As Sun Shines on Solar Industry, Power Companies Fret

A picture shows solar panels installed on the roof of a building in Lille on September 9, 2013.
National Journal
Clare Foran
Oct. 6, 2013, 7:27 a.m.

Com­pared with the cost of fossil-fuel-gen­er­ated elec­tri­city, sol­ar power isn’t cheap. But it’s be­com­ing more af­ford­able thanks to state and fed­er­al sub­sidies and com­pet­it­ive leas­ing and fin­an­cing op­tions. Add to this the fast-drop­ping price of photo­vol­ta­ic pan­els and sol­ar is start­ing to look like an in­creas­ingly cost-ef­fect­ive op­tion for many Amer­ic­ans.

As the tech­no­logy be­comes more wide­spread, however, util­it­ies are fight­ing harder than ever to stop sol­ar in its tracks, and they see reg­u­la­tion levied through state gov­ern­ments as the way to do it.

A main reas­on why sol­ar has be­come in­creas­ingly af­ford­able and a ma­jor thorn in the side of power com­pan­ies is a policy, now in ef­fect in 43 states, called net-meter­ing. Through these sys­tems, cus­tom­ers with sol­ar pan­els can earn cred­its for sur­plus elec­tri­city gen­er­ated dur­ing the day. The cred­its are then sold back to the util­ity and used to off­set the cost of con­ven­tion­al power pro­duc­tion, which sol­ar users must still rely on when the sun is not shin­ing.

Net-meter­ing has func­tioned as a kind of sub­sidy for sol­ar power, and sol­ar ad­voc­ates want the policy to re­main in place. Util­it­ies, however, ar­gue that now that sol­ar has be­come more af­ford­able, these sub­sidies should be scaled back or elim­in­ated al­to­geth­er.

Ac­cord­ing to Richard McMa­hon, vice pres­id­ent for en­ergy sup­ply and fin­ance at the Edis­on Elec­tric In­sti­tute, a trade as­so­ci­ation rep­res­ent­ing all U.S. in­vestor-owned elec­tric com­pan­ies, util­it­ies aren’t en­tirely op­posed to net-meter­ing; they just want a change in terms.

“What we’re con­cerned with primar­ily is the rate at which the util­it­ies are ex­pec­ted to pay for the sur­plus power gen­er­ated by con­sumers us­ing sol­ar pan­els,” he told Na­tion­al Journ­al Daily. “That’s what’s known as the feed-in tar­iff, and these tar­iffs are set much high­er than at mar­ket rates. These sub­sidies were put in place when sol­ar was in its nas­cent stages but now it’s out­grown the need for them.”

In ad­di­tion to press­ing state reg­u­lat­ors to re­vise the rates at which sol­ar users sell back their elec­tri­city to util­it­ies com­pan­ies, EEI is ask­ing state le­gis­lat­ors to raise costs for sol­ar cus­tom­ers. McMa­hon says this is be­cause sol­ar cus­tom­ers aren’t pay­ing their fair share for use of the power grid.

Sol­ar ad­voc­ates, on the oth­er hand, say the sub­sidies are do­ing what they’re sup­posed to do — make sol­ar more af­ford­able — and that they need to be left un­touched.

“Earn­ing a cred­it for the elec­tri­city that feeds back in­to the grid is only fair,” said Will Craven, a spokes­man for the Al­li­ance for Sol­ar Choice, a co­ali­tion of sol­ar fin­an­cing and elec­tri­city com­pan­ies.

“Really what util­it­ies are at­tack­ing right now is the cus­tom­er’s right to use less elec­tri­city,” he said. “When sol­ar was a boutique en­ergy source that was only avail­able to the wealthy, it was something util­it­ies could tol­er­ate. But now that sol­ar costs have come down greatly, they are threatened by us be­cause we rep­res­ent really the first com­pet­i­tion they have ever had.”

So far no ma­jor reg­u­lat­ory changes im­pact­ing net-meter­ing or feed-in tar­iffs on the state level have been en­acted, but util­it­ies across the coun­try are press­ing for change. Lob­by­ing ef­forts are play­ing out in many state cap­it­als, but McMa­hon said that in the fu­ture there could be is­sues re­lat­ing to reg­u­la­tion of sol­ar power and costs borne by util­it­ies that need to be ad­dressed by the Fed­er­al En­ergy Reg­u­lat­ory Com­mis­sion.

What re­mains to be seen now is wheth­er any of the pro­posed changes will go through and how they stand to al­ter the cost equa­tion on sol­ar if they’re suc­cess­ful.

At least one sol­ar ex­pert thinks the im­pact could be dev­ast­at­ing.

“I think it could hurt it pretty badly,” said An­drea Luecke, ex­ec­ut­ive dir­ect­or of the Sol­ar Found­a­tion, a non­profit ded­ic­ated to pro­mot­ing the ex­pan­sion of sol­ar tech­no­logy, when asked how ad­di­tion­al fees levied on cus­tom­ers us­ing sol­ar on a res­id­en­tial scale would im­pact the in­dustry. “Do I think it will kill it? In the short term, yes. We’re not yet at a point where we can com­pete without in­cent­ives or some type of sup­port. If util­it­ies win in this battle and ef­fect­ively shut­ter res­id­en­tial mar­kets, it’s go­ing to have a very dra­mat­ic ef­fect.”

Alex Brown contributed to this article.
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