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Is Solar Energy Prepared to Enter a Post-Subsidy World? [VIDEO]

solar energyLet’s start out with a fact: the free market for energy is a myth

Every country uses subsidies in some way to encourage production and dictate consumption of different forms of energy. According to the International Monetary Fund, global post-tax subsidies for fossil fuels (which includes the external costs of pollution) amounted to $1.9 trillion in 2011. And IMF said that figure is an “underestimate.” The IEA also estimates that global consumption subsidies for fossil fuels reached $523 billion in 2011.

Here in the U.S., the government practically gives away taxpayer-owned coal to mining companies. It provides billions of dollars to the oil and gas industry in the form of preferential tax treatment. And the fracking boom, which is often held up as a shining example of the free market, was spurred by strong R&D funding, government cost-sharing programs, and tax credits that helped an unproven technology reach wildly successful commercial scale.

And now, of course, we have billions of dollars in specialized tax subsidies, rebates, certificate trading programs and utility programs like net metering to encourage the production of renewable energy.

The conversation around how to handle subsidies — which has become more heated as renewables scale — is where facts and opinions start bleeding together. The heated opinions about the issue were on full display at GTM’s Solar Summit this week during a panel discussion called “The Transition to a Post-Subsidy Reality.”

The debate around subsides within the U.S. solar industry is manifesting itself in different ways.

On the federal level, the looming 20 percent reduction of the investment tax credit in 2016 is raising questions about whether the industry can pull together an extension, compromise on a longer-term phase-out, or simply live on without the credit. While the trade groups in Washington are thinking about the issue, businesses around the country are more focused on the local fights that have a more immediate impact.

On the state level, there’s a growing political campaign among conservative groups to repeal or water down renewable energy targets through the legislature. While those efforts have failed thus far, many utilities are already far ahead of their procurement targets — effectively creating the same outcome. Colorado’s “solar cliff” is proof of that.

But the true battle over subsidies is on the individual utility level, where a number of companies are working to cap or kill net metering as more distributed energy comes on-line. The utilities say the solar industry is spreading too many costs to ratepayers who can’t afford solar, while also failing to pay its fair share for transmission and distribution infrastructure. The solar industry says the utilities are threatened by the rapid emergence of distributed energy and are trying to suppress a technology that threatens their outdated business model.

Whatever your opinion on the reasons behind utility restrictions, the impact isn’t good for solar.

“The residential solar industry will be crippled if net metering goes away,” said Bryan Miller, vice president of public policy and power markets at Sunrun, in an interview. Given that Sunrun is one of the largest providers of residential solar leases in the country, the company isn’t hiding its willingness to fight in public.

At this week’s summit in Arizona — a state where nearly all solar incentive programs are getting dismantled — Sunrun’s CEO, Ed Fenster, came ready to throw some punches at Arizona Public Service for its solar policies. The relationship between utilities and solar companies has always been somewhat tenuous. But this week’s panel discussion was a notable change in tone. The net metering issue is definitely where battle lines are being drawn on the subsidy issue for solar.

Pull up a chair, get some popcorn and watch the session below. Then let us know your reaction to the discussion.

 
 

greentech mediaGreentech Media (GTM) produces industry-leading news, research, and conferences in the business-to-business greentech market. Our coverage areas include solar, smart grid, energy efficiency, wind, and other non-incumbent energy markets. For more information, visit: greentechmedia.com , follow us on twitter: @greentechmedia, or like us on Facebook: facebook.com/greentechmedia.

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Nathan Wilson's picture
Nathan Wilson on April 27, 2013

It’s encouraging that we are starting to see discussions about ending net-metering.  This incentive program artificially makes residential rooftop solar seem more appealing than ground-mounted utility scale solar, which is much cheapersafer for installers and maintainers, and more scalable.

Utility scale solar is also more grid friendly.  Utilities can (and often do) choose tracking collectors, which avoid the useless noon peak, delivering a flat daily output that better matches load (extending into the morning and evening).  Utilities (outside of the west coast) can also use power transmission to position generation resources west of demand centers, which further extends solar power into the evening.

Battery energy storage is also much more suited to utility scale.  Dispatchable energy storage changes PV from a nuisance negative load to a fully scalable power source which contributes to grid stability and generation capacity adequacy.  The most promising future technologies are flow batteries and the high temperature liquid metal batteries, neither of which is suitable for home use.  Co-location of batteries and PV allows them to share an inverter, which saves cost and reduces losses.

And of course, when solar energy deployment is left in the capable hands of utility engineers, a cost-optimal mix of PV and CSP can be chosen.

The claims by solar lobbyists that the utilities are pushing an “outdated business model” are non-sense.  Modern economies demand power that is reliable, affordable, and clean.  As renewable energy sources become cost effective, they can contribute, but only with grid services like geographic aggregation, transmission, and fossil backup.  Utility scale fossil backup is much cleaner and safer than what can be achieved on customer premises.  The traditional outsourcing of power generation to utilities reduces initial upfront costs for home buyers and allows businesses to grow more easily (boosting job creation and strengthening the economy).

Max Kennedy's picture
Max Kennedy on April 28, 2013

Question is since fossil fuels have been around for more than 100 years and are still mega subsidised, why should solar have to be ready to not be subsidised?

Nathan Wilson's picture
Nathan Wilson on April 28, 2013

Here’s the link for U.S. solar costs: http://www.seia.org/research-resources/solar-industry-data

At the end of 2012, they showed residential solar at $5.04/Watt, and utility solar for $2.27/W;  this enormous cost premium for residential more than makes up for savings of 5-10% in distribution losses.

Evgen Dev's picture
Evgen Dev on May 8, 2013

Well said NatanW

The issue of subsidies is more political than economic
No one wants to lose control levers (oil, gas …)

And the technology is still very expensive and not efficiency.
Although the solar system began to emerge with an efficiency of over 30% and this is a big progress.
Uncomfortable that not everywhere in the world there is enough sun

I K's picture
I K on May 8, 2013

Because contrary to fiction fossil fuels are on NET great contributors providing TRILLIONS in net taxes to various governments. Some states are purely and wholly funded by fossil fuels and have no other taxes to speak of.
Continuing to spout the nonsense that fossil fuels are NET subsidised is stupid.

So “why should solar have to be ready to not be subsidised” well its simple, throw $150B dollars at it (a la Germany) and produce less than 6% of your electricity via this $150B dollar investment and you begin to wonder…..can I afford a 60% solar electricity grid and what about my heating and transport needs? Do I really want to mortgage my grandchildren to Chinese bankers?

I K's picture
I K on May 8, 2013

Nathan if done on a large scale the distribution loss of residential solar would be higher than that of utility solar as there would be net flow from homes to factories through the least efficent low voltage part of the gird. If done via utility solar then the losses would be just through the high voltgage system, 3-4% vs 10-15%

Max Kennedy's picture
Max Kennedy on May 8, 2013

Ah, the BS gets piled higher and deeper.  Ifthat were true fossile fuels would have no problem being priced at their true cost of about $15/gallon.  Ain’t happenin, BS!

Paul O's picture
Paul O on May 8, 2013

Max,

1) Are you saying that Fossil fuels do not provide major taxation revenue to both federal and state governments?

If you live in the USA, there is the federal highway transportation taxe, and various state taxes.

http://en.wikipedia.org/wiki/Highway_Trust_Fund

Saying that FF’s are bad for climate change is one thing, But we don’t have to state untrue things which have no place in policy debates.

 

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