Solar power accounted for more than a third of new generation built in the U.S. during the first nine months of last year. What’s more, the U.S. installed more than 1,300 MW of solar photovoltaic (PV) capacity in the third quarter, up 41 percent compared with the same quarter in 2013, making it the second largest quarter for solar installations in the history of this emerging market.
In five years, U.S. solar capacity has grown a whopping 993 percent to 17,500 MW. The growth stems from subsidies for rooftop solar panels and net metering programs that require utilities to purchase the excess power produced by homes and businesses at a set retail rate.
Although this formula has been very effective, it is not sustainable at the pace the industry is growing and should be reconstructed to reflect the realities of maintaining and upgrading a grid used by rank-and-file citizens.
The breakneck growth of solar PV is pinching the bottom lines of utilities in state after state. Battles between utilities and the manufacturers of solar panels have erupted in several states, where utilities have requested permission to charge customers who generate their own power monthly fees to pay for the maintenance and up-keep of a distribution and generation system that everyone still relies on.
The rules for net metering programs and solar incentives should be revisited and reassessed due to vastly different circumstances caused by this solar revolution. Net metering programs were never meant to be permanent. Regulators have a responsibility to consider the rapid growth of distributed solar and the subsequent cost to utilities and their customers.
The growth of distributed solar, spawned by years of generous incentives, is affecting utilities’ ability to pay for the up-keep of distribution and generation assets because the cost of operating and maintaining the infrastructure is not collected from customers participating in net metering programs.
Just last month, lawmakers in Indiana proposed a bill that would lower the payments consumers receive from utilities. In Oklahoma, Gov. Mary Fallin enacted a law enabling utilities, upon approval of state regulators, to charge customers who have installed solar panels on their homes a monthly fee. What’s more, House and Senate lawmakers in Virginia recently voted to repeal that state’s standard for renewable generation, which required utilities to get 25 percent of their generation from renewable resources by 2025. In addition, Oklahoma, Kansas and Ohio may weaken their standards for the amount of renewable generation a utility is required to provide.
The battle over solar incentives, renewable standards and net metering programs is sure to escalate this year. A well-funded campaign against the policies that have fueled the breakneck penetration of solar power is being waged by utilities and their supporters.
The consequences of these battles will be significant for both sides. For the solar industry, sales could plunge if the payments consumers receive from utilities are eliminated or fall to a level that doesn’t justify the cost of installation. For utilities, revenues will continue to fall and consumer rates could skyrocket if they are unable to convince state regulators to create a system that accounts for these disruptive forces.
The current net metering structure creates a financial burden for customers who can’t afford to install expensive solar panels on their homes. For those customers, the cost of electricity will get more expensive as they pay a larger share of the cost to operate and maintain the nation’s grid.
With 578,000 individual solar installations in the U.S., solar accounts for 17,500 MW of capacity, less than 2 percent of the nation’s total capacity.
The debate over solar is about creating a just cost structure that is fair to both sides. This fight is expected to take place in more than two dozen states. The path to common ground will surely be turbulent.
If you have a question or a comment, contact me at [email protected] Follw me on Twitter @RussellRay1.