Here is what Governor Eric Holcomb had to say while signing SEA 309.
Senate Enrolled Act 309: Distributed Generation
“I support solar as an important part of Indiana’s comprehensive energy mix. I understand the concerns some have expressed, but this legislation ensures those who currently have interests in small solar operations will not be affected for decades.”
Utility CEOs seek new ways to profit amid historic shift
Renewables also cutting in on power generation monopoly
Electric utilities have been doing everything they can to preserve their bottom line from conducting multi-billion mergers to snapping up more profitable natural gas businesses. Their trouble lies in one thing they can’t control: demand.
Power consumption in the U.S. has stalled for the last decade, breaking the link the industry has enjoyed with economic growth. For more than a century after Thomas Edison invented the light bulb in the 1870s, electricity demand rose steadily, boosting utility profits in the process.
The lull couldn’t have come at a worse time for the industry, which is already struggling with the end of their historic monopolies. Power-sipping appliances, LED lighting and a shift away from heavy industry all have contributed to the slowdown, and that’s forcing traditional generators from Duke Energy Corp. to Southern Co. to re-examine how they can make money.
“Efficiency cuts utilities’ revenues and not their costs, and this is a big problem,” said Amory Lovins, chief scientist and co-founder of the Rocky Mountain Institute, a non-profit clean energy research group based in Colorado. “The whole business model is upside down.”
Utility executives, policymakers and industry financiers are discussing the trends at BNEF’s annual summit in New York this week. Power sales have remained steady since 2010 as the U.S. economy expanded an average of 2.1 percent, according to government data compiled by the London-based research arm of Bloomberg LP. Government forecasters at the Department of Energy don’t see a significant rebound anytime in the years to come.
Different strategies are emerging.
Duke CEO Lynn Good, whose service territory spans Florida and the Carolinas, is seeking to make money upgrading the distribution grid to cope with wind and solar power. “The transformation that is underway gives us opportunity to serve customers in a better and different way," Good said at the BNEF event on Monday.
Xcel Energy Inc., which owns utilities in Minnesota and Colorado, CEO Ben Fowke is hoping regulators will authorize him to build $3.5 billion of renewables plants in the next five years and to build those costs into the rates customers pay.
The chart below based on DOE data analyzed by BNEF shows how power sales have broken free of economic growth.
The figures complicate President Donald Trump’s ambition to revive demand for coal, which made up about 34 percent of the electricity generated in the U.S. in January, according to Energy Department. With demand stagnant and independent power producers turning to natural gas, wind and solar plants, utilities have less room for the giant power generation units they traditionally have built.
The outlook isn’t for a sudden revival in power demand. Total electricity use is forecast to increase 0.8 percent by 2050 as the economy continues to shift to less energy-intensive industries and equipment gets more efficient, according to a 2017 annual report from the U.S. Depart of Energy’s Energy Information Administration.
So far, the utilities have managed through a combination of mergers and cut costs, announcing $79.4 billion worth of U.S. deals last year, the most since 2007. They’ve snapped up natural gas assets and pared back their ambitions for building coal and nuclear power plants. And, as the chart below shows, they’ve maintained the price of power they charge to consumers even as the cost of generating that electricity falls.
Those strategies may not work for the long term. Natural gas and renewables are have helped reduce wholesale power prices by about 70 percent since 2007, and policy makers are looking for ways to pass those grid costs on to customers. They see cheaper supplies flowing from alternatives to the traditional coal plants and the potential for efficiency to reduce the need for investments in new generation.
U.S. investment in efficiency doubled from 2008 to 2015, with more than $12 billion spent in 2015, according to data presented Tuesday at the Bloomberg event by Michael Liebreich, chairman for the advisory board of Bloomberg New Energy Finance.
In the U.S., 32 states now offer financial incentives for electric energy efficiency or have changed rate structures so profits aren’t tied to how much power is sold compared with 19 a decade ago, according to Steven Nadel, executive director of the American Council for an Energy-Efficient Economy. Saving a kilowatt-hour of electricity with energy-efficiency costs about half as much as generating one with a new power plant, he said.
Some of the utilities are embracing that future and learning how to profit from efficiency themselves. Last year, Southern paid $431 million for PowerSecure International, which provides efficiency services and manages solar projects for U.S. businesses. The French utility Engie SA has been offering a suite of energy-trimming services for its customers.
Another strategy among the regulated utilities, which can earn a guaranteed return on capital investments they make, is to boost spending on their distribution grid. [Emphasis added] The cost of investments are passed onto customers, like a $13 billion grid upgrade Duke outlined earlier this month. Last year, electric utilities invested $121 billion on infrastructure in the U.S., more than double the amount a decade ago, according to the Edison Electric Institute, the industry’s trade group in Washington.
That spending may trigger a backlash from customers, said Paul Patterson, a utility analyst for Glenrock Associates LLC. Lovins at the Rocky Mountain Institute suggests that to avoid a “catastrophic” collapse of their businesses, utilities should start selling services for a fee -- such as supplying heating and cooling for buildings -- instead of only proving power in the form of kilowatt-hours.
“It’s a good idea to sell customers what they want before someone else does,” he said. “Sooner rather than later utilities need to be selling what the customer wants, which is a service, like hot showers and cold beer.”
Today (5/2/17) is the deadline for Governor Eric Holcomb to take action on #SB309. Governor can either 1) sign the #SB309 or 2) veto #SB309. If Governor Holcomb takes no action today, #SB309 becomes law without his signature tomorrow (5/3/17).
Ask Governor Holcomb to veto SB 309 by
1) calling the Governor's Office at (317) 232-4567 or
Governor considering legislation that would curtail net metering
By Scott L. Miley CNHI Statehouse Reporter • Indianapolis
Solar energy supporters toted a solar panel into Gov. Eric Holcomb’s office Monday to encourage him to veto controversial legislation that would eliminate net metering by 2022.
Net metering pays solar panel owners credits for sending some of the electric power they generate back to utility grids.
Legislation that passed the Indiana General Assembly and awaits the governor’s signature would reduce the buy-back rate from about 10 cents a kilowatt hour to about 3 cents a kilowatt hour.
Under the bill, by 2022, all investor-owned utilities would be prohibited from offering net metering to new customers unless they install systems before the end of 2017.
Current customers, for the most part, would continue to receive the net metering rate until 2047.
After passing through security at the Indiana Statehouse, the solar energy supporters carried the 50-pound panel to the governor’s office. The panel, measuring about 6 feet by 31/2 feet, was signed by 350 Hoosiers, mostly solar entrepreneurs who oppose Senate Bill 309. The governor was not at the presentation.
Holcomb has not said whether he intends to sign the legislation to end net metering. The deadline for signing the legislation is today.
“It seems fitting for the solar entrepreneurs to present it (the panel) because they’re the ones whose businesses are at stake,” said Jesse Kharbanda, executive director of the Hoosier Environmental Council.
The legislation was opposed by solar energy supporters during a rally outside the Statehouse and through hundreds of phone calls, emails and letters to the governor’s office.
Last week, 16 CEOs and founders of Indiana tech firms signed a letter asking for a veto. The executives included Chris Baggott, co-founder of Exact Target, and Don Brown, founder of Interactive Intelligence.
An estimated 2,700 jobs among 80 companies in Indiana are related to solar energy, according to the Solar Energy Industries Association.
Presenters of the solar panel on Monday said the law would diminish financial incentives for customer-owned solar panels. It would also harm the solar panel industry in Indiana, they said.
“If the governor is committed to Indiana being a jobs magnet, he must veto SB 309,” said Reggie Henderson, vice president and general manager of Carmel-based Telamon.
Phil Teague, co-founder of Rectify Solar, said the bill sends the wrong message to “homegrown entrepreneurs” who have solar panels on their rooftops.
“SB 309 is against the spirit of innovation that the governor is trying to foster,” Teague said.
After working 42 years for the Public Service Co. of Indiana, known today as Duke Energy, Stephen Scott knows a thing or two about electricity.
Scott cautions others about the challenges our nation faces as temperatures rise and the demand that poses to our grid. He has done his part by installing solar on his home. By doing so, he has reduced the amount of electricity he needs from the grid and can also supply his excess back for others to use.
Solar helps during heat waves
As summer approaches, pay attention to the news and talk about heat waves in cities throughout the United States. Scott says there is a process called wheeling power in which large generation corporations have the ability through their transmission lines to transmit power across state lines and across entire regions to where it is needed most.
For example, if there is a heat wave in Tennessee, and we are sitting here in Indiana with mild 80-degree temperatures, the cost we may pay to generate a megawatt hour is $20. “However, because they need the electricity so bad in these other areas, on the market the cost of a megawatt of electricity can go to $200 to $500 per megawatt hour,” Scott said.
During heat waves in other areas, utility companies in Indiana are sitting with what is known as a rolling reserve. It can only take a matter of hours to release some of those reserves. “I am the consumer in Indiana, also a generating facility because I have solar panels. When they sell their power at $300 a megawatt hour, are they going to pay me the multiple factors instead of the wholesale rate of $0.02 as listed in Senate Bill 309?” Scott asks. He refers to Indiana Senate Bill 309, which passed the House and the Senate during the just-ended legislative session. Senate Bill 309 presents a grim future for solar owners and prospective customers.
Paying to protect
Scott decided to install solar on his home after suffering a lot of physical problems. “I have watched a lot of good fellow employees die very young when they retire. I just wanted to try and make a small little difference in the world. Financially, this does not benefit me,” Scott said.
Before installing solar, he paid $310 a month for electricity; now he pays about $160. He still contributes to the costs associated with transmission and distributing power. He did not borrow money to install solar panels on his house. He elected to remove $40,000 out of his 401K retirement fund to invest in solar energy. “I didn’t have to pay federal tax on the $40,000, but I had to pay $2,500 in state tax because there was no state tax incentive because they view that as income,” he said.
Belief in the future
Scott recalls what President John F. Kennedy said at his inauguration, “ask not what your country can do for you, ask what you can do for your country.”
“Here is the irony of it,” Scott said. “I made my living from helping to produce very dirty energy. Due to making my living that way, I am now capable of making a little bit of clean energy.”
Every week ‘is going to be the week for tax reform,’ SEIA says
Tax equity for solar farms totaled $5 billion last year
Even without any specific tax-reform proposals, President Donald Trump’s pledge to revamp U.S. policies is already affecting the solar industry, and not in a good way.
“It’s causing disruptive effects on finance,” Abigail Ross Hopper, president and chief executive officer of the Solar Energy Industries Association, said in an interview Monday at Bloomberg New Energy Finance’s Future of Energy Global Summit in New York. “Costs are going up.”
After Trump’s surprise victory in November, clean-energy proponents worried that the prospect of tax reform would slow wind and solar finance. Investors, they said last year, might opt to wait out the uncertainty. Instead, activity may be accelerating -- at least in solar -- as developers and investors rush to get deals done before the corporate rate falls.
But developers may have to pay more than they would have before the election.
Part of the reason for the rush: lower corporate tax rates may deplete the supply of tax equity, an esoteric but critical source of financing for wind and solar farms. In such deals, clean-energy developers sell a portion of their projects’ tax credits to companies -- often banks and some insurance companies -- that can apply the federal credits to their own tax bills. If tax rates fall, investors would have less need for write-offs.
‘Under Water’
Many deals this year are priced assuming corporate tax rates of 25 percent, or even 20 percent. If the rates go lower, financing packages may no longer be as economical for developers, said Daniel Shurey, a New Energy Finance analyst in New York.
“I’ve heard of a number of sponsors who’ve had to end deal negotiations this year because the terms would have pushed the project under water,” he wrote in an email Monday. “They all blame stipulations added by fears of tax reform.”
Solar tax equity totaled about $5 billion last year. There are more than 35 companies that invest in tax equity.
The rush may not be necessary. While Trump, in the run-up to his election, proposed dropping the corporate tax rate to as low as 15 percent from 35 percent, there’s mounting doubt that tax reform will be resolved anytime soon -- if at all. Trump still favors a 15 percent corporate tax rate, according to a White House official.
“Every week is: ‘this is going to be the week for tax reform,’” said Hopper, who cited the uncertainty surrounding tax reform as the biggest federal concern for the industry.
Jacob Susman, a Brooklyn-based vice president at EDF Renewable Energy, said in an interview Monday that he’s concerned that deals are becoming more conservative.
“The feeling is, ‘man, tell me what the future is going to be already,’” he said.