No one can deny that 2016 was a turbulent year, least of all energy professionals. Last year marked the continuation of bitter regulatory tangles between utilities and environmental and clean energy groups. At stake? The future of net energy metering (NEM), tax credits, and other incentives that proponents say are vital to the proliferation of solar energy. All over the U.S. – and particularly in the coal-heavy Midwest – utilities complained that NEM for solar customers represented an unsustainable pricing system. If residential solar installations keep growing the way they have for the past two years, some utilities argued, the power companies could no longer afford to keep extended subsidies and price relief for solar-powered households.
Interestingly, 2016 was also the year that we got a full launch of Tesla’s Powerwall 2. Tesla paired the release of its revamped energy storage battery with a small-screen unveiling of solar roof tiles on TV’s Desperate Housewives set – and many Americans became acquainted with the idea of solar storage for the first time. Battery power’s entry into the mainstream begs the question: What is the way forward for solar? Is it residential rooftop solar paired with energy storage? Or will large-scale, utility-owned installations dominate, eventually rendering residential solar unnecessary?
If you’re Tesla CEO Elon Musk, who spearheaded the electric vehicle and battery maker’s recent acquisition of rooftop solar company SolarCity, it’s pretty obvious how you’re voting. However, the introduction of the Powerwall 2 storage system did more than present a vision of the future of Tesla; it also introduced battery storage into the public zeitgeist.
Of course, there are many other energy storage and solar companies out there ready to assist consumers in switching to clean energy, but the public’s growing awareness that solar can save them money – and that pairing it with storage can help them break away from the utility grid – comes at an interesting time. In the current environment, myriad utilities seem to be positioning themselves in a staunch “con” position when it comes to incentivizing solar power – coincidentally, the exact same incentives that Musk’s SolarCity and many more solar providers rely on to maintain their business models.
Rate reforms
Just in time for the new year, Arizona regulators completely revised pricing structures for NEM customers in December, in a new effort to move away from retail rate prices paid for solar customers’ excess energy. The regulators called their vote to replace retail NEM a “landmark” decision that will “determine a fair export rate for the future,” while solar proponents warned that the change could damage the state’s solar market. Some of Arizona’s neighbors also went through similar fights last year. For example, Utah solar advocates have denounced a proposal from Salt Lake City-based Rocky Mountain Power to revise its NEM program.
As proven in Nevada, dismantling NEM incentives can come with a price for both solar installers and the economy. After state utility regulators slashed NEM rates in December 2015, several solar companies ceased their local operations and installations in Nevada nearly halted.
Is it time for change?
The proliferation of NEM debates indicates that the face of energy is rapidly changing – and that it may be time to rethink energy pricing overall and the role of utilities.
A 2015 study conducted by MIT economists claims that NEM incentives aren’t the way forward for solar power. The report overwhelming supports the construction of utility-scale solar projects, citing the high cost of maintaining residential incentives and tax credits. Furthermore, it argues that because some key parties perceive NEM payment structures as unfairly slanted in solar customers’ favor, it would be more beneficial to the energy industry in the long run to invest in alternative reward systems – instead of engaging in conflicts over NEM.
Also included in the recommendations is a suggestion to revise customer pricing, moving from outdated flat rates to time-of-use models that give utilities the flexibility to charge end-users different rates depending on where their energy comes from and when it’s used. Of course, that may mean a shift in focus, as well. If the findings are to be believed, then utilities would be wise to ramp up development on smart grids and larger renewable installations, instead of painting themselves as solar boogeymen.
Meanwhile, this also may be something for lawmakers and residents to consider: Some research indicates that the cost of NEM incentives may eventually be passed on to non-renewable customers – although this belief is highly controversial. At any rate, it offers a pretty clear indicator that we must give up black-and-white “for” or “against” thinking.
On the other hand, it could be time for utilities to completely renegotiate their relationship with consumers. Green Mountain Power (GMP) in Vermont is essentially doing just that. The utility’s off-grid package, introduced at the end of last year, offers GMP customers a solar array, battery storage, home automation controls and a backup generator. GMP’s hope is that this move will preempt a potential off-grid shift, once battery technology becomes more efficient and affordable – while allowing the utility to cut back on maintenance for rural transmission lines. “Off-grid” doesn’t mean “bill-free” for GMP customers, however. The utility will charge off-grid customers a monthly fee that covers the cost of equipment and maintenance expenses.
Of course, adopting that model would alter the role of utilities significantly – and might potentially interfere with revenues for privately owned solar installation companies, as well. In that instance, one imagines PV installations becoming much like a home’s electricity meter or distribution lines – utility-owned and -maintained equipment that is simply housed on a private resident’s property.
Compromise
Despite all of the fighting, utilities and solar advocates do seem determined to find some level of peace. In Colorado, for instance, utility Xcel Energy, solar industry representatives and a host of other groups entered a major settlement agreement last year that bodes well for the future of solar in the state. And, in Utah, Rocky Mountain Power recently announced it was still trying to address the solar industry’s concerns about its NEM plans.
Perhaps most notably, though, electricity provider NV Energy, utility regulators and solar advocates, including representatives from SolarCity, reached an agreement in Nevada last year to grandfather in pre-existing customers under previous NEM rules. Although not necessarily a solution to the NEM question, it’s certainly a note of unexpected cooperation from unlikely collaborators.
In Nevada, Utah, Arizona and other states across the country, battles over the future of residential solar are ongoing. (As a matter of fact, NV Energy is currently contesting the recent reinstatement of retail NEM for solar customers in northern Nevada.) Nonetheless, with collaboration among utility and solar stakeholders on the rise, maybe there is hope for 2017 after all.
Erin Vaughan is a blogger who currently resides in Austin, Texas, where she writes full time for Modernize.
