Government Support for Solar Power Being Reconsidered Nationwide

Published May 2, 2016

Forty U.S. states have net metering policies under which households or businesses with rooftop solar panels can sell electricity they generate above what they actually use back to solar utilities at retail rates. The increase in the price of electricity to utility customers as a result of the growth of solar power due to the net metering incentives has prompted 25 states to begin reconsidering their policies.

In California, where opinion polls show solar power to be widely popular, by a narrow 3-to-2 vote, California’s electric power regulators voted in January to keep the state’s net metering program, but also added some fees on solar users to offset some of the costs of maintaining the electric grid. 

By contrast in neighboring Nevada, state regulators decided to phase out its net metering program pver 12 years, and in sunny Arizona, regulators decided to reduce the rates paid for excess solar power sold to the state’s utilities.

The response in both states show how dependent solar power is on goverment support for its continued existence despite decades of subsidies and state mandates for renewable power production. 

Even before Nevada’s new net metering policies took effect, solar providers began to pull out of the state. The largest solar provider, SolarCity, fired 550 workers in Nevada after the public utilities commission’s December vote to modify and phase out its net metering scheme. SolarCity’s major competitor, Sunrun, also announced it was pulling out of Nevada. 

Arizona’s decision to lower the amount it pays under its net metering scheme, resulted in the Salt River Project electric utility halting installation of rooftop solar panels in its service area. 

Reuters quotes Lyndon Rive, chief executive SolarCity Corp saying, “Without net metering, it just doesn’t work.” 

Government Driven Solar Growth

Solar energy made up just 0.4 percent of U.S. electricity generation in 2014, largely due to the fact solar power has the highest cost of any power generation source, much higher than electricity generated by coal and natural gas, for example. According to data from GTM research, a firm that does focused research on the green tech industry, the cost of a typical rooftop solar installation is between $17,000 and $24,000. 

Despite the steep unfront installation costs, the industry has grown quickly in states where high power prices and generous solar incentives have made it financially attractive to homeowners. 

For instance, the federal government offers a tax credit worth 30 percent of the cost of solar panels and installation. And many states offer their own incentives including requirements or mandates in some states requiring utilities to get at least a portion of the electricity they provide from solar power. Such public support helped push U.S. installations to 7.2 gigawatts worth of photovoltaic panels last year, nearly nine times the amount or solar installed in 2010. 

As solar installations have grown, so have resident’s objections to government support for the solar industry.

‘Costs, Fairness’ Issues Raised

Opponents raise fairness concerns noting solar subsidies benefit more affluent homeowners at the expense of average and lower income homeowners who, even with substatial government support, cannot afford to place solar systems on their homes. 

In addition, utilities point out, with solar users buying less power, or selling it back to the utilities at retail rates through net metering, fewer ratepayers are left to bear the the cost of traditional power generation and to maintain the grid that solar users have in fact made more expensive because the infrastructure has had to be upgraded to account for multiple on site power generators delivering inconsistent or variable power supplies back onto the grid. Academic research has shown in states that have required a set percentage of their power come from solar power the average price of electricity has risen, unemployment has increased and real income has declined.

As solar installations have increased, these drawback have become more apparent. As a result an increasing number of states are considering modifying, reducing or ending entirely the support their have given to solar power through their net metering programs. Reuters reports, Hawaii has already cut the net metering rates utilities must pay to solar users to half the retail rate. Maine’s legislature is also working through legislation to replace its net metering program. According to Reuters, the net metering programs in Massachusetts, New Hampshire and New York are also under review. 

The narrow victory continuing the net metering program in very pro-solar California sends a message to the rest of the country. “That tells you that the opinion is beginning to change,” Reuters quotes Ashley Brown, executive director of the Harvard Electricity Policy Group, as saying.

H. Sterling Burnett, Ph.D., ([email protected]) is the managing editor of Environment & Climate News.