Editor’s note: This commentary is by David Russell, a consultant for the past 25 years for small, development stage or emerging businesses. During the last five years, his focus has been exclusively on renewable energy technology, including the installation of commercial scale solar projects. For 20 years prior to that, he was engaged in various aspects of the securities industry.
[I]t was reported in an Associated Press article by Dave Gram that “In Vermont … state regulators are tapping the brakes” on expansion of solar power installations. The principle explanation for the restraint is attributed to utilities becoming increasingly concerned about solar power’s “increasing penetration of rooftop solar in their territories … there is also concern about consumers who haven’t gone solar absorbing cost formerly borne by those who have.”
Like so many things in life, the broad brush often provides messy coverage. As a commercial solar project developer, I feel compelled to smooth out the issues so that the public actually knows what is going on.
First off, Gram is simply parroting the drivel that has been widely circulated by the conservative American Legislative Exchange Council in draft legislative form for all state policy brokers to glom onto and put forward in opposing renewable energy efforts. In fact, with the exception of Green Mountain Power there are few if any utilities that have bothered to test their power supply costs against time and use models to determine whether or not subsidies actually cost them money. In New Hampshire, for example the Public Utilities Commission simply placed an arbitrary “cap” of 1 percent of generated power. Now that the cap has been reached the mewling and puking that is going on in reaction to demands that the cap be lifted has a pathetic quality to it since none of the utilities can point to studies that assess their costs. It remains the case that distributed power, that is power generated locally with solar, doesn’t travel as far to its end user. That means there is less “line loss” (dissipated power) and less capital cost for the utility for poles, transformers and wiring needed to keep up with increased demand and usage.
But that is not where the big savings is for the utility. Peak demand for power comes with hot weather and the collective switch that is flipped to power air conditioners. Solar is at its best in those conditions. Absent solar power the utilities have to buy supplemental power from the regional grid and those power costs can be high. It is those times and that cost that requires analysis. Green Mountain Power has made a convincing case that providing an above market credit, when combined with the value of the renewable energy credits that can be sold to offset those credits, actually saves them money.
Vermont erred in providing the best subsidies for the larger projects rather than incentivizing solar installations on every available rooftop around the state.
The argument about non-solar ratepayers bearing an undue burden is bogus. In New Hampshire, the utilities get paid a distribution charge. Net metered solar power flows through the utility’s grid and the charge, based on usage is indifferent as to source. End of story. There is no “added burden.” Vermont’s PSB will eventually consider this approach because it makes sense but the commissioners are not there yet.
The pushback that is occurring in Vermont and the reduction of subsidies being recommended may be an anathema to commercial solar developers but not to the citizens, the state or the long-term energy goals. First, state or federal subsidies are used to “kick start” new technology because, absent economies of scale, the new technology might be too expensive to be commercially viable. This approach has exceeded expectations in Vermont. What started with state-sponsored support at 30 cents a kilowatt hour (residential rates are generally 14.8 cents per KWH) will be down to 18 beginning in 2017. Developer costs are below 10 cents so “price parity” or getting the cost to install equipment to generate one KWH of solar power to be equal to the cost of a coal- or gas-fired plant is well on its way.
Subsidies have worked and are not supposed to be permanent so weaning the industry should be part of the program. It is lamentable that solar is being held to such a strict standard while subsidies for nuclear, coal or gas fuel sources are not but such is life in the business-oriented political world in which we live.
Second, communities in Vermont have rightly insisted on balance between aesthetics and convenience or necessity. While it is true that powering larger organizations like schools, hospitals and larger commercial establishments with solar requires big land tracts but the sun’s not always out and without storage (batteries) the utility has to provide power when the sun goes down. Besides, many consider a 20-acre solar field an eyesore. Developers haven’t helped much by grabbing whatever sites are available as they rush to meet sunset clauses on permits or waning subsidized support. While communities, abutting landowners and concerned citizens should have a say, if you have ever sat through one of these mind-numbing hearings you would wonder that anything ever gets done. The issue is balance and so far as I know there is no mountain in the region named Olympus.
Finally, Vermont erred in providing the best subsidies for the larger projects rather than incentivizing solar installations on every available rooftop around the state. While the new regulations will restrict new permits to rooftops, parking lots, brownfields, gravel pits and closed-in landfills, the PSB remains oblivious to the financial challenges of trying to fund an asset with a 25- to 40-year life span to a commercial establishment that could be out of business in a year or two or 10. The subsidized sale of power directly to the utilities as incentive to placing the arrays in the most acceptable sites would have been the answer but the PSB hasn’t gotten here yet.
Like we say in the business, it ain’t easy being green and it isn’t getting easier but keeping a clear eye on the prize is important.
