By Nichola Groom
Los Angeles March 1 (Reuters) - Two sun-drenched U.S. states
have lately come to very different conclusions on a
controversial solar power incentive essential to the industry's
growth.
In California, regulators voted in January to preserve
so-called net metering, which requires utilities to purchase
surplus power generated by customers with rooftop solar panels.
But neighboring Nevada scrapped the policy - prompting solar
companies to flee the state.
The decisions foreshadow an intensifying national debate
over public support that the rooftop solar industry says it
can't live without.
"Without net metering, it just doesn't work," said Lyndon
Rive, chief executive of top U.S. residential solar installer
SolarCity Corp . SCTY.O
More than 25 of the 40 U.S. states with net metering
policies are reconsidering them, according to the North Carolina
Clean Energy Technology Center at North Carolina State
University.
Opponents raise fairness concerns and argue that the
industry no longer needs generous incentives, citing its rapid
growth and solar panel prices that have fallen about 40 percent
in five years.
Net metering credits solar users - at full retail rates -
for any surplus power their panels generate above household
usage. That means many customers pay no monthly utility bill or
even rack up excess credits, which they can redeem later in
months when their systems produce less power than their home
uses.
For most customers, net metering and other incentives are
essential to make solar power worth the steep upfront investment
- between $17,000 and $24,000 for a typical system, according to
data from research firm GTM Research. For systems that are
leased, as most are, net metering creates a monthly savings over
typical power costs.
Solar providers understand those consumer economics, which
explains why SolarCity last month shed more than 550 jobs in
Nevada after the public utilities commission in December voted
to end net metering at retail rates. The commission plans to
reduce credits and raise service charges for solar customers
gradually over 12 years.
On Feb. 9, SolarCity blamed Nevada's move for a weakened
2016 outlook that subsequently sent its stock down nearly 30
percent. SolarCity rival Sunrun has also pulled out of Nevada.
Solar energy makes up less than 1 percent of U.S.
electricity generation in part because of its high cost compared
to coal and natural gas. But the industry has grown quickly in
states where high power prices and generous solar incentives
have made it financially attractive to homeowners.
The federal government offers a tax credit worth 30 percent
of the cost of solar panels and installation. In December, the
U.S. Congress extended that policy for another five years. It
had been scheduled to drop to 10 percent for commercial systems
and expire entirely for residential systems at the end of this
year.
Such public support helped push U.S. installations to 7.2
gigawatts worth of photovoltaic panels last year - more than
eight-and-a-half times the amount installed in 2010, according
to GTM Research. That growth, in turn, has brought increased
scrutiny of continued public support.
"None of this would be much of an issue today if solar
hadn't been so incredibly successful," said Benjamin Inskeep,
who tracks state solar policies for the North Carolina Clean
Energy Technology Center.
Utilities have argued that solar subsidies benefit more
affluent homeowners at the expense of everyone else. With solar
users buying less power - or even selling it, through net
metering - that leaves fewer ratepayers to share the cost of
traditional power generation, utilities say.
Warren Buffett's Berkshire Hathaway (N:BRKa) Inc is the owner of NV
Energy, the Nevada utility that proposed the state's move away
from net metering. In his annual letter to shareholders last
week, Buffett warned that "tax credits, or other
government-mandated help for renewables, may eventually erode
the economics of the incumbent utility."
Solar supporters counter that the costs of the traditional
grid should fall with the rise of solar because utilities will
eventually need fewer power plants and transmission lines.
Net metering, solar companies argue, fairly compensates
owners for energy they feed back into the grid - so it should be
a permanent policy, not a temporary boost to get the industry
going.
"Net metering doesn't need a replacement," said Sunrun
spokeswoman Lauren Randall.
Sunrun leads The Alliance for Solar Choice, the coalition of
solar installers that has been most aggressive in lobbying to
preserve net metering. If such policies are rolled back, solar
users may decide to disconnect from the grid entirely once
emerging battery storage options become more available and
affordable, Randall said.
For now, net metering - or its absence - has a major impact
on solar adoption. Salt River Project, an Arizona utility,
effectively halted installations in its territory last year
after enacting less generous rates.
The industry is gearing up for another battle over solar
rates in that the state, one of the leading solar markets. The
public utilities regulator there is considering the request of a
small rural power company, UniSource Energy Services, to reduce
net metering rates and add a series of charges for solar users.
The utility, a unit of Canada's Fortis Inc FTS.TO , said in
a regulatory filing last year that residential usage per
customer declined 4 percent between 2012 in 2014, in part
because of the rise in solar installations.
How the Arizona Corporate Commission rules on UniSource's
rate case is expected to signal how it will approach rate cases
from five other state utilities seeking changes to how solar
customers are compensated - including the state's largest
utility, Arizona Public Service PNW.N .
Net metering is also being reviewed in smaller venues, such
as Maine and New Hampshire, and in traditionally solar-friendly
markets such as Massachusetts and New York.
In some states with fledgling solar markets, officials have
tended toward less generous net metering policies. Mississippi
approved a plan last year that pays solar users below retail
rates for their excess power. Maine is expected to introduce a
bill this year calling for gradual rate reductions over time,
said Sara Gideon, the Maine legislature's assistant majority
leader.
The Maine policy, she said, aims for fair rates while also
giving solar users certainly over their costs for years to come.
The debate has already made waves in Hawaii - where 23
percent of households have solar, far more than any state. The
high concentration raised concerns about grid reliability and
questions of fairness for the 77 percent of households
shouldering traditional power costs.
As a result, the state last year cut net metering rates to
half of retail value.
In California, about 3 percent of ratepayers have solar
systems. The state's regulators in January preserved net
metering in a narrow 3-to-2 vote but also added fees on solar
users. The dissenters favored a less generous framework.
The narrow victory in such a pro-solar state was telling,
according to a consultant to utility trade group Edison Electric
Institute, which has vigorously opposed net metering.
"That tells you," said Ashley Brown, executive director of
the Harvard Electricity Policy Group, "that the opinion is
beginning to change."
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For a graphic on solar policies by state: http://tmsnrt.rs/1WMa3nO
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