Solar energy eclipsed by low oil prices, pinched economy

A bit of tarnish has appeared on the once-bright promise of solar power for the home.

Widespread predictions following the 1973 Arab oil embargo of an America made energy-independent by solar technology appear to have been premature. Solar sales have begun to dip, alternative energy companies are folding, and the range of solar products available has shrunk to primarily solar water heaters. (Many solar firms have abandoned solar space heating, judging it impractical at current prices.)

David Friedman, an analyst for Applied Management Sciences, a research and consulting firm that in 1980 and '81 conducted the first industry-wide survey of solar sales and installation for the US Department of Energy (DOE), says his forecast for domestic solar sales in 1982 is a zero growth rate.

''It is a time of extreme solar Darwinism,'' says Lew Boyd, vice-president for marketing with Terre-Light, one of the nation's leading manufacturers of solar equipment. ''Since the mid '70s, solar has experienced an average annual growth rate of 25 percent; 1982 may be the first year there is a negative growth rate.''

The downturn is being blamed on a combination of declining oil prices, a smaller federal role in research and development, and the economy in general, which is discouraging homeowners from buying expensive equipment that won't show a payback for a number of years.

The fear of ever-increasing oil prices is what drove a lot of people to alternatives, says Mr. Friedman. ''But now the energy-crisis psychology is over and people are getting used to higher energy costs.''

DOE outlays for solar research declined from $429 million in 1981 to $268 million in 1982, and were expected to shrink even further in 1983, though congressional inaction may result in a continuation of the 1982 budget through the current fiscal year. But cuts in government research funds are thought to have a negligible effect on small solar firms when compared with the effect of the current recession on a young, loosely structured industry.

''The solar industry is in a shake-out period,'' says one solar dealer. ''A lot of people jumped into the business for ideological reasons, and without firm financial footing. The result has been poor installation and maintenance in some cases, which hurts the reputation of the industry as a whole.''

While taken aback by their sudden change in fortune, many in the solar field see the slowdown as nothing more than a temporary glitch in a long-term upward trend. Still, the continuation of federal tax credits is a crucial ingredient in any such projection.

''In a way, (the current slump) has been healthy for the industry,'' says Mr. Boyd. ''It's given us time to catch our breath and focus on what has proven successful. Those companies that are surviving are strong and are poised for an upturn in the economy.''

When that upturn comes, say analysts, solar sales will likely break free from a sales pattern that has mimicked the roller coaster ride of oil prices - rising when they rose, dropping when they dropped - and establish an independent rate of growth.

While the solar boom may have faded on a nationwide average, the rise and fall of solar sales in individual states continues to fluctuate widely.

Likewise, individual companies such as American Solar King, which is projecting $20 million in revenues for the current fiscal year versus $5.6 million for 1982, are prospering. In the case of American Solar King, virtually all growth can be attributed to the industrial market, which continues to expand rapidly.

Another source of concern for the solar industry is the increasingly stiff competition from other energy alternatives. Dealers report brisk sales of insulation and window-sealing devices, as well a continuation of a long-term trend toward wood heating.

Even traditional means of home heating are making a comeback. A number of companies in the gas-furnace industry are developing furnaces with 83 to 96 percent efficiency ratings to replace the furnaces in most homes that average 55 percent efficiency.