Solar Incentives and Policies – 4/4/16

The growth of the solar industry is still very dependent on politics. Though this is changing after years of falling costs, solar incentives like net metering and investment tax credits can mean the difference between explosive growth and stagnation for the renewable energy. And a sudden shift in policy can send solar companies running as was the case with Nevada where utilities pushed through sudden cuts in incentives and increased fees for solar customers. The resulting exodus of companies from the state serves as a dark example of vulnerability.

Many other U.S. states are considering dialing back solar-power incentives just as Nevada and Hawaii have, bowing to pressure from local utilities fearing the revenue lost from customers switching to residential solar. Most system owners can sell excess electricity back to their utility under current laws; they use that income to significantly offset the cost of the solar panels. When there were relatively few solar customers, utilities benefited from reduced strain on the electrical grid, but fear of irrelevancy has lead many utilities to fight the rising tide of residential solar by lobbying for lower net metering rates.

Nevada and Hawaii are probably only the first states to see solar subsidies slashed.Arizona, Colorado, Louisiana, and Utah are already in the midst of battles over net metering programs and raising monthly fees charged to home solar users for grid access. Utilities are arguing that it is justifiable to charge solar customers more than others on the basis that the costs of maintaining the grid are unfairly falling on traditional customers. Whether or not that argument has any merit is questionable, especially in areas where utilities have less influence over legislators.

The U.S. solar industry got a shot in the arm in December  when federal solar subsidies were extended for five years as part a historic deal to lift the oil export ban. The unexpected passage of the tax credits, reducing the cost of home solar panels by up to 30%, gave companies more confidence in future projects. It is difficult to say how much more money will flow to solar projects as a result of the subsidization; however, stocks of solar related companies rose sharply following the announcement of the extension.

There are some states where solar is getting more love. In New York a new set of policies adopted last fall will have homeowners paid at the high retail power rates for their excess electricity. New York is just one of the states making bets on the future of energy. Every state will eventually face the rules set down by the Obama administration in its Clean Power Plan, which is almost certain to survive the challenges brought against it in court. The rule in question is set to go into effect in June when states will submit their plans to cut emissions to the EPA and it could wind up shutting down hundreds of coal-fired power plants.

When the Clean Power Plan comes into effect, heavy emitters will be legally obligated to find cleaner alternatives to coal power plants. In states that ignored the rules while the Supreme Court deliberates on the issue will face sharp increases in energy costs either because demand will be too high during the shift to cleaner natural gas-fired power plants or because they will have to buy greener energy from other states.

Government incentives have also encouraged the spread of solar farms built on real farms. North Carolina granted developers tax credits equal to 35% of project costs, helping make the state the third-biggest U.S. solar market. In Georgia, the Public Service Commission passed a bill requiring the state’s largest utility, Southern Co.’s Georgia Power, to buy 525 megawatts of solar by 2016.

Interest in farmland as a location for solar panels has bolstered U.S. farms struggling to survive low commodity prices. With cotton prices down 71%, soybeans down 33%, and peanuts down 16% in the last five years, farmers are desperate to supplement their weak incomes. Meanwhile, solar companies are paying triple the average rent for crop and pasture land in the state helping to buoy tax bases and diversify revenues.

Not everyone is happy to see solar panels or wind turbines becoming more common on farmland. Some criticisms have surfaced in the U.S., where local officials have pushed for zoning changes to restrict solar developments to industrial properties. Regardless of what complaints people may have about aesthetics, the actual owners of the land will tell those people to shove their opinions where the sun doesn’t shine so long as solar is keeping them in the green.

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