handle the increased workload from the exponentially rising numbers of electrical devices—computers, entertainment systems, kitchen appliances, heating and cooling systems, even plug-in cars—in high population areas. In addition, the electrical inputs into the grid must be balanced against the demand load, with additional power needed during peak hours. Under the current system of generating electricity via a few hydrocarbon-based generation plants, grid managers can balance their loads relatively easily; but when a cityful of solar panels or rooftop turbines kick in, this task becomes much more difficult.

Without strengthening this necessary infrastructure, and without finding a means of balancing these inputs against demand loads, RES-e could cause more problems than it solves. The cost of grid upgrades, meanwhile, could eat a significant share of the new administration’s recently proposed economic stimulus plan.

There’s no easy solution to driving such a fundamental change within the world’s largest economy, particularly through established political fiefdoms and vested interests. Nobody should expect the process to be smooth or error-free; but then, neither is economics.

<p>However, economically speaking, the major problem with the current method the U.S. uses to supply itself with power is not the generation system but rather the grid that transports it. For safety reasons, power production facilities are traditionally constructed at a distance from population centers, and the cost of connecting the two via high-voltage transmission lines is astronomical at best. When Texas recently formed plans to upgrade their grid system, channeling power from new windfarms in the Panhandle and West Texas to cities in the center and east of the state, they budgeted $1.5 million per mile for the lines and considered it reasonable. (There are a lot of miles in Texas, but at least that included the poles.)

<p><b>Small Generators</b>

<p>So if transmitting power is expensive, but large electrical generation facilities can’t be built near population centers, how about small ones? The burgeoning trend is for residences and businesses, particularly those in rural areas, to produce their own power through small wind or solar systems; however, rather than “going off the grid” in the classical manner, these small generators stay connected and feed any leftover power back to the grid.

<p>Under a system known as net metering, the meter runs backward when the small generator has power to spare and forward when clouds cluster and the wind dies. But an alternative system known as the feed-in tariff (FIT) requires the power company to actually purchase this electricity, meaning these small systems can pay for themselves and even earn a profit before they fall apart or become obsolete. After Germany initiated a FIT program in 1999, solar panels appeared on the roofs of Bavarian barns and small generation systems surged, now providing over 14% of German electricity.

<p>One problem is that, rather than spreading the initial capital costs across a large client base as the power company does, the family or business must eat it themselves. To address this, governments at all levels are increasingly providing incentives such as tax credits to make that investment more palatable. Back in Texas, for example, value added to real estate by the installation of a green generation system is exempt from property taxes, and businesses that manufacture, sell or install solar and wind energy products are exempt from corporate taxes entirely. And there’s no cap.

<p><a href=”http://www.dsireusa.org/index.cfm?EE=1&RE=1″ target=”_blank”>DSIRE</a>, the Database of State Incentives for Renewables & Efficiency, is a website maintained by the North Carolina State University’s Solar Center which provides lists of such incentives for all 50 states.

<p><b>Costs of Renewable Energy</b>

<p>Even with the transmission grid out of the picture, the cost of green generation remains a prohibitive factor. On average, despite a 5% rise in electricity prices in 2008 and another 10% expected in 2009, most U.S. customers, both residential and industrial, pay less than ten cents per kilowatt-hour for power or around a dollar per watt of generation capacity. This has come to be considered the “magic number” that green generation must meet or beat in order to compete, and for the most part, it’s just not there yet.

<p>Wind energy has come closest. The cost of wind generation varies inversely with the size of the turbine, and bigger, more efficient systems are currently very near that coveted level. Rural residential systems are hovering between $2 and $3 per watt. For rural areas with good wind resources, it’s become the small generation system of choice.

<p>Despite decades of research, solar energy remains expensive, and the classical photovoltaic system still costs $8 to $10 per watt installed, not counting the incentives. Solar shingles, a form of urban camouflage designed to pacify home owner associations, push the price up to $10 to $12 per watt but can be rolled into a mortgage like any other roof. However, thin film solar panels, which eliminate expensive silicon and instead use inkjet printers to distribute nanotechnological solar ink across almost any backing surface, have lowered the cost to around $2 per watt.