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Committee Leadership Chairman
Orrin G. Hatch This is “America’s Priorities” Committee. Orrin Hatch is fighting to lower taxes, strengthen Medicare, Medicaid and Social Security, and open markets to American products.   |
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Solar PV industry analysts are increasingly becoming divided on the issue of centralized verses decentralized solar PV. On the one hand, centralized solar supporters point to how much cheaper(supposedly) utility-scale solar is compared to distributed solar. In fact, a recent Brattle Group study claims that utility-scale solar will continue to be around two times more cost-effective than rooftop solar. On the other hand, decentralized solar supporters point to the superior energy stability and independence associated with distributed solar.
While both these forms of solar will likely play a role in the future energy landscape, a decentralized solar PV model will likely dominate for many reasons. Despite the fact that utility-scale solar is still dominant by far, distributed solar has been making huge progress. In fact, distributed solar is expected to overtake utility-scale solar post-2016(solar ITC step down). This is especially great news for U.S.-based pure play distributed solar companies like SolarCity (NASDAQ:SCTY), Vivint Solar (NYSE:VSLR), SunRun (Pending:RUN). While the long-term dynamic between utility-scale solar and distributed solar is somewhat more murky, distributed solar should ultimately prevail.
There are many utility-scale solar supporters claiming that utility-scale solar is approximately two-times less expensive than rooftop solar. These claims, which have been made by the likes of Brattle Group or Edison Electric Institute, are somewhat misleading. With rooftop solar being cheaper in more than 40 states, the claim that distributed solar is around two-times more expensive is patently inaccurate. While the at-site cost of utility-scale solar is indeed twice as cheap as distributed solar in many cases, this leaves out all the costs associated with the grid infrastructure, i.e. transmission, distributed, maintenance, etc.
As such, an at-site comparison between utility-scale solar and distributed is meaningless, as this is an apples to oranges comparison. The better way to compare these two solar generation methods would be to use final consumer costs, in which case rooftop is increasingly becoming more cost-competitive. With grid costs accounting for the majority of retail electricity costs in a huge number of cases, an at-site cost comparison between utility-scale solar and distributed solar makes absolutely no sense. This comparison method entirely leaves out the grid costs associated with utility-scale solar.
The only thing that matters in cost comparisons of this sort are final retail costs, in which case rooftop solar looks to be increasingly attractive. The huge costs associated with the grid makes at-site cost comparisons between utility-scale solar and residential solar irrelevant.
There are many near-term issues associated with distributed solar that are obscuring many to its true long-term potential. The major bear argument used against distributed solar companies like Vivint Solar have been centered around solar PV's intermittently issues. Whereas utility-scale solar does not need to worry about this due to the presence of base load power generation sources, distributed solar has no such base load mechanisms. While energy storage technology is a solution to this problem, such storage devices are not yet cost-effective in the vast majority of cases.
While it is certainly true that energy storage technologies are still not cost-effective for most homeowners, the view that energy storage technologies will not progress significantly is somewhat nearsighted. This is even more true with the enormous growing demand for such technologies, which will only accelerate energy storage innovation. With Tesla's (NASDAQ:TSLA) batteries serving as a benchmark for the cutting edge of energy storage technologies, one would be hard-pressed to think of a scenario in which such technologies would not be cost-competitive even a decade down the road.
As the continued rapid progress of energy storage technology is nearly guaranteed at this point, barring any sort of abnormal/catastrophic event, there is little standing in the way of distributed solar's dominance. Given that cost-effective energy storage technology is the only true barrier to distributed solar's long-term success, it seems rather clear that a decentralized energy generation would be optimal for most homeowners. While this scenario may currently be hard to envision given how widespread utility-scale generation is and how niche distributed generation is, it increasingly seems likely to come true.
Considering that a fully financed rooftop solar PV system is less expensive than buying electricity from the utilities in the vast majority of states, the economics are clearly starting to favor distributed solar. While distributed solar companies like SolarCity currently benefit from solar subsidies, utility-scale solar plants usually benefits from the same types of subsidies. Whereas utility-scale solar is currently only cost-effective against energy sources like coal or natural gas in a small minority of cases, distributed solar entirely beats grid prices in the majority of cases.
This would imply that distributed solar indeed cheaper than utility-scale solar when comparing the final customer electricity costs in most cases. It is clear that when grid-associated costs are factored in, distributed solar looks to be the more attractive option. The current low levels of distributed solar penetration are not a result of high costs, but rather a result of low consumer awareness. Distributed solar companies like SolarCity and Vivint Solar are successfully tackling the consumer awareness problem, as is evident by their enormous growth rates. On the growth front, distributed solar is also beating utility-scale solar, which is not surprising in light of the aforementioned information.
Comparisons between utility-scale solar and distributed solar can only be taken seriously when considering all costs. By factoring in all costs, utility-scale solar's supposed cost advantage disappears completely, and may in fact reverse in distributed solar's favor. This is clearly not good news for utility-scale solar companies like First Solar (NASDAQ:FSLR), and great for distributed solar companies like SolarCity and Vivint Solar. Talks about utility-scale solar's long-term dominance over distributed solar must be taken with a grain of salt, as this seems highly unlikely given the enormous costs associated with the grid.
A proposed fee for some Montana-Dakota Utilities customers who use their own wind or solar power has drawn opposition from renewable energy backers who say the company is trying to stifle small-scale electricity generation.
The Public Service Commission said the fee is unprecedented for customers who use "net-metering," which allows homeowners or businesses to sell excess power they generate back to the grid in exchange for credit on their bills.
It's built into a 21-percent rate increase that's proposed for about 26,000 eastern Montana customers. The Bismarck, North Dakota-based utility says it needs additional revenue to cover its increasing costs, including $400 million in pollution controls at coal plants in Montana and South Dakota.
The fee would apply to only a few current customers, according to the company, but critics said its impact would grow as more people seek to lower their electricity bills with investments in small-scale renewables.
MDU customer Jean Dahlman, whose family ranches near Forsyth, said she's considering solar power to offset a rate increase that would cost her and her husband about $29 a month, or $343 a year.
But Dahlman said under MDU's proposal the couple would be unfairly penalized by the extra fee for renewables.
"We're family farmers, not a big corporate farm. We work very hard just to keep our heads above water," she said. "We don't think it's right that MDU is taking away energy choices for customers at the same time as a double-digit rate increase."
MDU spokesman Mark Hanson says the renewables fee that's included in its rate change application is needed to cover the costs of providing on-demand service to customers when their self-generated power is insufficient.
During those months when customers don't need the utility's power, they wouldn't pay the fee, Hanson said.
"It's more to recognize the cost of service, not to penalize," he said.
The proposed fee would be $1.50 per kilowatt of electricity demand. Hanson couldn't immediately say how much that would amount to for a residential or business user but said six customers currently are eligible: two homes, two storefront businesses and two larger, general service customers.
The Montana Public Service Commission has pledged a close review of the fee and the overarching rate hike, which a spokesman for the commission has described as unusually steep. A decision on whether to approve is due next March.
PSC spokesman Eric Sell said it was the first time a utility had requested a special fee on net-metering customers, and would scrutinized top make sure that MDU is treating its customers fairly.
Montana Renewable Energy Association Director Diana Maneta disputed whether MDU needed the fee to recover costs. She said that was still to be determined as the PSC considers the proposal.
Maneta said MDU also ignored that customers who generate their own electricity can generate savings for the system by whole, by decreasing transmission and distribution costs and avoiding the need for more pollution controls for power plants.
"People are getting interested in installing solar, and we hate to see MDU put up a barrier at this time," she said.
MDU has also proposed a customer rate increase in South Dakota, but Hanson said there is no fee on renewables in that proposal because the state lawmakers have not passed net-metering legislation.
Both witnesses slated for a meeting with Ohio lawmakers on Monday want the state to scrap its clean energy standards altogether—a move that supporters of the law say would cause Ohio to miss out on investments and job growth.
The final scheduled meeting of the state’s Energy Mandates Study Committee will come less than two weeks after Facebook announced its decision to locate a new data center in Fort Worth, Texas, instead of in Columbus, which had reportedly been under consideration for the facility.
And while Amazon committed last month to site new cloud computing facilities in Ohio, the company announced this week its commitment to buy wind energy for those operations from a new Iberdrola Renewables wind farm to be built in North Carolina.
Under Ohio Senate Bill 310, increases in the state’s renewable and energy efficiency standards are currently frozen until 2016 while the committee is charged with reviewing their costs and benefits. Meanwhile, critics of SB 310 say the freeze and other actions by Ohio’s lawmakers have already caused a drop in investments within the state.
Advocates of repealing the standards note other factors are at work in the siting decisions, and claim the laws raise energy costs and lead to economic and job losses in other sectors.
Scheduled to speak at Monday’s meeting are Greg Lawson of the Buckeye Institute and Ryan Yonk of Utah State University and Strata Policy, also in Utah.
“We generally don’t think government mandates or subsidies are a good thing because they intervene with the market,” said Lawson, who described the Buckeye Institute as a free-market think tank.
The Buckeye Institute is one of 62 member organizations of SPN, the State Policy Network. Associate members listed on SPN’s website include the American Enterprise Institute and the corporate-funded American Legislative Exchange Council (ALEC).
SB 310 co-sponsor Bill Seitz (R-Cincinnati), who has frequently invoked Stalin in his denouncements of the standards, sits on ALEC’s board of directors and is scheduled to speak in a panel discussion on "Renewable Energy Mandate Reform" at the group's annual meeting in San Diego next week.
The Center for Media and Democracy claims ALEC, SPN and the American Enterprise Institute all have ties to Charles and David Koch, billionaire political activists who have pushed efforts to repeal state renewable energy standards across the country.
When a state adopts renewable energy standards, “you’re mandating where the energy resources come from rather than letting the market decide,” said Lawson. “There’s a lot of costs that are sort of ignored because of the subsidy issues” in having ratepayers cover any extra costs for meeting the standards, he continued.
“There’s also a lot of costs relative to infrastructure and other generators, because of the intermittent capacity that displaces coal power” and potentially natural gas in Ohio, Lawson added. In his view, such “hidden costs” will “drive up energy prices across the board.”
Yonk and his colleagues at Strata Policy and Utah State University have likewise argued against Ohio’s renewable portfolio standards. An April 2015 report from the group claims that if the standards stay in place, Ohioans will pay roughly $1.9 billion more for electricity, lose out on about $52 million in investments, and forego up to $258 million in personal income by 2026. That same month, Newsweek ran an article on “the true cost of wind power” by Yonk’s cofounder at Strata Policy, Randy Simmons.
The American Wind Energy Association (AWEA) and other groups have criticized both reports, saying that Strata Policy’s experts relied on outdated data, ignored subsidies for other types of energy and failed to account for the benefits of job growth, avoided costs from pollution, and other factors.
In contrast to the views of Lawson and Yonk, supporters of Ohio’s renewable portfolio standards have said that rolling them back would cost the state’s ratepayers billions of dollars in extra electricity costs and cause Ohio to miss out on millions in investments and thousands of jobs.
Most recently, the Columbus Dispatch reported that Columbus lost out to Fort Worth, Texas, on the siting of a new Facebook data center, which will be powered by wind energy. Wired reported that arranging a renewable energy deal for the energy-intensive center was easier in that state than elsewhere.
Gov. John Kasich’s press secretary, Rob Nichols, dismissed concerns about the Facebook decision, noting that Amazon recently chose Ohio for its new cloud computing facilities.
“The Amazon deal is pretty telling,” Nichols said. “It’s a billion dollar investment [that will create jobs for] 100 employees, and we’re happy that they chose Ohio.”
Lawson says a repeal of Ohio’s clean energy standards should not affect the state’s ability to attract and keep good jobs.
“To have a company come in and say it has a corporate policy and so the state needs to bend all its policy around the personal preference of the company, I think, is a misguided thing,” Lawson said. “How many jobs are you going to lose from corporations that are already here in Ohio?” he asked, if companies close because energy costs get too high. “Those are trade-offs that are real problems.”
Much of the energy for the new Amazon project will likely come from Indiana and North Carolina. Iberdrola Renewables started planning for the North Carolina project about five years ago.
“In North Carolina, as in Ohio, policies that encourage renewables send a clear signal to businesses evaluating investment opportunities and hoping to expand,” said Paul Copleman at Iberdrola Renewables. “The first phase of this wind farm in North Carolina represents a roughly $400 million investment on our part.”
A January 2015 position paper from the Buckeye Institute claimed that any investments that might be lost from ending Ohio’s clean energy standards “will ultimately stay in Ohio,” shift to other industries and “allow more job creation and economic growth for the State in the long run.”
However, other evidence suggests that states compete with each other to attract jobs and economic growth and that clean energy is an increasingly important factor in that competition.
“We’ve heard directly from many... executives that their companies are increasingly investing in clean energy to save money, improve resiliency, and become more sustainable—and that state and federal policies often play a role in these private-sector investments,” said Phyllis Cuttino at the Pew Charitable Trusts.
For example, in 2013, Iowa’s vast wind energy portfolio helped it beat out neighboring Nebraska for a $300 million Facebook data center, prompting Nebraska lawmakers to seek ways to improve the market for wind energy in their state.
Facebook and about 35 other big-name companies already support Corporate Renewable Energy Buyers’ Principles promoted by the World Wildlife Fund and the World Resources Institute.
“More and more multi-national companies are committing to use renewables to power their facilities,” noted Samantha Williams at the Natural Resources Defense Council (NRDC). In her view, meeting those commitments becomes harder when states adopt laws like SB 310 and House Bill 483. That law basically tripled setbacks for wind turbines.
“Ohio needs its clean energy standards back if the state hopes to keep attracting these big ticket data centers,” Williams said. “Why throw up roadblocks to this sort of investment like last year’s freeze bill and the wind setbacks? Facebook found a friendlier state to call home rather than jump through Ohio’s hoops.”
“Companies care about renewable energy, and Ohio needs to get with the program or they may be on the losing end more and more often,” added Gail Parson at Environmental Entrepreneurs (E2), a nationwide group of business leaders affiliated with the NRDC.
Ohio policies are also driving investments in clean energy businesses to other states, Parson noted.
“Our jobs report showed a scant 1.5 percent job growth for renewables companies in Ohio, which indicates lots of room for missed opportunities,” said Parson. “The national job growth in wind and solar is markedly higher. According to The Solar Foundation annual job report, the solar industry grew 21.8 percent from November 2013 to November 2014. According to the International Renewable Energy Agency, the U.S. wind sector saw jobs in the wind industry increase by 43 percent in 2014.”
A January 2015 report by the Pew Charitable Trusts confirmed that investments in Ohio’s clean energy businesses had dropped dramatically since Ohio lawmakers began debating changes to the state’s standards in 2013.
“Our research at the federal and state levels has consistently found that businesses need stable policies to continue innovating and competing in the growing global clean energy economy,” Cuttino said. “Where uncertainty exists, private investment in clean energy has suffered.”
Cuttino gave specific examples to illustrate her point.
“Molded Fiber Glass Companies, headquartered in Ashtabula, once produced spinners for wind turbines in Ohio, but has since moved those operations to other states with more favorable clean energy policies and abundant wind resources, such as Texas and California,” she said. “Iberdrola Renewables, developer of Ohio’s largest wind farm, has indicated uncertainty about its future operations in Ohio due to unstable state and federal policies.”
“In a January 2015 panel discussion on our research, Ohio business leaders from established and new companies alike—including Dovetail Solar and Wind, Nextronex [Inc.] and WHE Generation (now Q2Power)—indicated that they were starting to see greater opportunities in other states with more stable policies,” Cuttino continued.
“Some clean energy companies will continue to come to Ohio no matter what, due to its talented energy workforce and experience in manufacturing—but the state’s potential could be more fully harnessed with stable policies that encourage clean energy deployment,” she added.
And while both the Buckeye Institute and Strata Policy object to clean energy standards as subsidies, Amazon’s May choice of Ohio for its cloud computing facilities was reportedly sweetened by millions of dollars of financial incentives in the form of land, tax abatements and other benefits.
Ohio’s state and local governments often offer various financial incentives that could be viewed as subsidies in order to attract businesses and investments. However, the details of those incentives are often not made public.
“We don’t talk about economic development deals or incentives to keep Ohio’s competitive advantage versus other states,” Nichols said.
Net metering is a contentious issue in a growing number of states, and NV Energy is again battling over the rule.
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| Solar Panels on Gass Peak in Nevada. Credit: Ballonboy101/Wikimedia Commons |
Under the current net metering rules, the Alliance for Solar Choice filed a petition with the Nevada Public Utilities Commission (PUC) saying that the current net metering cap will be reached well before the Dec. 31 deadline. TASC is asking the PUC to look at the case, and determine a new cap -- before the end of the year.
"While we can't predict the specific date that the cap will be reached, the industry is fast approaching the 235 MW cap and will hit it before a new program is in place -- as early as August," TASC spokesperson Lauren Randall told FierceEnergy. "TASC filed an emergency petition with the Commission yesterday to clarify that the existing program can continue until a new net metering program is in place. This request aligns with the intent of SB 374 to prevent industry disruption."
TASC is also saying that Nevada utility NV Energy did not account for 17.5 megawatts (MW) of solar when it filed projections, and is also currently received 6 MW of solar applications each week.
Nevada's current net metering cap is 235 MW, which was not raised by lawmakers in the last legislative session, despite opposition. Lawmakers and NV Energy agreed that before they would raise the cap, PUC would conduct a study to determine benefits to raising the cap, and compromised on creating a new rate class in the meantime.
In May, when the bill (HB 374) was being considered, around 145 MW of solar was currently being used in net metering. The compromise gave PUC power to come up with new rules by December, but the issue is what would happen if the current net metering cap was met before that.
"NV Energy said throughout the legislative session that we would not hit the cap until next year. The solar industry disagreed," Randall explained. "SB 374 presented a solution by promising a smooth transition with the intention of preventing any industry disruption. The Commission can clarify matters to prevent layoffs and disruption."
However, NV Energy said they based their estimates on the best available at the time.
"We based the estimated date for reaching the net metering limit under the existing rules on both an analysis of historical application data and input from rooftop solar providers," Jennifer Schuricht, NV Energy spokesperson, told the Reno Gazette-Journal. "We have been in regular contact with the rooftop solar industry to make them aware of the changing date."
In April, TASC conducted a study on the public perception of net metering, and found that 84 percent of respondents were in support of solar energy, while 70 percent support a net metering policy, and nearly 74 percent would be less likely to support a representative who had not voted for a rise in the cap of net metering.
"Without clarification from the Commission," Randall told FierceEnergy, "the industry would come to a halt and the more than 6,000 Nevadans employed by solar could lose their jobs."
For more:
- read this report
Related articles:
NV Energy, advocates compromise on net metering rules...for now
Poll: Nevada residents support net metering
Montana planning a net metering study prior to legislative decision
