Sustaining Solar Industry Growth - We need to Support and Create Forward-Thinking Policies

What can be done to sustain solar industry growth? We need to focus on the political and regulatory environments of the solar industry. One significant answer is in forward-looking policies, existing or new, that create incentives and limit obstacles or restrictions for people to reduce their contribution to global warming and expand the use of local renewable sources.

Environment America reports that more than 21,300 megawatts of cumulative solar electric capacity was installed towards the end of the first quarter of this year. This is enough electricity to power more than 4.3 million homes. In 2014 the solar industry grew 34% over 2013. (In 2006, a Federal policy known as the Investment Tax Credit was implemented to support the growth of solar energy in the US. The policy made solar technology more affordable, and is a driving force for the recent growth of solar.) However, the policy is set to expire at the end of 2016. This will cause the cost of solar to be placed more on the developers and consumers of clean power. The future of solar will depend on state Renewable Portfolio Standards (RPS) that direct utilities to produce or acquire a percentage of the power that they sell from clean energy. Despite the expiration of the Investment Tax Credit, industry officials and analysts predict that the US solar markets will continue to boom over the next term. They forecast a 31% growth target by the end of 2015. This is possible with the help of declining costs of solar technology, business model innovation, favorable political and regulatory environments, and access to low-cost capital.

The federal law known as the Public Utility Regulatory Policies Act (PURPA), passed in 1978 makes it mandatory for utilities to allow homes that produce electricity to connect to the grid, and companies must buy the excess power that is produced by homes or business. Forty-two states and the District of Columbia went the next step and allowed Net Metering as reported on http://science.howstuffworks.com/. What’s going on in the other eight states? Policies and requirements vary from state to state. In fact a state can allow Net Metering but have rules that are so restrictive that they make it very hard for the average homeowner to buy solar systems. Resistance from the utility companies and other communities often stalls the passing of the right legislation in these states. For example in 2007, Texas signed a bill that would set Net Metering into affect as rapidly as possible. However, the utilities protested and the legislators succumbed to the pressure, so the bill was compromised.

Net Metering has already contributed to the increasing trend to produce power from solar energy, especially for homes and businesses. Net Metering is a method for solar panel owners to measure exactly how much energy they produce for other users on the electricity grid,  and thus they would be compensated fairly. Net metering makes installing solar panels more affordable and appealing because selling back to the grid offsets the cost of the system and subsequent energy consumption. The process of producing energy and putting it right back into the grid, in one place, is known as on-site generation or distributed generation. Solar panels and intermittent generators are the most common methods used in this process and can be located at houses, schools, or businesses. In distributed generation, intermittent generators are used and often connected behind the same utility meter as customer power loads. These intermittent generators only generate power when their energy source is available; in this case when the sun shines. The on-site electric power production is not necessarily at the same level as the electric power consumption of the customer at any given time. This means that solar customers may be importing power from the grid, or consuming more energy than they are generating. At Nationalgrid, when a DG customer is a net importer (uses more energy on-site than they generate) they will bill the DG customer for the net energy use. When the opposite happens and the DG customer is a net exporter, Nationalgrid will first bill the DG customer for zero kWh of energy usage. They then credit the DG customer for the net energy that is exported to the grid in the form of Net Metering Credits (NMC). The Net Metering Credits will appear as a dollar-value credit on the recipient’s next bill.

There are also many benefits to Net Metering. Net Metering increases the number of utility customers that are also generating electricity from sources on their own property. This reduces the amount of electricity that utilities would typically generate at plants that are powered by fossil fuels. This also eliminates the need for utilities and electric companies to build more power plants because there is less of a demand for the electricity. The cost of fossil fuels can fluctuate and when costs rise these increases often get handed down to ratepayers. The cost of energy from solar tends to be stable. The power produced from solar energy also increases the resiliency of the electric grid because it decentralizes where the power is produced, and therefore helps to prevent the spread of electrical problems from one region to another. It also helps avoid the cost of installing new technology to make power plants more efficient and it can help meet renewable energy requirements. Net Metering is simple, easy to administer, and guarantees that solar panel owners are compensated based on the changing electricity prices over time. This in turn entices residents and businesses to invest in solar. The National Conference of State Legislature reports that the increasing number of customers using Net Metering has caused solar capacity in the United States to increase by 418% since 2010. Half of this increase is from solar panels that were installed in homes and businesses.

Not everyone is a fan of distributed generation solar energy and Net Metering policies. A common argument against DG solar power is that energy is only produced if the energy source is available. The intermittent generators used in solar are only activated when the sun is shining on a clear day. In fact, when the intermittent generators are not producing power they are actually consuming small amounts of electricity to keep their electronics running. Therefore, due to customer utility loads, some of the time a DG solar customer could be importing energy or consuming more energy than they are producing for the grid. Even in this case that a customer is not paying the same electric bill as a non-solar customer, who uses the same amount of power because the energy that the DG solar customer did produce, offsets some of their bill. Some utility companies have argued against solar because it means a decline in revenue stream. Utility companies have fixed costs for customers in a given region. For DG solar customers, utilities are no longer receiving these fixed costs, and they often get handed down to non-solar ratepayers. This means that solar customers are increasing costs for non-solar ratepayers without necessarily paying for the grid should enough power be produced. Solar customers also contribute to this trend because DG solar power reduces the demand for power derived from power plants, this causes electric prices to go up. To address a potential unfair cost distribution, some state entities that regulate utilities are voting to charge solar ratepayers an additional fee every month. Another counterargument is that the benefits that solar panel owners, particularly homeowners, provide to the electricity grid and society tends to be worth more than the actual credit they receive through Net Metering. According to an Environment America piece, http://www.environmentamerica.org/reports/amc/shining-rewards 8 out of 11 analyses showed that the value of solar energy produced by solar homeowners was worth more than the average residential retail electricity rate, at the time and in the area where the analyses were conducted.

There is evidence to support that Net Metering is more beneficial than a burden to ratepayers. According to http://bit.ly/1W8ebmh, Tom Beach of Crossborder Energy performed a new study in California by. Using actual data from 10,000 solar systems and analytic models, he found that when California reached its current Net Metering cap of 5% of non-coincident peak load, the benefits of net-metered projects exceed the costs by about $92 million annually. This was true across the three large investor-owned utility territories in the state. The study shows that the benefits of net metering to the ratepayers of utilities actually outweighs the costs, Not to mention the benefits to the environment and society.

In order for America to continue on the trend to increase the capacity and generation of energy produced by solar power, additional policies are needed, and existing policies need to be enhanced.   Today 29 states and Washington D.C. have RPS or equivalent, a number which has doubled since 2004. Every state should have RPS and we should push to set more aggressive targets for the RPS of the entire country. This in turn will push each state to set higher RPS targets and enact more forward-looking policies that endorse renewable energy. As an example, California is a clean energy leader with one of the most aggressive Renewables Portfolio Standards (RPS). The state also passed The Solar Rights Act enacted in 1978. This bars any restrictions placed on homeowners by state entities to install solar-energy systems. In September of 2003 the act was amended to prohibit a public entity from receiving state grant funding or loans for solar-energy programs if the entity prohibits or places unreasonable restrictions on the installation of solar-energy systems.

It also would be beneficial to enact more federal policies, like PURPA that force the states who are really not doing much for renewable energy to get the ball rolling. When the Investment Tax Credit expires next year we should work to find new ways to create incentives for people to go solar.

States can enhance their RPS by lifting arbitrary caps, which limit the access to Net Metering in solar markets that are growing fast. State and local governments should evaluate all of the benefits of Net Metering, especially environmental and societal benefits. State and local governments should realize that the benefits that outweigh the costs of Net Metering when comparing to other programs that compensate solar customers for their power. Alternatives to Net Metering that do not give full compensation to residential and business solar customers for the solar electricity that they produce should not be taken into account. Net Metering should be a system that can be taken advantage of by everyone including multifamily homes and homes without little sun exposure.

To continue in the right direction America needs focus on the political and regulatory environments of the solar industry and support policies and practices  that diversifies our energy sources and help to expand the use of local renewable sources.

-Contributed by Nick Schepis
 

For reference:

http://www.environmentamerica.org/reports/amc/shining-rewards

http://www.dsireusa.org/