Costs of home solar electrical systems have plummeted in the past two years, creating something of a rush to solar systems to avoid steep increases in electrical rates, according to Eric Hassett of Palo Alto Hardware.

Homeowners, more than businesses, are lining up to switch from standard electrical to solar power, with the expectation of avoiding what may be a return to the age of candles and wood-burning stoves in the face of soaring energy rates.

Hassett and his father, Larry, are finding their small hardware store at Channing Avenue and Alma Street in downtown Palo Alto is becoming a regional center for solar-power inquiries. They are planning a separate spinoff business to accommodate the rush to solar.

Hassett said that just two years ago a home solar electrical system was costing from under $40,000 to nearly $60,000.

Not anymore. A homeowner can put in a system for under $10,000--even less if they seek a rebate from green-power programs such as Palo Alto's "Green Future."

Payback time for Palo Alto residents and businesses is much longer than for PG&E customers because Palo Alto's utilities rates are half or less than PG&E rates.

Hassett said those living in PG&E service areas especially are looking for alternative power sources, and their solar business is beginning to boom--which means a new line of business.

"We are in the process of forming it," Hassett said of a new spinoff business. "It's still more of an idea than reality, but we are definitely moving towards a separate office with enlisted installers and dedicated salespeople. Right now its kind of a side business for me and for the store."

"I have had a couple of apartment house managers come and talk to me about it, but 90 percent (of the interest) has been from homeowners, both in Palo Alto and from the whole Bay Area. I've been getting calls from Berkeley, San Jose, Morgan Hill, Brisbane."

They just finished an installation for a woman in Brisbane, which illustrates the sharp drop in prices.

"The retail price of that unit was $14,500," Hassett said of the Brisbane solar unit. "The rebate she will receive in the next week or two reimburses her for $6,000 of that."

After the rebate the owner will have paid $9,500, including about $1,000 installation costs. Had the owner lived in Palo Alto the rebate would be around $8,000 since the city's "Green Future" program pays more than the state rebate program does.

By contrast, in December 1999, a system installed in the Gyr/Friedman home in Palo Alto cost $57,767 (batteries included) before the rebate.

A system for the Slater home, also in Palo Alto and also installed in December 1999, cost $38,000 before rebate. No batteries were installed and the unit runs on high efficiency single-crystal silicon solar cells.

But just five months later, a system in the Ebenhoech home in Palo Alto cost $18,188 before rebate.

"Palo Alto has a $4-per-watt-installed rebate for photovoltaic systems," Hassett explained. "Anybody in the PG&E area gets a $3-per-watt rebate from the state."

The rebates are not "free" money. All power users pay into a state rebate fund as part of their electric bills.

"It's a state program that requires the utilities to collect (money) for a renewable-energies fund," Hassett said. "The state maintains the fund and Palo Alto maintains its own fund. PG&E does not."

Hassett said there are five other businesses selling commercial solar-power systems, but added they are not selling to homeowners because the profit margin is less.

"Solar has been so pricey for so long it was only the commercial customers that you could make money on," he said. "So you see very little business for them. We are the first ones (in the greater Bay Area) to have a whole pre-engineered kit for the homeowners."

Because of the escalating power rates, Hassett said it is difficult to determine when the system would finally pay for itself, the payback.

"There's lots of variables. Typically, if rates were to remain flat where they are right now, in the middle of power crisis, it would be about a 15-year payback to recoup the price of the kit and the installation," he explained.

"If the rates go where PG&E is pushing, we're looking at closer to a six or seven year payback for PG&E customers. PG&E customers are currently being billed 13 to 15 cents per kilowatt hour. If you look at your bill, they give you a price they would like to charge you and then they refund you back down to that rate. The rate they would like to charge you right now is 32 cents a kilowatt hour. PG&E would like to see a flat, agreed-upon rate of 25 cents per kilowatt hour.

"The basic kit that I sell is a 1-kilowatt system," Hassett said. "The retail price on that is $7,500. The rebate from PG&E on that is $3,013 while the rebate from Palo Alto is $4,024."

So, for about $3,476 (after Palo Alto rebate) a homeowner can save approximately 2,000 kilowatt hours per year. "During the day it is providing power for anything you use in the home," Hassett said. "If you need more power than what the system is producing, your utility is still there behind it, so there is no flickering. At night you are still drawing off the utility.

"What we're trying to do is build a system that, during the day, provides all your power needs or over produces and spins your meter backwards, and then at night you buy that power back," he said.

The one kilowatt system, according to Hassett, will provide between 25 and 50 percent of the homes' needs depending on what appliances are used and if it is a family of two or six.

"The typical home usage that I see is between 6,000 and 8,000 kilowatts per year. What I have been finding is that the most popular size is the 2-kilowatt system," which fits on most home roofs.

"At under $10,000 it fits within most budgetary restraints and it provides 50 to 60 percent of an average household usage."

Hassett said he has sold triple and quadruple systems for high users.

And then there are the "monster homes," the ones with the 600-volt switch boxes needed to power the large air conditioners and heating units, and multitude of gadgets, appliances and home-entertainment centers.

"Typically, their consumption is astronomical," Hassett said. "Of the four or five homes that I have gone to, their monthly consumption has been between 10,000 and 15,000 kilowatts per year. Their bills, a couple of them, are between $300 and $400 a month."

Hassett said a major problem is that roof designs do not provide for easy installation of solar panels. "Weird angles everywhere," he said.

Strange shapes of some monster-home roofs leave few options for installation unless the the installation is custom-designed for that particular home.

Hassett said his system is ideal for mounting on Eichler homes because the roofs are basically flat."

Typically, he said, the post-rebate cost is in the $8,000 range. That can be cut down if the homeowner does most of his own work, which the solar kits that Siemens manufactures allows. "That would eliminate 90 percent of the installation charge," Hassett said, "if they feel comfortable doing it.

"If they don't, I have several people I can recommend to do the installation, ranging from an electrician and handyman to a full general contractor."

Hassett said he recommends only licensed contractors who know what they are doing and back up their warranties.

Hassett noted that PG&E also has a program that charges customers a high peak-hour. "That peak time is when solar would be producing peak power too, and by law they are required to pay you retail for that power," he said. Customers can opt to pay the peak-power rate, and get paid back at that rate when their system is feeding power to the grid.

"It's a good way to return that investment very quickly," Hassett said.

--Marv Snow