Solar Panels Compete With Cheap Natural Gas

Renewable energy is growing rapidly in the U.S., with wind and solar industries enjoying double-digit growth each year. Part of that growth comes from more homeowners choosing to install solar panels.

With government subsidies, some people can even make a financial argument for installing the panels. But in recent years, the price of one fossil fuel — natural gas — has declined so much that solar panels are having difficulty competing.

The reason natural gas prices have fallen is because production is way up, thanks to hydraulic fracturing. Fracking, as it's called, is a controversial drilling technology that some say harms the environment. But the process has also made it possible to extract oil and gas once thought to be trapped in rock too deep underground for drillers to reach.

Due in large part to a combination of fracking and horizontal drilling, there's been a nearly 30 percent increase in the amount of natural gas produced in the U.S. since 2005.

"We've got a classic situation of supply and demand," says Kathryn Klaber, president of the Marcellus Shale Coalition, an industry group based outside Pittsburgh.

Natural gas demand has not gone up as quickly as supply, and Klaber says the price has dropped.

"A handful of years ago, natural gas could have been in the order of 12, 13, 14 dollars per million BTU," she says. "We're now down to three to four [dollars]."

This has allowed utilities that burn natural gas to produce electricity to hold the line on rates. For most of us, that's a good thing, but for those who've installed solar panels, it makes that investment less of a bargain.

Barbara Scott had 21 solar panels installed last March on her house in Media, Pa. Scott's family was the first in the community, and she was prepared to evangelize, "We can have open houses and write newsletter articles and promote the idea of solar," she said. But that was before the economics changed.

With government rebates and tax incentives, Scott says, her family spent $21,000 to install the system. She figured it would take eight years to recoup that investment.
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http://www.npr.org/2012/01/05/144526652/solar-panels-compete-with-cheap-natural-gas
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