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With Rooftop Solar on the Rise, U.S. Utilities Are Striking Back

Faced with the prospect of a dwindling customer base, some U.S. power companies are seeking to end public subsidies and other incentives for rooftop solar.
 
 
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A solar farm near Rifle, Colorado.
Photo Credit: Tara Lohan

 
 
 
 

Issues of electricity regulation typically play out in drab government hearing rooms. That has not been the case this summer in Arizona, where a noisy argument – featuring TV attack ads and dueling websites – has broken out between regulated utilities and the rooftop solar industry. 

An Internet web video attacks the California startup companies that sell rooftop solar systems as the “new Solyndras,” which are spending “hard-earned tax dollars to subsidize their wealthy customers.” Meantime,  solar companies accuse Arizona Public Service, the state’s biggest utility, of wanting to “extinguish the independent rooftop solar market in Arizona to protect its monopoly.” 

Similar battles about how rooftop solar should be regulated have flared in California, Colorado, Idaho, and Louisana. And the outcome of these power struggles could have a major impact on the future of solar in the U.S. 

Today’s solar industry is puny – it supplies less than 1 percent of the electricity in the U.S. – but its advocates say that solar is, at long last, ready to move from the fringe of the energy economy to the mainstream. Photovoltaic panel prices are falling. Low-cost financing for installing rooftop solar is available. Federal and state government incentives remain generous. 

Yet opposition from regulated utilities, which burn fossil fuels to produce most of their electricity, could stop a solar boom before it gets started. 

Several utilities, including Arizona Public Service and Denver-based Xcel Energy, have asked their state regulators to reduce incentives or impose charges on customers who install rooftop solar; so far, at least, they aren’t making much headway. A bill in the California legislature, backed by the utility interests would add $120 a year in fees to rooftop solar customers. 

But other utility companies are adopting a different strategy – they are joining forces with solar interests. NRG Energy, based in Princeton, N.J., has created a rooftop solar unit to sell systems to businesses and, eventually, homeowners. New Jersey’s PSE&G is making loans to solar customers, and Duke Energy and Edison International have invested in  Clean Power Finance, a San Francisco-based firm that has raised half a billion dollars to finance solar projects. 

“The industry is divided on how to deal with the opportunity – or threat,” says  Nat Kreamer, Clean Power Finance’s CEO. “Some utilities are saying, how do I make money off distributed solar, as opposed to, how do I fight distributed solar.” 

Distributed solar – which produces electricity outside the grid – “has become one of the more polarizing topics in the power industry, with some utilities joining the party, some doing just what is legislatively mandated, and others remaining reluctant and not being true believers,” according to a new report from Citi Research, called Rising Sun: Implications for U.S. Utilities. The report warns the utilities that “solar is here to stay, and very early in the growth cycle in the U.S.” 

Until recently, utilities could ignore solar. Although the sun’s rays have been touted as a clean energy solution since Jimmy Carter first installed photovoltaic panels on the White House roof in 1979, solar remains barely a blip in the U.S. power market. In 2012, solar power provided a mere 0.11 percent of U.S. electricity generation,  according to the Energy Information Administration, a government agency. By comparison, coal delivered 37 percent, natural gas 30 percent, nuclear 19 percent, and wind 3.5 percent. And that solar percentage includes utility-scale projects, like the big solar farms in California and Nevada that feed into the electricity grid, as well as distributed solar. 

But the solar industry is growing fast, and much of the growth is distributed solar built “behind the meter” – that is, on commercial and residential rooftops, where electricity from solar panels eliminates the need for power that would otherwise be generated and sold by the utilities. Last year, nearly 90,000 businesses and homeowners installed rooftop solar projects totaling about 1.1 megawatts, roughly the amount generated by a large coal plant. That represented a 46 percent growth over 2011, according to the  Solar Electric Power Association. By the end of last year, the number of customer-sited photovoltaic systems in the U.S. topped 300,000, the association says. 

 
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