When you read a
headline such as one from CNBC touting “Solar power’s stunning growth,” realize
that it’s thanks to you—even if you’ve never even thought of putting solar
panels on your roof or live in an apartment where you couldn’t install them if
you wanted to. If you live in the United States, vote, pay taxes, and get your
electricity from a utility company, you’ve helped the solar power industry. You
support the solar industry through a variety of tax and regulatory
policies—voted in by politicians you elected—that favor it over other
lower-cost forms of electricity generation.
The CNBC story from
December 2014 that claims:
“US generation up 100 percent this year,” acknowledges the reality of my
postulation. “Four major factors have made the
solar surge possible,” it states. It, then, goes on to list them: (Only one is the result of market
conditions, with the other three relating to government policy.)
- The extension of the Investment Tax Credit for renewable energy;
- State renewable portfolio standards;
- The Obama administration’s pro-solar policies, including friendly environmental reviews, cash grants in lieu of tax credits and guaranteed loans; and
- The steep decline in the price of PV.
With such favorable
conditions, solar may seem like a fail-safe investment—which is exactly what
Sunrun is hoping for with its new initial public offering (IPO), expected to raise about
$100 million. After all, the Wall Street Journal’s (WSJ) reporting on the Sunrun IPO points to SolarCity’s success:
“shares have soared more than sixfold since its 2012 IPO.”
However, before
investing, it would be wise to consider the changeable nature of politics. Tim
Snyder, President of Agri-Energy Solutions, Inc. told me: “I spent years
developing ethanol and biodiesel opportunities. That was in a time when
everyone wanted to invest in them. When times were good you could expect
payback of your initial investment in less than two years with sky rocketing
internal rates of return. All it took to kill investor interest for these
projects was for the government to turn its back on the standard corn-based
ethanol plant.”
Snyder added: “The
countryside is littered with the carcasses of investors who thought they were
investing in the new energy wave for the future, in ethanol and biodiesel, only
to have their hopes and cash robbed by a very conflicted energy policy. It’s
just not a safe place to put your money without a real and comprehensive plan
and the federal government has no such plan. Remember the old saying, ‘The
government giveth and the government taketh away.’”
Sunrun, as WSJ summarizes, “installs solar panels
on residential homes either for no upfront cost or at low cost. Sunrun owns the
solar panels and receives monthly payments from homeowners for the power
generated by the panels. It also receives government tax incentives to cover
its costs.”
Reading through the
234 pages of fine print in Sunrun’s form S-1, filed on June 25 with the Securities and Exchange
Commission, it becomes very clear that its past and future success is because
of government policies. Government-dependent growth is why, on page 104, under
the heading “Government Regulation,” Sunrun is committed to maintaining a
“policy team to focus on the key regulatory and legislative issues impacting
our entire industry.” The term “policy team” is gentlespeak, meaning lobbyists
whose sole job is to insure policy favorable to its business model, as the S-1
explains: “We plan to continue to invest in building out our team to shape the
dialogue and promote a policy framework that will be beneficial.”
Just how
“beneficial” is the “policy framework”? The answer is found a few paragraphs
down: “These incentives enable us to lower the price we charge homeowners for
energy from [solar], and to lease energy systems, helping to catalyze homeowner
acceptance of solar energy as an alternative to utility-provided power.”
Under the heading
“Policies and Incentives” the S-1, on page 89, outlines the three specific
“federal, state, and local policies” that have “been strong factors affecting
the market for distributed solar generation.” They are the Federal Investment
Tax Credit (ITC), net metering, and Solar Renewable Energy Credits and “other
state incentives.”
The S-1 states:
“Tax incentives have accelerated growth in U.S. solar energy system
installations.” Under today’s policy, businesses and homeowners who install a
solar system can receive a tax credit worth up to 30 percent of the system’s
cost—though it is scheduled to drop to 10 percent on January 1, 2017. In bold
print, page 18 states: “Our business currently depends on the availability of
utility rebates, tax credits and other financial incentives in addition to
other tax benefits. The expiration, elimination, or reduction of these rebates
and incentives could adversely impact our business.” Extending the ITC is
likely a top priority of the “policy team.” All U.S. taxpayers, then, are
paying for solar’s “stunning growth.”
Net metering is
essentially a “utility rebate,” that, according to page 18, provides
“homeowners with a one-for-one full retail credit within a monthly billing
period for electricity that the solar energy system exports to the electric
grid.” Interestingly, the only states where Sunrun operates are those states
that have “adopted net metering policies.” Sunrun’s S-1 acknowledges “we rely
on net metering and related policies to offer competitive pricing to
homeowners” and “changes in net metering policies may significantly reduce
demand for electricity from our solar service offerings.” It continues
addressing proposed changes and/or caps to net-metering policies, saying that
if changes are made, homeowners “will be unable to recognize cost savings.”
And, states that do not have favorable net-metering policies “would pose a
barrier to entry.”
It is net-metering
policies that have made all ratepayers shoulder the tab for solar’s “stunning
growth.” As the S-1 points out, homeowners get “a one-for-one full retail
credit” for the electricity the system generates. What it doesn’t make clear is
that the policy requires the utility to pay the retail rate for electricity
whether it needs it or not, and even though it can get lower-priced electricity
from conventional sources. As a result, the utility is wasting money and not
operating efficiently as a business must to be profitable. This loss is a
result of government policy, not bad management. Therefore, to stay in business
the utility has to raise rates on all its customers so that the few can
benefit. Page 88 points out: “Residential solar has penetrated less than 1% of
the 83 million single family detached homes in the United States.”
Many states are
revisiting the generous net-metering policies that were put in place a decade
ago when solar adoption was miniscule. In Arizona, where solar penetration is
now the second highest in the country, homeowners who install new solar systems
pay a fee for “plugging into the electric grid of Arizona Public Service.”
Solar customers need to plug into the grid. Page 99 explains: “The home’s
energy usage is provided by the solar energy system with any additional needs
provided by the local utility.”
Tucson Electric
Power wants to change to paying wholesale for the excess electricity homeowners
sell to the grid—which, according to the Arizona Republic, “may mean solar power would
no longer be a good buy for homeowners.”
Louisiana is reining in its generous solar tax credits with a bill
signed into law on June 19. The Advocate reports: “During the
recently adjourned legislative session, they capped solar spending at roughly
$20 million next year and put in place tighter fraud controls.”
Citing a March report from GTM research, WSJ warns: “a number of new
state laws ‘could impact residential solar’s value proposition’ due to changes
in subsidies and electric rates.”
With all the claims of renewable energy reaching cost parity with conventional
energy, realize this headline is only semi-accurate because government
regulation is driving up the cost of conventional electricity while ratepayers
and taxpayers are underwriting the cost of renewables.
For once, it is nice to see the solar industry acknowledge that, page
18, “Any of these changes could materially reduce the demand for our products
and could limit the number of markets in which our products are competitive
with electricity provided by the utilities.” As Sunrun states: “We focus our
resources on markets with high electricity rates, favorable policy
environments, and other characteristics that allow for low operational costs
and favorable unit margins.”
If you are tired of having your tax dollars raise your electricity
costs, benefitting the 1 percent while the 99 percent pays twice, the best
investment you can make is to vote accordingly.
The author of Energy Freedom, Marita Noon serves as the executive
director for Energy Makes
America Great Inc. and the companion educational organization, the Citizens’ Alliance for
Responsible Energy (CARE). She hosts a weekly radio program:
America’s Voice for Energy—which expands on the content of her weekly column.
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