301 Moved Permanently

---

nginx

When I started my clean energy career, the 109th U.S. Congress was on the verge of passing the inaugural federal solar investment tax credit (ITC) as part of the Energy Policy Act of 2005 (EPACT 2005). The U.S. Department of Energy (DOE) had just launched the Million Solar Roofs Initiative, and the California Public Utilities Commission (CPUC) was developing the California Solar Initiative under an executive order.

The Interstate Renewable Energy Council (IREC) was just starting to draft the country’s first model interconnection standards for distributed renewable energy, and the concept of community shared solar was not yet conceived. Most notably, the majority of states lacked meaningful solar policies and rules capable of supporting robust markets.

Today, it is states and local governments that are defining the future of the solar sector. Front and center in state policy and regulatory discussions, solar is making headlines and drawing crowds. It’s not surprising, considering solar represented 32% of all new electric generating capacity in the U.S. in 2014 - second only to natural gas - and considering 20 states are now home to more than 100 MW of installed solar PV capacity, according to the 2015 Q1 U.S. Market Insight Report published by the Solar Energy Industries Association (SEIA).

With the forthcoming reduction of the ITC from 30% to 10% in 2017, states are now holding the keys to unlock solar’s long-term market growth.

 

States setting the trend

Following the passage of EPACT 2005, states began adopting a wide range of solar policies, including net metering, interconnection, renewable portfolio standards (RPS) and state tax credits, among others. The states that adopted a suite of complementary policies laid the foundation for strong solar market growth and saw the most significant uptick in solar installations, jobs and investments over the past decade.

SEIA highlights states’ solar market leadership in its annual ranking of the top 10 solar states, which takes into account installed annual capacity, among other metrics. Ranked first for 2014 was solar’s reigning champ, California, with over 4,300 MW of solar installed. For perspective, that’s more solar than the entire country installed from 1970 to 2011. Coming in second was solar newcomer North Carolina, with 400 MW of solar installed in 2014 - more solar capacity than all of the other southeast states combined.

In terms of solar capacity per capita, Hawaii leads with 321 W of installed solar per person, followed by Arizona, Nevada, California, New Jersey, New Mexico, Massachusetts, Vermont, North Carolina and Colorado.

Looking beyond the numeric snapshot of the top 10 solar states, a closer examination of the activity on the ground reveals just how states are actively transforming not just the solar market, but also the U.S. energy market. In addition to some more predictable solar market trendsetters, several unexpected states are jumping into the fray.

It’s no real surprise that four of the states featured in the top 10 list are on the bleeding edge of solar policy and regulations: California, Massachusetts, New York and Hawaii. With high penetrations of distributed solar and other renewable energy, these states are grappling with the next generation of solar policy and regulatory issues.

As they address more fundamental questions about how the electricity grid is planned, operated, utilized and paid for, these states are slowly ushering in a more comprehensive energy paradigm shift, including strategies to accommodate more distributed energy resources, such as distributed generation, energy storage, demand response, electric vehicles and energy efficiency.

As California’s net-metering successor tariff and residential rate design dockets play out, solar’s leader is potentially changing the rules of the game. Not only will the outcomes of both of these high-profile proceedings have a ripple effect in the top solar market, but it is highly likely that decisions made by the CPUC will also influence some 20 other states that are now actively considering rate design or net-metering policy changes.

Simultaneously, California’s Rule 21 docket is addressing the interconnection and utilization of smart inverters and distributed energy storage - two additional markets in which the Golden State is well ahead of the national curve. In fact, California’s actions are putting pressure on the leading standards developer - the Institute for Electrical and Electronics Engineers Standards Association (IEEE-SA) - to expedite adoption of smart inverter provisions within the IEEE 1547 Standard for Interconnecting Distributed Resources with Electric Power Systems. This is a critical step to facilitate the widespread market adoption of this potentially revolutionary technology.

Looking west across the Pacific, Hawaii’s utilities, solar sector and residents are grappling with a range of issues relating to its unique system and very high penetration of distributed solar. After nearly two years of stagnation, a new ray of sunshine is shining on the Aloha State with the announcement by Hawaiian Electric Co. (HECO) that it will, once again, allow new rooftop systems on crowded circuits. HECO also plans to increase the threshold for distributed solar on circuits from 100% to 250% of the daily minimum load, with commission approval.

Clearly, this is another state effort that will have a ripple effect on the U.S. solar market and provide an important lesson for other high-penetration states. However, the future of net-metering, interconnection and shared solar policies in Hawaii is still under discussion as the Hawaii Public Utilities Commission works through several concurrent dockets amidst a high-profile utility merger and acquisition of HECO by NextEra.

Across the country, New York is vying for the solar industry’s attention with its ambitious Reforming the Energy Vision proceeding. This comprehensive effort will take time, though, seeing as replacing and revising the current utility system with one designed to reward demand reductions, resilience and grid efficiency is extraordinarily complex.

The state is also considering sweeping changes to its RPS and energy-efficiency standards while creating a new clean energy fund. Add to the mix new efforts to revise the state’s interconnection standards, launch a new community net-metering program, conduct a net-metering cost-benefit analysis and … well, you get the idea.

Just across the border in Massachusetts, the investor-owned utilities are in the process of developing statutorily required 10-year grid modernization plans intended to yield more proactive planning and interconnection of distributed energy resources while also improving the resiliency of the grid. Similar to Hawaii, the Massachusetts utilities’ recent challenges with high penetrations of solar leading to closed distribution circuits has made this exercise more timely and pertinent than originally envisioned. On the table for discussion are methods for determining circuit hosting capacity and ways to enhance transparency of grid planning and the integration of distributed energy resources.

For other states on the top 10 list with well-established solar policies, such as Nevada, Colorado and Arizona, ongoing deliberations by state legislatures and utility commissions are hinting at major changes for solar. What happens in these states will most certainly reverberate through in-state and national market growth and job creation, as well as investor and consumer confidence.

 

Innovation from below

Moving away from the higher-penetration markets, the solar dialogue is ramping up in states that have not yet reached the top 10 list. Although perhaps not trendsetters, these states are more like bellwethers whose policy outcomes may be representative of many state and local solar policies across the U.S.

Last year, Minnesota led with the adoption of strong solar market policies, such as its Community Solar Gardens program, and innovative solar valuation approaches, such as its value of solar methodology. However, through the launch of its strong Community Solar Gardens program (which attracted over 400 MW of new solar applications within a week), the state quickly realized that it lacked certain foundational policies and processes to handle such rapid solar growth. Now, the state needs to turn its attention to interconnection reform to avoid serious bottlenecks in solar growth.

The Minnesota experience offers a helpful reminder to all states that the rules governing the physical interconnection of solar energy to the grid remain foundational to near-term and long-term growth. Fortunately, this is a wheel that need not be reinvented.

The 2013 Federal Energy Regulatory Commission (FERC) order that implements revisions to its small generator interconnection procedures (SGIP) establishes updated best practices for interconnection. These best practices are also reflected in IREC’s model rules for interconnection.

Although it still remains up to each state utility commission or other utility-governing authority to adopt and enforce any modifications to the interconnection procedures, the robust FERC SGIP vetting process - developed with input from utility distribution engineers - should give states assurance that the SGIP is a good starting point for updates. California, Massachusetts and Ohio interconnection rules are already consistent with the SGIP, and more states are considering similar updates.

Illinois, Iowa and Utah are three states with comparatively small solar markets but that have relatively strong net-metering and interconnection standards. They are also reopening these policies to examine them more closely. The desire to resolve concerns and avoid pitfalls while the markets are still small is understandable, but precautions should be taken so as to not prematurely restrict market growth with burdensome process requirements, unfair rate structures or costly fees. Long-term solar growth can be manageable and beneficial, especially with best practice interconnection procedures. Striking the balance is the name of the game.

Lastly, in Georgia, South Carolina and Mississippi, where the solar conversation is really just beginning, positive trends are emerging. Regulators are commissioning reputable analyses, asking robust questions and working through solid stakeholder processes to help inform and guide their decision-making. They are looking to benefit from lessons learned by others, and to the extent that they prepare at the onset for the expansion of solar, they’ll likely find themselves much better off than other states that don’t prepare.

As the next chapter of the solar market unfolds, expect the lead to continue to come from states - which translates to more emphasis on state engagement. And although the outcome and impact of the U.S. Environmental Protection Agency’s proposed Clean Power Plan and corresponding Section 111(d) rulemaking remain uncertain, it’s reasonable to expect another tidal wave of state energy policy changes in the coming years.

 

National leadership still needed

To date, federal government policies and support have been fundamental catalysts for solar market growth. The U.S. solar market is going strong, thanks, in part, to this support. Yet, the U.S. solar market landscape is still a patchwork of state and local policies, programs, rules and regulations. Such a patchwork makes solar more costly, time-intensive and inefficient. If the solar sector is to continue to see long-term gains nationwide, a cohesive approach and national vision remain imperative.

The DOE’s SunShot Initiative is proffering important national solar goals and identifying the replicable strategies to foster greater consistency among states and local governments. Similarly, the national laboratories, with federal support, are putting their best and brightest to work on resolving solar’s technical, economic and policy challenges. National nonprofits such as IREC, which work in and across multiple states, are helping to foster greater policy consistency and replication of proven best practices. All are helping and important.

Ultimately, though, pillars of our new energy economy need support and reinforcement at the federal, state and local levels.

 

Sara Baldwin Auck is the director of IREC’s regulatory program and is responsible for developing and overseeing the organization’s national regulatory engagement strategy. She has over a decade of experience working on renewable energy policy and regulatory efforts. She can be reached by email at sarab@irecusa.org.