Springtime in Hong Kong marks the start of an eight-month battle between your air-conditioner and the sun. Your air-conditioner usually wins, leaving you to pick up the power bill. But why not turn the sun's rays into fuel rather than a furnace? Every year, 1,000 sq km of Hong Kong soaks up 2.2 billion megawatt-hours (MWh) of clean energy - from the sun. Last year, the city chewed its way through 42 million MWh, just 2 per cent of the solar energy supply. Until recently, high costs meant solar power was restricted to niche applications such as remote transmission aerials and lighthouses, or experimental units. But the price of solar generating systems has fallen substantially. Many developed nations, especially Japan, Germany and the US, have programmes to encourage the use of renewable resources. Farmers sell power from windmills or biomass generators, while factories use waste heat to drive turbines. Households can install photovoltaic (PV) panels on their roofs. They can sell any surplus, often produced when homes are empty, to their utility company. Utilities buying power from small-scale generators and customers is known as distributed generation and is used in many developed countries and at least one developing one, Thailand. Ontario, Canada, is a typical example. Small-scale power producers such as wind farms are called retail generators and sell their power to the utility grid. Household generators (usually with capacities of one kilowatt to 5kW) do not sell their surplus power but use a net-metering system. For each kilowatt-hour of power fed into the grid, 1kWh is subtracted from their bill. Distributed generation is efficient as little energy is lost during transmission. Japan, the world leader in PV power, started its PV programme in 1994 with a 50 per cent government subsidy to help householders and businesses install PV systems. Solar News reports that this subsidy fell to 10 per cent by 2002. Japan had 167,500 units installed by 2003, producing 603MW of power - enough to meet peak demand from 172,000 households. Not wishing to be outdone, California's governor Arnold Schwarzenegger last month announced an ambitious one-million-roof programme. One objection many power producers have to distributed generation is that utilities are stuck with systems that turn out a constant amount of power and cannot adjust this hour by hour to compensate for changes in solar radiation, wind speed or demand. But Colorado-based power systems engineer Dan Bihn, who runs consultancy Bihn Systems, says large-scale producers prefer, but do not have to, run their plants at full capacity, as the fuel is relatively cheap. As long as the volatile input from solar or wind systems is less than 10 per cent of capacity, it should be able to accommodate such suppliers. Mr Bihn says Japan's PV system probably crossed the one gigawatt (1,000MW) capacity mark this year, and the government hopes capacity will reach 4.8GW by 2010. This is enough to supply 1.3 million households, but will still be just 0.5 per cent of Japan's overall capacity. But these systems are still expensive. Mr Bihn says a small residential system (with a 3kW capacity) would cost about US$20,000. Assuming it took 15kWh per day off a Hong Kong household's power bill, they would have to wait 28 years to recoup the purchase price of the system, never mind cover maintenance costs. Ted Sargent, of the University of Toronto, has developed a soluble material that can be used to create generators that theoretically convert 30 per cent of the sun's rays into electricity by harnessing infrared solar radiation. The generators would be extremely flexible and could be applied to surfaces as paint or incorporated into clothing. Professor Sargent hopes this new technology will be available commercially within five years. Mr Bihn says that despite such high hopes, fundamental breakthroughs are hard to predict and even harder to take to the bank. He warns that in the short term, prices for systems may increase as demand rises sharply, then decline from next year as more factories come on stream.