Solar Policy Update: Which Incentives Are Most Vulnerable In 2012 And Beyond?

SI Staff
Written by Jessica Lillian
on July 17, 2012 No Comments
Categories : E-Features

How can the U.S.' policymakers and utilities best support solar power as it enters its next growth phase?

Incentives for renewable energy may be increasingly vulnerable to election-year politics, budgetary concerns and other threats, but successes seen abroad help demonstrate the effectiveness of solid solar policy, according to the industry experts who spoke at a panel session during the Intersolar North America conference in San Francisco earlier this month.

For instance, Germany's feed-in-tariff (FIT) program has propelled the country's PV market to impressive heights. In order to truly stimulate solar demand, a FIT must be properly designed, noted Hans-Josef Fell, a member of the German Parliament who is credited with helping to create Germany's FIT.

A good FIT must be high enough to allow for economic operation of the PV system, uncapped in order to provide long-term certainty for investors, and unobstructed by ‘restrictive’ permission policy, he said. It must also be funded through the regular electricity rate.

‘When the FIT is dependent on monthly budget discussions, you have no chance of increasing the market,’ Fell stated.

Last January, Germany raised its electricity prices, leading to increased backlash against the country's renewable energy policies. But according to Fell, in reality, solar energy has made power less expensive for consumers, thus reducing electricity prices on the stock market. The January rate increase was designed to counteract utilities' declining margins, he said.

‘This is a lesson that the whole world should learn,’ Fell stressed, denouncing policymakers' claims that Germany's FIT has burdened the economy and consumers' wallets.

State-driven policy
Of course, the political and regulatory landscape in the U.S. differs drastically from Germany's. Whether or not the U.S. should – or can – adopt a national FIT remains up for debate in the industry. For now, other policy mechanisms – especially those on a state level – play the most active role.

‘The single largest market driver for PV in the U.S. is renewable portfolio standard (RPS) laws,’ said Tom Starrs, vice president for market development and policy at SunPower.

On a federal level, the forecast appears mixed. Despite bipartisan polls showing that a large percentage of the U.S. public supports government spending on renewable energy, many policymakers' opposition to incentives and funding programs has intensified over the past year.

‘A lot of this grew out of the Solyndra bankruptcy and Solyndra's having received a federal loan guarantee,’ Starrs noted. Viewing the Solyndra failure as a particular vulnerability for President Obama, opponents have launched well-funded campaigns specifically targeting solar – a push that is expected to continue through the November election.

Continuing budget woes cast additional clouds of doubt, especially regarding the investment tax credit (ITC).

‘The ITC is secure if sequestration happens, because it is not an appropriation,’ Starrs explained. However, if lawmakers wind up enacting broad tax reform as a means of easing the economic crisis, the ITC could disappear.

Utilities' efforts
In addition to state-level RPS mandates, net metering continues to help push the U.S. solar market forward on a sub-federal level. Although net metering is currently in effect in 47 states, many electric utilities have stepped up their criticism of the policy in recent months and attempted to constrain customer participation.

‘They're doing it under various auspices,’ Starrs said. ‘The most common one I see is that net metering [allegedly] constitutes a shift in costs to low-income customers. The other one I see is that net metering contributes to a broader challenge – grid integration.’

Grid integration issues also must be continually addressed in the larger-scale solar market, in close collaboration with utilities and regulatory agencies.

‘We need to look at what a sustainable model moving forward is,’ said Aaron J. Johnson, director of renewable energy policy and strategy at Pacific Gas & Electric (PG&E), pointing out that because of their emphasis on reliability, utilities tend to be ‘conservative by nature.’

PG&E ranks among the U.S.' leading utilities in solar deployment, and Johnson expects that by 2020, approximately 40% of PG&E's renewable energy portfolio will be solar power.

However, with the abundance of contracts already signed in recent years, the utility's need for new large-scale projects has begun to diminish.

Johnson explained that because PG&E's existing solar project contracts have posted higher success rates than originally anticipated, the industry has become a victim of its own success. The highly aggressive bidding that characterized these contracts may also be unsustainable in the long term.
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‘The 'green rush' seen in 2009 and 2010 is unlikely to return,’ Johnson warned. ‘We will continue to contract for renewable energy, but the seemingly weekly announcements of contracts being signed are likely behind us.’

(Please address all comments regarding this article to Jessica Lillian, editor of Solar Industry, at jlillian@solarindustrymag.com.)

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