Towards a Distributed Florida

The US transition towards a distributed power generation network has recently started to gain some momentum. However Florida, aka the sunshine state, has lagged. Even though they have healthy solar conditions (albeit not best in class due to some frequency of cloud cover), the consumer adoption of at-home generation in the state pails in comparison to other states found further west. This author suspects that this shortfall is largely due to an overly conservative legislature with an unwillingness to cross the utility lobby.

While Florida does have benefit of a net metering policy ensuring that utilities must buy excess capacity locally generated, it lacks any kind of significant incentive to encourage a local solar economy at scale, one that would afford us a more competitive environment for installation vendors to drive down costs. Without this kind of competition, consumers are left to turn to group purchase coop programs for instance to achieve sufficient scale for competitive sourcing. Florida further handicaps our distributed solar economy by forbidding the type of solar leasing programs popularized by vendors such as SolarCity, forcing consumers to purchase equipment outright — a proposition which traditionally has required high upfront costs (although there are some who are trying to lower that barrier through more aggressive financing offerings).

There are two pending solar amendments that will soon be up for public vote in the state. In the upcoming August primary elections, Amendment 4 is a proposal to exempt solar purchases from property taxes, a policy that on its own is not expected to transform our solar economy, but one that at least will lower the cost of ownership to the benefit of property owners. The other amendment, number 1 in the November ballot, is one spearheaded by the utility lobby. Under the guise of a “pro-solar / pro-consumer” vagueness, the proposal is actually meant to strengthen the position of utilities in their ability to regulate and control the solar industry in the state.

In his entrepreneurship centered book “From Zero to One,” noted investor Peter Thiel sites the benefit of achieving monopoly status and suggests that all companies should set this status as a goal, noting that most successful companies have some version of a monopoly even if they will deny it publicly. A monopoly is the best kind of moat in a quest for a sustainable competitive advantage. The problem with monopolies for the public are many. They tend to stifle innovation — with actors preferring to use their dominant position to maintain the status quo (such as we have long seen from the major wireless carriers), they tend to take advantage of their position through abusive pricing practices (such as we are increasingly seeing in the pharmaceutical industry), and their institutions tend to be the most fragile to disruption — once a monopoly has been breached and they are forced to operate in a more competitive environment they will usually find that their institutions are not adequate to keep pace with more agile firms such as those disruptive startup companies with them in their sights.

In the case of Florida’s public utilities, such monopoly status is not one that was achieved through a competition, it was government granted. In determining how to regulate monopolies, I believe that those who achieved their status simply by decree or legislation should be held to a much higher standard than those who arrived competitively or through innovation.

Until such time that Florida follows others’ prudent lead and adopts a Renewable Energy Standard to require utilities generate a minimum percent of their capacity through carbon neutral sourcing, we are left to the mechanisms of markets to move our generation mix in the right direction. It is in the interest of the utilities to maintain the status quo and thus stifle our solar prospects as they have done fairly successfully to date, thus granting them further powers of regulation in this environment would be myopic and counterproductive to what should be our focus: mitigating the potential impacts of climate change.

Further Reading:

Amendment 4

Amendment 1

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