NewEnergyNews: ORIGINAL REPORTING -- Solar Vows Fight For A Level Playing Field


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    Tuesday, June 21, 2016

    ORIGINAL REPORTING -- Solar Vows Fight For A Level Playing Field

    SPI 2015: Tax credit sunset preoccupies a fast-maturing industry; The tax credit fight reveals a rift within the solar industry as strong growth continues

    Editor’s Note: Solar prevailed in this effort at the tail end of 2015 when Congress finally enacted a five year extension that set the industry off on its current boom.

    Herman K. Trabish | September 15, 2015 (Utility Dive)

    Skyrocketing growth is no longer the big story in the solar power industry, although growth continues to skyrocket.

    The big story is how the increasingly vital segment of the energy industry will mature.

    Solar provided nearly a third of the nation’s recent new generation capacity, continues to set quarterly growth records, and is on track to double its mid-2014 cumulative installed capacity by the end of next year.

    Solar photovoltaic (PV) installed capacity is expected to reach 7.7 GW in 2015, up 24% from 2014, according to the Solar Energy Industries Association (SEIA) and GTM Research.

    From July 2015 to December 2016, the report forecasts the U.S. solar PV market will add 18 GW, which is more than the cumulative capacity built by the industry up to the middle of 2014.

    But there are some headwinds for the sector. In a sign it has reached a level of maturity achieved recently by the wind industry, solar advocates now face an uphill political battle for the industry's most vital federal incentive

    The mandated term of solar's vital 30% federal investment tax credit (ITC), in place continuously since 2008, will end on December 31, 2016. Beyond that deadline, the tax credit provided at the end of a project’s first year of operation will fall to 10% for commercial investments in solar and to zero for residential solar investments.

    SEIA is mounting a multi-million dollar lobbying campaign to secure a five-year extension that will get the industry to 2020, when it hopes the Clean Power Plan can take over to help boost growth.

    Failing that, insiders say solar advocates will attempt to convince lawmakers to include a two-year extension in next year's omnibus spending bill with a special in-construction provision for projects that break ground by the deadline.

    The ITC and SEPA v. SEIA

    Another sign of maturity is the internal rift SEIA’s plans have spawned. Its leaders wrote to the Solar Electric Power Association (SEPA), asking it to chip in on the costs of the lobbying campaign. SEPA and SEIA have long partnered in fostering solar growth through production of Solar Power International(SPI), the industry’s most important annual deal-making and innovation-unveiling conclave.

    But SEPA says it cannot provide the funds.

    “Our value is in bringing together parties in the solar industry and the utility industry with very diverse perspectives and to do that everyone has to trust us. Our credibility is the thing most important to us,” SEPA President and CEO Julia Hamm told Utility Dive in an exclusive interview. “We don’t do lobbying or advocacy. The minute we start putting money into a policy campaign, it can damage our credibility.”

    SEPA is just as committed to solar as SEIA but in a different way, Hamm said. “We are different by design. We complement one another.”

    SEPA is an educational organization whose mission is to engage with utilities on questions like interconnection and procurement. And it has invested in longer term programs like its 51st State Initiative, aimed at advancing the debate on regulatory and business model consequences of solar proliferation.

    “This is not about whether or not we support the extension of the ITC,” Hamm said. “We don’t take policy positions.”

    Much of the separation between the groups comes from their institutional structure and membership, Greentech Media pointed out. SEIA is a trade group that advocates for specific solar policies whose board is made up almost entirely of solar companies. SEPA, by contrast, has a board that includes several prominent utilities, some of which support altering net metering policies. Typically, it stays silent on controversial regulatory issues, preferring to bring the two sectors together through joint projects, surveys and other educational initiatives.

    “We stand by our letter calling on SEPA to step up,” SEIA President and CEO Rhone Resch told Utility Dive.

    Tax credits, solar finance headline opening session

    A number of speakers at the opening session of SPI addressed the ITC issue.

    Pacific Gas and Electric Regulatory Affairs VP Steve Malnight avoided a confrontation, but spoke up for SEPA.

    “SEPA is focused on bringing utilities and solar companies together,” he said. “As solar grows and utilities see higher penetrations on their systems, SEPA is helping utilities understand how distributed resources make solar even more cost effective and better for the system.”

    SEIA's Resch urged the session’s audience to understand how important the fight for the tax credit is.

    “Since the ITC was put in place, solar has added over 150,000 jobs and seen over $100 billion in capital investment in the industry,” he said. “A new Bloomberg New Energy Finance study shows the downstream segment of the U.S. solar industry will lose 80,000 jobs if the ITC is not extended.

    Implementation of the final Clean Power Plan (CPP) begins sometime after 2020, when SEIA wants the ITC to expire, Resch reminded them.

    “It is a long term driver, but not a panacea," he said. "And we need the ITC to get to 2020.”

    “The ITC represents between $0.30 per watt and $0.80 per watt of the installed cost of solar,” explained Clean Power Finance President and CEO Nat Kreamer. “There is no room for that to come out of the cost of hardware. The one place it can come from is soft costs. That’s jobs.”

    Kreamer provided a brief run-down of current solar finance opportunities, including securitizations, yieldcos, and solar stocks. The recent drop in solar stock prices, he said, is due to fund managers' profit-taking on solar investments to recoup losses from the falling oil price of oil.

    “The best way to invest is through a portfolio approach that takes advantage of the range of opportunities,” Kreamer said. “A trillion dollars is likely to go into solar to meet the demand created by the Clean Power Plan and other policy drivers.”

    Community solar consensus

    A near term opportunity is in community solar, the panel agreed.

    “There is always going to be a segment of the population that can’t be served by putting solar on their roof,” Malnight said. “Community solar allows for a large project’s economies of scale and gives customers the solar opportunity even if their roof are not solar suitable. It is going to open a lot of new approaches to solar.”

    The SEPA membership is half solar industry and half utilities, Hamm said. “Community solar is the number one thing both sides are asking us about.”

    “More and more utilities are developing programs,” she said after the panel discussion. “But it is not just for utilities. We are working with the Department of Energy to help define the different kinds of community solar business models and help the marketplace understand the differences between those models and come up with templates that will expedite the rollout of community solar nationally.”

    In places like Minnesota, solar advocates have blamed state and utility policies for preventing community solar subscribers from getting the cost savings available to rooftop solar owners.

    “Even with solar costs dropping, it is hard in many places to make community solar pencil with an initial price lower than the retail price of electricity but we are getting closer every day,” Hamm said. “And many lock in a rate over the long term so as retail rates go up, it will be a great hedge.”

    Community solar often seems complex from a utility’s perspective, Hamm said.

    “It seems to touch every functional area of the business, something utilities have not had to deal with," she said. "When you are building a power plant, it doesn’t impact everybody in the organization ... but community solar does.”

    When they see there are tools and existing models, she added, they realize they can implement it.

    'Good citizens of the grid'

    Solar now supplies about 1% of U.S. electricity, but growth will eventually take it to a 20% grid penetration, Kreamer said. That means solar developers will need to begin worrying more about using the grid responsibly, a third sign of sector maturity.

    “We cannot grow solar without maintaining reliability and safety,” Kreamer said.

    As industry leaders confront higher penetrations, they are learning to be good citizens of the grid, Kreamer said. “We are beginning to see redesigns of power markets away from a one-direction flow of power to a market that allows for many kinds of distributed energy resources.”

    A portion of the ConEd system in New York, he added, “is now viewed as a network and not a one way flow. That creates economic incentives that will bring in new technologies that provide low cost and reliability and safety.”

    The 51st State Initiative is intended for solar stakeholders to resist incremental thinking and imagine a new system that incorporates distributed energy resources while ensuring affordability and reliability, Hamm said.

    “Last year we asked for a variety of future visions. Now we are trying to identify the roadmap to get from where we are today to the many different futures,” Hamm said. “It will be different in different states. We will be asking people in the energy industry for those roadmaps.”

    “We are asking them to think about distributed energy technologies from the customer’s point of view and offer solutions that include combinations of different technologies,” she said. “As a result, we are seeing solar companies partnering with smart thermostat companies and with storage providers. This is the beginning of what it means to be a good citizen of the grid.”

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