Utilities Declare War on Solar

February 2016, Vol. 243, No. 2

Now that solar power is reaching prime time, the fossil fuel industry is doing all that it can to stop its growth.

For many years solar was on the periphery, installed by early adopters and helped along by government subsidy. But over the last several years, solar has emphatically become mainstream. It is still growing from a low base, but it is now one of the most preferred sources of new electricity generation. The cost of residential solar has been cut in half since 2010, and utility-scale solar has achieved even greater cost declines.

In 2015, the U.S. saw 16 gigawatts of new renewable energy capacity installed, which accounted for two-thirds of the total. Solar alone accounted for about one-third of new capacity last year. Natural gas only captured 25 percent of the newly installed capacity despite several years of incredibly low prices. The banner year for clean energy occurred while 11 gigawatts of coal-fired electricity came offline as old plants were retired amid rising costs and stricter environmental regulation. The clean energy transition is very much underway.

But the backlash from incumbent industries has also sprung to life. With solar and wind suddenly eclipsing fossil fuels as a preferred option for new power plant capacity, utilities and other fossil fuel interests are moving quickly to disrupt the progress of clean energy.

The industry argues that homeowners with solar must pay fees to cover their costs of using the grid. Solar proponents dismiss that argument, pointing to the costs saved by not needing to build new power plants.

However, the threat that solar poses to the utility industry is deeper than customers no longer needing to purchase electricity. Building new power plants and other large infrastructure is at the core of utility industry’s business model. Since those costs can be passed onto the ratepayer in the form of regulated rates, building expensive infrastructure is actually a source of profit. Customers switching to solar ends up hitting the utility’s bottom line twice by no longer buying as much electricity and upended the utility’s case for costly new power plants and transmission lines.

That is why utilities have become much more aggressive in beating back solar. One of the most high-profile cases is in Nevada, where a NV Energy, subsidiary of Warren Buffet’s Berkshire Hathaway, convinced the Nevada Public Utilities Commission to abruptly and harshly alter the rules of the game for solar power in the state.

Not only did state regulators gut the net metering payments to homeowners with solar on their roofs, but they also refused to grandfather in those that have already signed up or purchased solar panels on the basis of the net metering rule. Homeowners with solar will now see their electricity rates increase in the coming years. Some residents may see their electricity bills spike by 300% above what they likely would have been had they not purchased solar in the first place. Under the net-metering rules, purchasing or leasing solar made sound financial sense for more than 17,000 homeowners. Now, all of a sudden, it doesn’t.

The move sparked outrage from both homeowners and the solar industry in December when the PUC made its original decision. SolarCity immediately announced its decision to pull out of the state and lay off most of its Nevada workforce. On Feb. 12, the PUC upheld its decision, although it slightly delayed the rate increase for solar homeowners from four to 12 years, which was still much quicker than the utility industry had even asked for. NV Energy proposed rate increases for solar customers to be phased in over 20 years.

But Nevada is not the only state where the fight to block solar’s rise is taking place. The signs of obstruction abound. In 2013, Arizona regulators slapped a fee on solar customers of $5 per month after a campaign by the state’s utilities. The fee was lower than what the utilities wanted after protests from a collection of solar companies and conservative groups advocating for freedom of energy choice. That fee remains in place, but the state’s largest utility is reportedly looking to submit a request to regulators this year to raise the fee to $21 per month.

Rolling Stone just published a long article on the monopoly power held by the utility industry in Florida, where they have succeeded in keeping Florida a solar backwater, despite the state having the third-best solar generation potential in the country. Unlike most other states, nobody except the utility is allowed to buy and sell electricity, so the power-leasing model that SolarCity has made popular is illegal.

“We live in the Stone Age in regard to renewable power,” said Florida state Rep. Dwight Dudley. “The power companies hold sway here, and the consumers are at their mercy.”

The anti-solar initiatives are spreading around the country. Oklahoma’s utility industry is proposing new fees, which sparked protest in December. Renewable portfolio standards are being rolled back in Ohio, Kansas, and other states.

The fight will only escalate moving forward as solar makes further inroads. Worldwide, the clean energy sector enjoyed a record year in 2015, attracting $329 billion in investment, a staggering figure that is set to rise.

Utilities may be able to buy themselves some time, but as solar continues to see costs decline, more and more people will want to defect from the grid.

Written by Nick Cunningham, Oilprice.com