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CEO Column: Why others don’t like solar


A couple of months ago I wrote an article titled, “Why Don’t You Like Solar?” I received a few comments to the effect that I was backwards and against progress, I was against clean energy, I was only interested in my paycheck, and I must consider Alabamians idiots.
 
Interestingly, on Dec. 29, the Wall Street Journal (“WSJ”) published an article titled, “Time for Solar Energy to Grow Up.”  The article doesn’t exactly track my logic or feelings about solar energy, but it confirms my position that solar is not necessarily the answer to all of our energy questions and problems. 
 
The WSJ article states that more than 40 states (Alabama is not one of those states) have net-metering programs for distributed generation, including solar power. (Net-metering programs allow electric consumers who own generation to sell energy to their electric provider at the retail rate.) The article states the retail price of electricity is generally about twice the cost of wholesale power because the retail price includes the cost of transmission service, distribution service, transformation costs and maintenance of all the facilities required to provide basic electric service. 
 
Solar programs have evolved from people interested in owning their own generation to corporate marketing plays by national companies. The WSJ article states the primary beneficiaries of solar programs are not electric consumers but companies like SolarCity and SunRun, which install solar panels at no upfront cost to customers, receiving the government tax subsidies and benefits associated with solar generation. Then, they rent the panels to consumers at rates lower-than-retail rates at the onset but typically escalate these rates by about 3 percent per year. Electric consumers may reduce their power bill at the start of the program, but non-solar customers have to make up the difference.
 
Customers that sell electricity back to their utilities obviously do not provide those services provided by utilities, yet they receive their utilities’ retail price. Because those customers receive payment for services they don’t provide, customers who don’t produce their own electricity have to make up the costs of the services that are paid to net-metering customers. Generally, that results in poorer electric consumers who can’t afford to install their own distributed generation to subsidize wealthier electric customers who can. Those subsidies can be substantial. The California Public Utility Commission estimates that solar subsidies among California electric consumers approach $2 billion annually. The Nevada Utility Commission estimates that Nevada non-solar customers subsidize each Nevada solar owner by $623 per year. Almost all of that shift goes to the solar leasing companies – not the solar customers. 
 
Because of the subsidies among electric consumers, several states (including Hawaii, Arizona, California and Nevada) have recently proposed changing their net-metering programs to reduce cost-shifting among electric consumers. The Nevada Commission went even further by reducing the rate utilities pay to existing solar customers to the wholesale rate for electricity and increasing the fixed charge solar customers pay to access the electric grid. 
 
SolarCity has not reacted well to the changes in Nevada. It announced it would cease doing business in Nevada and complained, “… the Nevada government encouraged these people to go solar with financial incentives and pro-solar policies and now the same government is punishing them for their decision with the new costs they couldn’t have foreseen.” SolarCity doesn’t mention that its disclosure statements to solar customers acknowledge the risk of rate change.  
 
SolarCity also said, “Our ability to sell solar energy systems and the electricity they generate may be adversely impacted by changes in net-metering policies, including reductions in the amount or value of credit that customers receive though net-metering.” However, the change should have little effect on what solar customers receive from their solar installations. It will primarily affect SolarCity’s profits and the amount non-solar customers have to pay to subsidize the solar customers.
 
Non-solar customers should not have to pay for decisions made by solar customers. The federal government recently extended the 
30 percent tax credit for solar installations through 2021 so our tax dollars can be used to subsidize solar choices. There is no reason states should continue to double down on subsidies that benefit SolarCity and other solar companies at the expense of retail consumers.    
 
Just another reason not to like solar. I hope you have a good month.


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