Cut costs, raise subsidies, and solar's appeal will shine

Victor Chen says he sees cutting his electricity bill as a great way to save money and reduce his carbon footprint, and he has been told installing a solar-energy system might be the best way of doing that, having just moved into his new three-story house.

But he says he has no plans to choose solar, despite knowing that his energy bill might well be 1,500 yuan ($242) per month using conventional sources.

"I have doubts it really saves money, because I have heard people talk about how big a headache it can be, first to apply for permission to install the panels, and then to maintain them," said Chen, who owns his own business in Shanghai.

"And that's even before I find out whether the bills are cheaper. I certainly do not want to pay more for going green."

His concerns are common among Chinese consumers, who might like the idea of going solar to meet their family's energy needs but have yet shied away from the often-tedious process of applying, in the hope of gaining long-term returns on their investment.

China has been working hard to promote the use of rooftop solar panels, amid mounting environmental pressures caused by air pollution.

The country has been rolling out various incentives to encourage more business and commercial owners to install solar, to companies to manufacture them, and to householders to buy them.

But still, the number of people who have actually installed solar systems has been limited.

Industry figures show that there are more than 60,000 single-family villas and townhouses in Shanghai, for instance, but just 100 have been installed with solar power systems. In Beijing, the rate is even lower.

Experts say several obstacles have hampered the government's effort.

According to regulations, for instance, if individuals want solar panels on their roofs they must first get the permission of their neighbors before making a filing with the local energy administration.

"It would be very difficult to get all the permissions," Chen said. "Also many property management companies consider them 'illegal', so they can be reluctant to hand out permits too."

The good news is that the procedure for connecting to the grid is a lot more straightforward than ever. The grid company is required to let a customer or solar company know the progress being made for a connection within 30 working days after accepting an application.

But the greatest concern for many remains the high cost of installation, and how long it will take to recover the outlay.

China has adopted what is called a self-consumption model, which means electricity converted from solar power can feed home use, with any excess electricity then sold to the grid.

Home users are offered several incentives to go solar, including grants of 0.42 yuan (6.8 cents) per kilowatt hour of output from the central government, which can apply for 20 years, and subsidies of around 0.4 yuan from the local government, such as in Shanghai, for five years.

For any surplus power sold by an individual user, the grid company pays at the local benchmark price of coal-fired power, which is around 0.5 yuan.

A standard 3-kilowatt system that can generate 3,600 kWh of power a year costs around 40,000 yuan. If a household consumes 3,000 kWh a year and sells the rest to the grid, individual users will get rebates from the government worth 2,460 yuan and 300 yuan from selling the electricity to the national grid.

A quick calculation shows taking a lifespan of 25-30 years into account, solar products take more than a decade to pay for themselves in China.

Every time I feel choked up by the smog, I wonder why it cannot be made easier and cheaper for residents to use solar.

Visiting countries in Europe, for instance, I have noticed many rooftops with solar, suggesting many in those markets already consider this new, clean energy the norm.

In the US, there are not only lower installation costs and tax credits, but also heavily subsidized offers from the government at both state and federal levels.

On average, a solar system there will pay for itself in just four years, and generate free electricity for the next quarter of a century.

From a cost perspective, it is still not affordable for many Chinese homeowners to go solar to keep their lights on.

Only with more subsidies and a stronger emphasis on residential users will solar be embraced as a money saver compared to conventional forms of energy.