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Is the state’s lottery system for solar rebates stifling the programs it was meant to encourage?

It’s something to think about when you fly into McCarran and look down: All that sunshine. All those rooftops. Where are the solar panels generating clean, renewable energy?

The dream of distributed generation, in which residents and businesses would meet some or all of their electric needs with the natural resource of which we have the most — sunny days — seems to be consistently just out of reach. A few “early adopters” have spent tens of thousands to reduce their electricity purchases from NV Energy, but for most who would like to go down the same route, the initial investment is just too big.

That’s despite the fact that the photovoltaic solar panels that are the basic building blocks of such systems have dropped in price by some 70 percent over the last several years. The nascent industry of solar-generating installers says one reason for the lack of widespread acceptance of rooftop systems is that a Nevada law designed to encourage that development is now having the opposite effect.

A renewable energy program established by the Public Utilities Commission of Nevada and overseen by NV Energy gives rebates to residents and businesses to put in rooftop solar systems. However, there has always been more demand for the rebates — which amount to $2,000 to $6,500 for a typical residential rooftop system, which can cost anywhere from $10,000 to $40,000 to install — than there has been available funding.

So the state holds an annual lottery for the rebates. According to industry leaders, about one out of 10 applicants wins the rights to the rebate. But very often the losers, many of whom might go ahead with installation even without the rebate, don’t move forward, choosing to wait until the following year in the hope of winning the thousands of dollars.

“There are lots of people out there, and businesses, who are ready to move forward, but the incentives are only available once every 12 months,” says Chad Dickason, chief executive officer of Hamilton Solar, a Reno-based company expanding into Vegas. “They want to support the program, but there’s this one out of 10 chance — it’s almost psychological.”

The 3-year-old lottery also was in hiatus for a year after the first year’s effort, in 2010, overwhelmed NV Energy’s funding ability. Ratepayers fund the program through the Renewable Energy Program charge on their bill — typically about $1.50 on a $100 bill.

Up to October 2012, Nevada electricity consumers have funded $147 million in rebates to government, business and residential consumers, including about $14 million for residential and small business systems. That’s 977 solar systems on homes and small businesses, according to NV Energy’s website.

The Public Utilities Commission referred questions about the existing program to NV Energy.

NV Energy spokesman Mark Severt referred most questions about the program to the utility’s online information and state statutes and administrative codes. The rules and regulations for the program are, by all accounts, Byzantine.

From one small section of the voluminous regulatory language around the program: “If the maximum capacity authorized by NRS 701B.260 for a given program year is reached before the end of that year, the utility shall suspend the payment of incentives for capacity beyond the capacity authorized for the current program year until the beginning of the next program year, but may continue to issue confirmed reservations at an incentive level not more than two steps ahead of the step associated with the current program year.”

Says Dickason, “The program is broken.”

But advocates have reason for optimism. Federal tax credits and the market are making rooftop systems more affordable. Lydia Ball, director of the nonprofit Clean Energy Project in Las Vegas, says that balancing the cost of electricity over the grid versus the cost of installation, homeowners can expect to cover their costs in about seven years. Photovoltaic systems are usually guaranteed for 20 years, so investors have a potential margin of more than a decade of low- or no-cost electricity.

Ball joins her colleagues in the installation industry in seeking legislation that will make sense for those seeking clean, renewable energy at an affordable cost. But she says potential consumers and the market have been battered over the last two decades by changes in the incentive programs in Nevada and residents and installers need a program that will provide a stable, long-term environment for business development.

“There are multiple avenues where we can go, but the most important is to put in an incentive and make sure it doesn’t change every two years,” Ball says. “Every two years, the Legislature has tweaked the program. It has been hard to build a sustainable business model over a decade if your business model has to be changed every two years.”

NV Energy’s spokesman Severt said, “We’ve not affirmatively taken any policy positions for the upcoming legislative session yet. NV Energy has long been advocates of sensible renewable energy development that makes sense for our customers. However, our goal is always to be sure that the interests of customers, especially costs in this still recovering economy, are balanced with any changes in policies or mandates.”

Chris Brooks is the director of Bombard Renewable Energy, the company responsible for many of the photovoltaic systems that you see on roofs around Las Vegas. He agrees that the state rules need to be tweaked again, hopefully for a permanent solution.

“We’ve kind of outgrown it,” he says of the existing program, which he notes that despite problems, has nonetheless invested millions into renewable solar systems. “It has served its purpose. It’s time for a new program that better reflects where the industry is in the state and globally right now.”

State Senator Kelvin Atkinson and Assemblyman David Bobzien have introduced a bill-draft place holder for legislation to make those changes, which are likely to see smaller one-time rebates but an end to the lottery. Atkinson and Bobzien did not return calls last week, and their bill draft still does not include language, but the industry representatives said they believe the program can be changed in a way that makes sense for energy consumers in Las Vegas and statewide.

That probably will include a smaller rebate incentive, but one that is open for everyone.