Solar On and Under Fire

June 1, 2015 By Sara Gutterman

Sara Gutterman

Solar is soaring, but some are stopping at no end to stall its success.

Solar is on fire. According to the Federal Energy Regulatory Commission’s (FERC) Energy Infrastructure Report, solar and wind represented 100 percent of the nation’s new generating capacity in April. The US Energy Information Agency reports that, among the US renewable portfolio, solar is growing the fastest, primarily because of the cost benefit—the price of solar photovoltaics (PV) has plummeted 99 percent over the last four decades, from $74/watt in 1972 to less than $.07/watt in 2014.

Improvements in technology and the creation of innovative financing models from companies like SolarCity that have reduced or eliminated upfront acquisition and installation costs have also played an essential role in the accelerated adoption of solar PV.

A recent study conducted by the Massachusetts Institute of Technology stated that “solar electricity generation is one of very few low-carbon energy technologies with the potential to grow to very large scale. As a consequence, massive expansion of global solar generating capacity to multi-terawatt scale is very likely an essential component of a workable strategy to mitigate climate change risk.”

Given the colossal growth opportunity and our urgent environmental need for clean energy sources, one would think that companies of all kinds, particularly utilities, would concoct innovative ways to capture a piece of the success pie. But, in reality, something very different is happening. Instead of getting in on the game, utilities and lawmakers are digging in and waging war, which is becoming increasingly problematic for the solar industry, particularly in light of expiring tax credits, difficult grid integration and demand-side synchronization, and swelling political polarization.

In theory, utilities should warmly embrace solar since the low-maintenance, safe, and clean energy source helps solve peak demand issues that would otherwise require the construction of expensive plants that would only run at partial capacity when energy hits highest usage levels.

However, utilities across the country are pushing back against solar, claiming that net-metering enables customers with solar systems to receive financial benefits for excess kilowatts (they get paid for energy they feed back into the grid) without paying their fair share for grid maintenance, thereby making energy costs higher for users that don’t have solar systems.

As implausible as it seems, states across the country—even those with the greatest solar opportunity—are trying to put the kibosh on solar. Take, for example, Arizona, which ranks first in the nation for solar power capacity per capita. On top of the Arizona Corporation Commission’s $5 monthly fee for solar customers, utilities have added rate increases and grid maintenance fees to make solar adoption so prohibitive for customers that growth rates have plummeted.

Nevada, which ranks third in the country for total solar power capacity per capita and first for solar industry employment, is in the throes of a heated battle between the solar industry and NV Energy (the local utility owned by Warren Buffet’s Berkshire Hathaway Energy). Last week, it looked like the solar industry would suffer a fatal blow when the State Senate voted unanimously to give the Public Utilities Commission the authority to impose new fees on rooftop solar customers while maintaining a controversial cap on the number of solar users that can net meter (the cap is presently set at 3 percent, and given current growth rates, that cap could be hit as early as this year.)

Fortunately, it appears that NV Energy and the Alliance for Solar Choice may have reached a compromise—the two groups just announced joint support for an amendment to the Bill that would accept the net metering tariff while raising the cap on solar usage.

States across the US, including Wisconsin, Illinois, Ohio, and New Mexico, are embroiled in similar battles over net metering tariffs and caps. Fortunately, other states like Massachusetts, Maryland, New York and Delaware serve as a counterbalance with progressive solar policies. In Utah, Idaho, Maine, Oklahoma and Indiana, lawmakers have actively opposed fees, and in more than 30 states, utility companies in have unsuccessfully fought to eliminate net metering or impose fees.

It’s not surprising that the fossil fuel industry and utilities—and the politicians in their pockets—are fighting against net metering since solar adoption cuts directly into their profits, but their lack of foresight is incomprehensible. Once again, short-term profit is trumping long-term systemic planning, which begs the question—what do we value more, the dirty legacy of our past or the promise of a sustainable future?

Any way you look at it, solar is a winning proposition. Unlike fossil fuels, sunshine doesn’t have diminishing supply. And while fossil fuels will continue to get more expensive as supplies decrease, sunshine offers the promise of continued growth and price stability.

Utilities still have the power (literally and figuratively)—they now have the ability to tax sunshine in the form of a net metering tariff. Even solar advocates agree that net metering and grid maintenance fees are logical—utilities do need to get paid for the services and infrastructure they provide. However, by making the fees so high that they completely eradicate the benefits of purchasing a solar system, like in Arizona, shows a clear lack of vision and an obvious refusal to accept our environmental realities.

State governments need to balance the financial losses that utilities claim they’re suffering from net metering with the increase in jobs and vitality that growth in the solar industry delivers. For example, while net metering tariffs and grid maintenance fees in Arizona are helping utilities maintain profitability, the solar industry claims that the resulting slowdown of solar adoption has killed more than 6,000 solar-related jobs.

Ken Bossong, Executive Director of the SUN DAY Campaign, a non-profit research and educational organization focused on promoting sustainable energy technologies, asserts that “Members of Congress and state legislators proposing to curb support for renewable energy, such as Renewable Portfolio/Electricity Standards and the federal Production Tax Credit and Investment Tax Credit, are swimming against the tide. With renewable energy’s clear track record of success and the ever-worsening threat of climate change, now is not the time to pull back from these technologies but rather to greatly expand investments in them.”

Despite the short-sightedness of certain utilities and legislators, the solar industry’s growth trajectory will most likely continue to soar, with experts forecasting another year of over 20 percent growth in 2015.

Sara Gutterman is the co-founder and CEO of Green Builder Media. An experienced entrepreneur, investor, and sustainability consultant, Sara specializes in developing companies that are simultaneously sustainable and profitable. She is a former venture capitalist and has participated in a portion of the life cycle (from funding to exit) of over 20 companies. Sara graduated Cum Laude from Dartmouth College and holds an MBA in entrepreneurship and finance from the University of Colorado. This article was republished with permission from Green Builder Media and was originally published on the Green Builder Media blog.

2 comments on “Solar On and Under Fire

  1. I believe that solar, coupled with cost effective storage, will one day provide all the low cost electricity that we need. But the writer of this article exhibits little understanding of solar, or basic economics. To suggest that solar is now at $.07/watt is naïve. There are some utility scale installations that may provide electricity at .07 per kWH, but kW and kWH are two different animals. Mid-sized arrays are still going to cost in the range of $1.50 to 2.00 per kW installed. Let me provide an example; I recently had a 150KW array priced, which was just under $300,000. Even factoring in the 30% ITC and accelerated depreciation, it provided an internal rate of return of less than 5%. If I could sell its production under a PPA at .25 per kWH, it might merit the investment by my company, but since that is approximately 3 times the current cost of what we pay per kWH, it is by no means cost effective for our use. And if I sold my power through a net-metering, arrangement, it would mean that someone else would end up paying a hefty premium.

    I agree with the author that solar may offer some relief during peak periods, but balancing the grid should limit this option to utility scale operations, as the logistics of tracking numerous small scale installations would create a nightmare.

    I am by no means a utility apologist, but solar is not currently cost effective, and transferring additional costs to non-solar electric customers via the ITC and net-metering arrangements is Robin Hood in reverse.

  2. Please clarify the “price of solar” in the opening paragraph.

    Cost per Watt is typical for installed system costs or module costs. However, $0.07/W is more than an order of magnitude too low.

    There are optimistic claims of $0.07/kW-h from solar power generation. Is this what was intended?

    The rest of the article is a wee bit disingenuous – claiming victim status for one of the most heavily subsidized industries. It is good to want more, but expect growing pains when PV begins to impact other business models.

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