Despite Washington’s reputation for gloomy weather, the market for solar panels is looking brighter thanks to state incentives that pay homeowners and businesses up to $5,000 for producing solar energy.
Here in Bellingham, that incentive program has led to the launch of Itek Energy, a solar panel manufacturer that opened earlier this year in an 18,600-square-foot building in Irongate and is ramping up production.
Though the incentives are paid to the energy producer, they were put in place to help create demand for local solar panel manufacturers by paying producers nearly four times more for solar arrays made here in Washington.
Rather than the base rate of 15 cents per kilowatt-hour of energy produced, the state will pay 54 cents per kilowatt-hour for energy produced with solar panels and an inverter that are made in Washington.
“The incentive package is one of the best in the whole country,” said John Flanagan, president of Itek Energy.
The incentive program for renewable energy production was passed by the Legislature in 2005 and also includes wind power and anaerobic digesters. Itek is one of just two companies in the state — the other is Silicon Energy in Arlington — making solar panels and inverters that qualify as made in Washington, said Mike Gowrylow, spokesperson for the Department of Revenue, the agency that issues the certification.
Getting the company up and running has been time consuming, Flanagan said, from purchasing equipment and setting up the production line to meeting state requirements and getting product safety certifications. The UL rating alone took about eight months to get.
To date, Itek has produced around 100 solar panels, but Flanagan plans to ramp up production with the start of the new year.
“Every day we’re producing more and more. We should be able to make 100 a day in a couple months. With our equipment now we have the capacity to produce 30 megawatts a year,” about 120,000 solar panels, Flanagan said.
At full production capacity, Flanagan plans to employ 40 to 50 people working around the clock in three shifts.
Much of the production line is automated, involving machines that lay individual solar cells in a line and solder them into a string of 10. Six strings make up a full solar panel, which also includes layers of glass and insulated backing that are all laminated together before being placed into an aluminum frame.
Itek does not make any of the materials for the solar panels, but since the company assembles them into a finished product, that qualifies as made in Washington, Flanagan said.
Solar panels are only half of the equation though. The power that the panels produce has to go through an inverter that switches the current from direct current (DC) to alternating current (AC). Also, the state offers incentives for using inverters that are made in Washington.
Though Itek designed and developed its own solar panel, Flanagan decided to partner with Texas-based Exeltech to make the inverters. Starting in December, Itek will start building inverters designed by Exeltech.
Overcoming high prices
The greatest hurdle for Itek and the whole solar industry is the high upfront cost for customers, said Joshua Miller, project manager for the solar installation company Western Solar. In fact, certified made in Washington panels cost about 30 percent more than panels made by larger companies that have economies of scale.
Despite the higher cost, Miller is seeing a jump in demand for locally made panels because the state incentive is better and customers can pay off the investment in about seven years, compared to 10-15 years for out-of-state panels. Half of the solar panels he installs now qualify as made in Washington, he said.
“So even though you’re paying more upfront, you’re payback is much quicker,” Miller said, adding that there is also a feel-good factor to buying panels made in Washington. “The people that tend to buy solar panels are interested in locally produced power and having those panels built here falls right in line with that.”
As Itek grows and realizes production efficiencies, the price of its solar panels should come down, making it more attractive for the average homeowner, Flanagan said. But reaching that point would be difficult without the state incentives.
“In our business, volume is very important,” he said. “What we’re hoping is that when those incentives diminish in 2020, the market will have grown enough to be sustainable. If all goes well, what we’re hoping to achieve is greater acceptance of solar.”