T&D World Magazine
Solar – Grow Up and Pay Up!

Solar – Grow Up and Pay Up!

Does solar need to be continually subsidized in some form to keep this resource viable and growing?

The growing number of rooftop solar installations are efficient enough and large enough to garner the owners a tidy revenue stream and/or generation credit from the utility – and other ratepayers and taxpayers foot the bill!

A feed-in tariff, if offered, pays the solar owner directly for energy produced and then charges the owner/resident for energy used. The more common net energy metering (NEM) of some sort is offered in 44 states. Usually the NEM scheme allows the rooftop solar owner to use what they can of electricity produced and sell the remainder back to the utility at retail rates. The utility may charge a fixed cost for allocated grid costs for the connection, unless the owner has gone completely off-grid, which is rare.

So NEM has been a boon to rooftop solar providers and a case of severe acid reflux to the utility industry, partially because of operational and planning issues, but also because the solar subsidies seem unfair to other ratepayers and mess up free market signals. (see 5 Reasons Why I Don’t Have Solar Panels on My Roof...Yet and Solar Incentives Stifle Competition)

Says the Wall Street Journal: “Well-meaning—but ill-conceived—federal, state and local tax incentives for rooftop solar give back between 30% and 40% of the installation costs to the owner as a tax credit. But more problematic are hidden rate subsidies, the most significant of which is called net metering...

The article goes on: “The California Public Utilities Commission projects that net metering will cost the state $1.1 billion a year by 2020. Arizona Public Service Company calculates that if the current rate of rooftop-solar installations continues through mid-2017, its non-solar customers will pay close to $800 million in higher rates to subsidize rooftop-solar customers over the next 20 years. The total costs nationwide are unknown. On May 5, however, an interdisciplinary group of researchers and professors at MIT released a study about the future of solar energy and concluded that net metering is inefficient and should be redesigned.”

In response to these and other studies and growing awareness of the craziness of rooftop solar economics, there is a move afoot to restructure NEM and increase the fixed connection charge. Michigan, for example is considering changing the rules to require solar owners to pay for the electricity they consume from the utility and get a lower, wholesale rate for any energy sent back into the grid. (see article on Bill 438 )

Depending on how you jigure the figures, this change alone could double the payback time for a rooftop installation.

Then there’s the Indiana brouhaha over adding a fixed charge to existing solar owners as several other states are moving to do. And of course there’s the curious situation in Iowa where the small Pella Cooperative Electric will begin charging a fixed connection fee of $85/month  – up from $27.50 – for all new connections. Existing solar owners will have until 2020 to take a deep breath and start paying the new rate.

But don’t we need subsidies to pay for solar “research”, to make better panels? Not really – utility scale solar already makes economic sense (albeit with the aid of tax credits). The proof that utility scale solar may be ready for prime time is shown by increasing construction of solar plants to compete with fossil sourced generation. Now the Orlando Utilities Commission, a public power agency, has signed a 20 year agreement to purchase the output of the 13 MW Curtis Stanton Energy Center at $0.07 per kWh. This bargain price compares to $0.08 per kWh from coal and natural gas.

Economies of scale and location (Florida rather than Maine) will drive near-term PV solar economics, not more technology.

Of course, on the opposite extreme – some argue that solar isn’t really viable for the future anyway because it depends on rare earth metals that are controlled by China (which also controls the price of panels) – so we’re really just looking at a bubble that could make the US dependent. Call it a technology addiction. Why over-commit through subsidies?

All this begs the question - does solar need to be continually subsidized in some form to keep this resource viable and growing? Or is it time for solar to start paying, as the popular challenge goes – its fair share?

(Also see Poll: Time for Solar to Pay its Fair Share!)

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