Solar-Panel Rebate System
Helps Spur Demand -- and Prices

Putting solar panels on homes is especially costly right now, as backlogged installation companies accommodate customers willing to pay more. This is especially true in California, where a time-sensitive rebate system has homeowners trying to cash in on incentives before they shrink, and before summer utility bills start arriving.

The rush for installation "may have allowed local companies to cherry-pick the most aggressive customers at higher pricing levels," leaving others to wait longer, says Travis Bradford, president of the Prometheus Institute for Sustainable Development, a Cambridge, Mass., nonprofit group.

Because of installation and supply issues, prices have risen for the past year or two, says Richard King, a senior manager of the Department of Energy's Solar Energy Technology Program. "It's a short-term phenomenon," says Mr. King, who expects prices to fall significantly in the near future.

But so will some rebates, which have been structured to offer incentives while solar technology is still relatively expensive.

Most solar panels are made from silicon, a product used in the semiconductor industry. Though several new silicon plants are in the works, most won't be operational for a few years. Solar panels that don't rely on silicon aren't as widely used because they either can't produce as much energy or are still being tested. While venture capitalists have rushed to invest in the newly hot market, it could still be years before there's a truly competitive industry.

Costs have been on the rise since 2004, when the German government put in place a rebate system that covers about half the cost of installation. The U.S. and other countries followed suit, but Germany still represents about half of the solar-panel market, according to Mr. Bradford.

In California, the average price of solar-panel installations in April was 14% higher than a year earlier, at $37,752 a system, the California Energy Commission says. The number of installations in April rose 76% to 646 -- though that's still an infinitesimal share of the state's housing market.

California state rebates cover about one-third of the cost of installation. Tack on local, federal and utility-company rebates, and a typical $35,000 system can cost $17,500 in the city of Los Angeles and about $23,000 in outlying areas, says Peter Weich. His company, Absolutely Solar, has seen a 50% increase in installations this year.

Patrick Redgate has been installing solar technology for 33 years through his company, Ameco, and says customers often bargain to get better prices or faster installation -- more often the former. "If the situation is right, we try to work with them," he says.

Should a customer eager to get solar panels attempt a backdoor deal to get ahead of the first person in line? Consumer-advocacy lawyers say there's nothing illegal about trying to bargain to get panels installed faster.

And when should a consumer buy -- while prices are high, but so are rebates, or when both drop? For Californians, the decision to buy while rebates are high "is kind of a no-brainer," says Mr. King. For those in states behind the rebate curve, it may be better to wait.

As always, it's also wise to get several estimates. Rhone Resch, president of Solar Energy Industries Association, a lobbying group, has a six-kilowatt system on his Washington, D.C., home. He says he found three installation companies on the Web and chose the one that offered him the best deal.

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