Jul. 2--The bad economy slowed the growth of California's solar-power sector in the first half of the year, but the industry appears to be rebounding, according to a report released this week by the California Public Utilities Commission.

New solar-power capacity nearly doubled from 2007 to 2008, with 156 megawatts installed last year in areas served by the state's largest utilities. But after peaking in January, the monthly rate of installations dropped sharply, according to PUC figures. While the industry's year-over-year sales growth stayed positive through the spring, it was a disappointing dip for a sector that had been expanding rapidly.

To some degree, the factors driving the slowdown in solar-panel installations are the same ones that have consumers and small businesses holding off on other major purchases.

"It's a durable good. Sales of durable goods are down," said Paula Mints, principal analyst for photovoltaic services at Navigant Consulting in Palo Alto.

Larger solar projects are being stymied mainly by difficulty lining up the complex financing such deals require, Mints and others said.

Still, the PUC report noted that applications for new residential photovoltaic systems jumped in May after a slump to start the year, and many in the business see signs of recovery.

"By October, we'll be -- getting back to our normal growth rate," said Ron Kenedi, vice president of Southern California panel maker Sharp Solar.

The sector should get a lift from economic stimulus programs expected to roll out later in the year, Kenedi said, particularly those that support solar installations on public buildings and campuses. In addition, prices of solar panels are down as global production has outstripped demand. At least some of that reduced cost is likely to be passed on to customers, he said.

The PUC data come out of the first progress report on the state's $3 billion "Million Solar Roofs" plan, passed in 2006 and launched in January 2007.

The program uses a ratepayer surcharge to subsidize solar installations for homes and businesses. It is intended to prompt the installation of 3,000 megawatts of new solar power by 2016.

The report concluded that the state is on track to meet the 2016 goal, assuming the industry returns to at least a modest rate of growth in coming years.

The report covers only the state's large investor-owned utilities -- Pacific Gas and Electric Co., Southern California Edison, and San Diego Gas and Electric Co. -- which serve the majority of the state.

SMUD has historically had lower rates of solar adoption than the private utilities. SMUD customers pay less for grid power, giving them less incentive to invest in a solar system.

During the first 29 months of the Million Solar Roofs program, PG&E customers have retrofitted their homes with solar panels at about eight times the rate of SMUD customers, according to data from the PUC report and SMUD.

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Call The Bee's Jim Downing, (916) 321-1065.

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