Residential Solar Policy
Follow the Money to See What Works
Germany has contributed 30% of the world’s solar energy as of 2012 . Many people in the United States are perplexed by how a country smaller than ours can have over four times the amount of solar generation. We have several tax incentives for solar installations and even production credits. What is the barrier keeping the United States from being the world leader in solar ?
According to a report from the Solar Energy Industries Association (SEIA) the complicated tax structure of the United States may be hindering the development of more solar. In Germany they have a simplified feed in tariff system that helps drive installation costs down and make it obtainable for more people. The feed-in tariff works very well to drive consumer adoption of residential solar installation. A feed in tariff is an agreement between the homeowner and the utility company. Feed in tariffs are making their way into the United States but not at a national level. With individual states such as California , Hawaii , and Vermont adopting feeding tariffs with mixed responses from their constituency. The feed in tariff means that the homeowners are guaranteed rates and long term contracts from a utility in the range of fifteen to twenty years. By having such a long term investment the financing is much easier to obtain for all consumers. The banks reflect upon the feed in tariff as a great way for the homeowner to pay back the loan that they took out. This being a national policy affects all of the banks that do business in the country. In the United States with the effects being limited to states that choose to adopt a feed in tariff. Consumers reap the rewards of a competitive loan market from banks. With banks having to compete against each other the interest rates on the loans are much cheaper. With all of the convoluted tax rebates , accelerated depreciations, tax write-offs that the United States has , it wasn’t as effective as the simple yet eloquent solution. Germany is currently on track to eliminate nuclear from the power production plants as what their goal to do.
Feed in tariffs face much opposition here in the United States from utilities. Utilities are fear full that they will be legally required to pay customers for energy at a rate that would cause them to take a loss. This is also how some people end up making money because any energy generated in excess of monthly use must be paid for. Net metering is having the utility know in real time your current power consumption. In Arizona they have had a huge surge in residential solar installation because of net metering. The ability to work acquire solar arrays for little money upfront and have them pay for themselves under leasing programs is very appealing to many consumers. This has resulted in many utilities becoming very uneasy and some have been out right hostile towards rooftop solar. The reason for their shift in opinion from indifferent to a more decisive opinion is from the customers that don’t have solar installations. Customers who don’t have solar do not benefit from net metering as they are always consuming and never producing. With fewer of these customers existing in a market where a utility is still having to conduct normal day to day business they are feeling the most pressure. Losses for a utility makes a utility want to raise rates, not too bad if you are producing power and only a small jump. Utilities are concerned with fewer customers paying the full amount for their bills how are they expected to be able to maintain their operations. Many make the case of transmission line repair, a very costly investment that every consumer benefits from. However with the increase in monthly losses the Arizona utility companies are putting off normally scheduled maintenance. Arizona decided to start charging a small fee for net metering, specifically on roof top solar. The Arizona Public Service recommended a charge to the customer of $8.00 per kilowatt hour. However the Arizona Corporation Commission voted and approved a $0.70 charge per kilowatt hour. Many solar advocates believe that this will hamper the development solar in Arizona, but doesn’t make it unsustainable.
What would be better would be a long term slowly decreasing feed-in tariff that would start out high and then as it comes to a close the amount paid to customers would be closer to market defined levels. By market defined levels I mean what a individual would be able to negotiate on their own or what the state negotiates as the preset rate for utilities. When as a nation we establish a standard that the states can model their own policies after it stabilizes the market while not forcing it upon people. Also solar is not the most efficient source for all states due to the diverse climate of the United States. By allowing the states to define the starting and the ending points of the degrading feed in tariff this allows them to decide how much they can afford to pay and if their grid is capable of handling it. Residential solar arrays also prime the rest of the grid for the roll out of the smart grid technology in area with strained power grids.
With all of the confusing tax codes , possible state and federal incentives , and overlapping programs the United States may have just legislated itself into a corner. When we have a simpler model to work with and proven examples to go by we choose to forge our own path. Many corporate interest heavily lobbying for their own interest and legislature being influenced to benefit them. Money is often the source for most conversations when concerning energy production. This time the conversation isn’t about how much a utility can make, but how much they stand to loose. As independent as Americans usually are, when it comes to power production we aren’t as independent as we want to be.
“German Solar Feed-in Tariffs Wildly Successful (New SEIA Report).” CleanTechnica. Accessed April 15, 2015. http://cleantechnica.com/2014/08/07/germany-solar-feed-in-tariffs-seia/.
Trabish, Herman K. “Arizona Preserves Net Metering by Charging a Small Fee to Solar Owners : Greentech Media,” November 15, 2013. https://www.greentechmedia.com/articles/read/Charging-a-Fee-to-Solar-Owners-Preserves-Net-Metering-in-Arizona.