Fight over Rooftop Solar Forecasts a Bright Future for Cleaner Energy…


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From Scientific American

Americans have begun to battle over sunshine. In sun-scorched Arizona a regulatory skirmish has broken out over arrays of blue-black silicon panels on rooftops, threatening the local utilities that have ruled electricity generation for a century or more. With some of the best access to sunshine on the planet, Arizona boasts the second-most solar power in the U.S.—more than 1,000 megawatts and counting. The state hosts vast photovoltaic arrays in the desert as well as the nation’s first commercial power plant with the technology to use sunshine at night—by storing daytime heat in molten salts.

In terms of infrastructure, such big solar fits as comfortably as a coal-fired power plant in the traditional electricity business model, which involves large plants transmitting electricity over a grid of conducting lines through transformers and into individual homes and businesses. The trouble, from an electric utility’s perspective, is the tens of thousands of Arizona’s total of three million or so homes that have installed small solar: photovoltaic panels made from wafers of semiconducting material, typically silicon, that use incoming sunlight to create an electric current. With these homes making their own electricity, utilities lose their most lucrative customers and confront a dwindling base over which to spread big infrastructure costs, like building new power plants or maintaining the grid. “The net-metered customer does not share equally in the overhead costs associated with the grid or other services provided by the utility, producing a very substantial ‘cross-subsidy’ funded by all other utility customers who must pay proportionately more,” wrote James Hughes, CEO of solar panel maker First Solar, in an op-ed in support of the utility Arizona Public Service Co. (APS) position this past June.

These homeowners have installed photovoltaic panels on their rooftops with the help of cash incentives and a state law that requires the local electricity provider—APS—to buy any excess power produced by an individual home. Such “net metering” programs allow homeowners to zero out monthly or even annual electric bills. That means APS gets nothing from these former customers, and their number is growing. More than 15 rooftop arrays go onto Arizona homes each day, according to the Phoenix-area utility, and the number of such solar independents grew from 4,770 in 2010 to 14,524 in 2012.

In response APS and other utility companies across the country have launched a propaganda war against an energy source that still accounts for less than one quarter of 1 percent of U.S. electricity. In Arizona that fight became very public in 2013, as APS took on such residential solar power in a television ad campaign and mailings. But the utility met resistance from a coalition of liberals and libertarians decrying monopoly or wanting to help cut greenhouse gas pollution. The red on the map that shows the amount of incoming sunshine available in most of Arizona might just as well stand for the bad blood spilled between solar homeowners and the local utilities.

It’s not just Arizona. More than 40 states allow property owners to sell excess energy generated by solar panels onto the electric grid, and many utilities must pay a premium for this resource. Utility companies warn that the lost revenue from solar-powered costumers will necessitate price increases for people without solar panels, because the electric grid and other critical infrastructure must still be maintained. That’s a sticking point for residents like Alicia Roll in Phoenix, who wrote in her complaint to the state: “I’m all for helping preserve the environment but there must be a fairer way of going about it all.”

Solar homeowners, on the other hand, love their lower bills and independence from utility companies. “Why should they be allowed to hold the monopoly on this power source?” asks Tom Morrissey, former chairman of the Arizona Republican Party. “Why should they be the only providers? Why can’t we provide for ourselves, while easing the burden on the power grid?”

The utilities have a point. If solar rooftop arrays became as ubiquitous in home design as chimneys, the U.S. grid could indeed cease to exist—an end to power lines, electrical substations and transformers atop equally archaic wooden utility poles. “Right now our electricity system is very much a command-and-control centralized system,” says David Crane, CEO of Princeton, N.J.–headquartered national energy company NRG, which is attempting to reinvent itself for the less centralized future Crane foresees. “In the future I see an at-home, disaggregated system, with the home like a brain, with supply and demand of electricity being generated in that home.”

The key to Crane’s vision of a decentralized system is the cost of a power producing system to the individual homeowner, and the price of solar power keeps dropping. As a result, solar proponents push for the switch for a variety of reasons that cut across political party lines. This war over solar has pitted Republican against Republican, and formed new alliances between libertarians and liberals.

Sunnier future
The first intimations of war started with Solyndra. The bankruptcy of the would-be manufacturer of innovative tubular solar arrays heralded the arrival of cheap photovoltaic panels, many of them from China. Such modules can be bought in bulk now for as little as 25 cents per watt. Even the electric utility industry recognizes that where residential electricity costs reach 15 cents per kilowatt-hour—or roughly 16 percent of the U.S. retail electricity market—solar is already as cheap as grid electricity. “The solar cost battle has been won,” NRG’s Crane notes. “It’s all friction costs.”

By friction costs, Crane means the cost of finding a solar panel maker and installer, and then filing the appropriate paperwork with the appropriate state and local authorities as well as the local utility, then making sure the solar array is installed properly and safely. Such installation costs at least double the cost of a residential solar system, meaning a typical system costs at least $25,000 to put on a roof and hook up. As it stands, the average solar system in the U.S. costs roughly $4.50 per watt to purchase and install, according to the U.S. National Renewable Energy Laboratory.

But that cost is coming down, too—in some cases to near zero—thanks to solar companies that essentially rent the equipment, such as SolarCity, Sungevity, SunRun and Vivint. The contracts differ but, essentially, these companies pay to install solar panels on a roof and reap any attendant tax credits. Homeowners pay a set rate for the electricity used as well as a lease price, resulting in a total bill that is less than their current monthly electric bill. Most of these companies contract with the homeowner for 15-year leases, which include maintenance, for example, or a power purchase agreement that guarantees a certain rate (the same contract used between a utility and the developer of a big desert solar project).

The idea is to remove the “stigma,” in the words of Solar City CEO Lyndon Rive, that solar is expensive. Solar City, for one, expects to deploy at least 475 megawatts of rooftop solar in 2014, or nearly double its expected installations for all of 2013. It’s a system pioneered by SunEdison with large companies that owned hectares of rooftop space on stores or warehouses, resulting in the creation of what some have called “solar bonds.” SolarCity, in fact, is planning to sell more than $54 million worth of such solar bonds pegged to the company’s thousands of installations across 14 states that will come due in December 2026.

The only traditional utility to do something similar: NRG and its residential solar division. Other utilities, such as Duke and Southern Co., have attempted to block such changes by implementing their own solar-at-home programs that leave the utility in charge.

Now, with solar more than a boutique product for those rich in both kinds of green, utilities have something to worry about. Waking up to the looming threat, utility-funded research outfit the Edison Electric Institute released a report in January 2013 called “Disruptive Challenges” [pdf]. In essence, EEI noted that home solar, dubbed “distributed energy resources” could allow Americans to get off the grid, putting their member utilities into a death spiral of fewer and fewer electricity sales to cover more and more grid maintenance costs. That would drive up electricity prices and, as a result, drive more and more people to install rooftop solar. The parallel is drawn with the telephone monopolies of the 1970s that are, in the words of the report, “not recognizable today nor are the names of many of the players and the service they once provided (‘the plain old telephone service’).” The roughly 3,000 electric utilities that now control U.S. electricity may be as dim a memory in a decade or two.

Spurred by projections of 500 percent growth for solar in the U.S., Arizona Public Services mounted a public relations campaign against its own obsolescence. Backed by EEI and other outside interest groups, APS spent nearly $4 million on TV, print and Internet ads depicting solar homeowners as freeloaders on the grid, and an economic burden to all the households without such solar panels. According to APS ads, such solar homes cost the rest of the utility’s customers at least $1,000 a year, what they dubbed a “cost shift” in anodyne bureaucratic terminology concealing real malice. APS therefore proposed a surcharge, or “sun tax” in the words of opponents, of as much as $100 per month that solar homeowners would pay as their fair share of grid maintenance costs. Some Arizona residents described such ads as “deceptive at best” or “false advertising,” among other, less mild epithets.

The solar industry, consumers and homeowners fought back over the course of 2013, running their own ads touting the benefits of solar, including increased competition for sclerotic monopolies such as APS, self-reliance and less pollution in smoggy Phoenix. They decried the campaign by APS to blame solar homeowners for doing the fiscally and environmentally responsible thing. Homeowner Scott McCay notes that in a decade of home improvements prior to installing solar, like better insulation and more energy-efficient lightbulbs, his electricity use dropped by roughly 18 percent whereas his bill from APS increased by 33 percent, largely because of the shared cost of grid maintenance. As a result, such solar proponents have no love for their local utility.

In fact, utilities may be underpaying solar homeowners for the benefits of rooftop electricity, at least according to an analysis run by one of their own: Texas’s Austin Energy. The municipal utility’s analysis concluded that it should pay to solar homeowners 3 cents more than the retail electricity rate, for savings in transmission losses and the ability to delay building large, centralized power plants that can require multibillion-dollar investments. “We must fight the greedy, unscrupulous tactics of companies like APS every step of the way,” Sun City West-resident Christina Compton testified to the public commission charged with regulating APS and the solar-at-home program last November.

At the end of this first battle, where public comments against any “sun tax” significantly outnumbered those in support, the Arizona Corporation Commission (ACC) agreed to impose a charge of 70 cents per month on solar homeowners. That charge is probably not enough to eliminate the cost benefits of leasing solar arrays from companies like SolarCity. But the war is far from over. “We missed it on this one,” argues Dillon Holmes of Clean Power Arizona, an advocacy organization for renewable energy in the state. “We didn’t do enough to uncover the true effects, both positive and/or negative, of distributed rooftop solar.”

And APS expects to continue to advance the “cost shift” barrage again before the commission in 2014 and beyond. “We applaud the ACC for cutting through the rhetoric and focusing on how the cost shift impacts nonsolar customers,” said APS CEO Don Brandt in a statement on the ruling. “Of course, having determined that a problem exists, we would have preferred for the ACC to fix it. The proposal…falls well short of protecting the interests of the one million residential customers who do not have solar panels.” Perhaps Arizona has in mind what has happened in Hawaii, where the local utility now requires homes that install solar to pay for upgrades to the grid to handle any extra electricity, which has led to a precipitous decline in the amount of solar-at-home installations.

Not your grandma’s utility
The frontlines of solar power aren’t yielding to these threats from the old guard. Solar is only going to get cheaper, as the EEI report and others have noted. Richard Swanson, the founder of solar panel manufacturer SunPower, has argued that the cost of a photovoltaic cell drops by 20 percent every time global manufacturing capacity for such cells doubles. This “Swanson’s Law” for photovoltaics suggests that PV prices are now less than 75 cents per watt. Even in the face of a significant solar tax, photovoltaics might win as harvesting sunshine for electricity grows ever cheaper.

The U.S. Department of Energy hopes to help with that, using some of the human resources it typically devotes to managing the nation’s nuclear arms for ensuring energy, economic and environmental security. Its SunShot program aims to make solar power cheaper than burning fossil fuels, such as coal and natural gas. The program’s name draws explicit parallels to Pres. John F. Kennedy’s “moon shot” of the 1960s, except the funding is not quite as plush. So far SunShot has awarded $87 million to projects that could reduce the cost of solar power to 50 cents per watt to make a module, and 50 cents per watt to install a module. That includes the $10-million SunShot prize for the first three “teams” (read: companies) that achieve $1 per watt for the messy paperwork side of installing solar. “PV modules cost about 1 percent of what they did 35 years ago,” noted Secretary of Energy Ernest Moniz in a talk at Columbia University August 2013. “Now it’s the soft costs that we have to work on more, to get those down.”

Projects also include efforts to build novel types of photovoltaics via the Advanced Research Projects Agency—Energy’s “Full-Spectrum Optimized Conversion and Utilization of Sunlight” or FOCUS program as well as manufacturing processes that could bring down costs. That includes 1366 Technologies’s bid to directly grow the individual silicon wafers in traditional solar panels rather than shaving them from ingots and wasting the expensive material. Such specially treated silicon is responsible for more than half the final price of the photovoltaic module, and sawing off the wafers turns as much as half of that expensive silicon into dust. Growing such wafers individually from melted silicon could cut wafer costs by 80 percent, according to the company named after the wattage of sunlight that hits each square meter of Earth’s atmosphere. And if wafer costs fall, so, too, should photovoltaic prices.

Even as an “expensive” alternative, solar is the fastest growing electricity source in the world. Globally, more than 100 gigawatts of solar power have been installed to date, including some 400 million solar panels, the majority in Europe where subsidies are highest. And although investments were down in 2012—just over $140 billion globally—total installed capacity was up, thanks to the declining technology prices. Solar power may be finally beginning to follow a 25-year path similar to that of now ubiquitous cell phones—from an oddity in the 1990s to world domination in the next decade or so.

All fracked up?
Solar might be growing even faster, if not for another innovation funded by the U.S. Department of Energy: fracking to free natural gas in deep shale. Such shale gas has flooded the market and reduced natural gas prices, resulting in natural gas–fired turbines becoming the technology of choice for producing electricity. Natural gas is killing off nuclear power, slowing the rise of wind and solar, and even shoving aside old, dirty coal.

But natural gas doesn’t have to be tied to big turbines. Most homes in the U.S. are already connected to a distribution system for such natural gas, using it for cooking or heating. That buried distribution system could end up replacing the old electric grid, still carried from place to place atop weather-exposed steel pylons and more than 100 million dead trees, aka utility poles. Novel devices, such as some types of fuel cell, could instead use natural gas to produce electricity cheaply in the home. Or battery systems, like those offered by Tesla, could serve as backup and electricity storage system. Paired with solar cells on the roof, such “disruptive energy resources” could result in one nation, off the grid. “The solar industry belongs with the natural gas industry,” NRG’s Crane says. “Those two go together, they just don’t know it.”

The past few decades’ severe weather caused by climate change—itself largely an outcome of the old electricity model of a big, centralized grid powered by coal-fired plants—may help hasten that transition, blowing down the world’s largest machine, the U.S. electric grid, again and again, until it becomes obvious that reinvesting in an antiquated technology that Thomas Edison himself would recognize is no longer smart or sustainable. Solar can help insulate people from the vagaries of a changing climate (as well as reducing the greenhouse gas pollution causing the changes by replacing fossil-fuel burning to produce electricity.) “We have to help this rebuilding in a smart way, in a way that prepares our energy infrastructure not for the last storm but for the next storm and for the next possibility of major disruptions,” Moniz told the audience at Columbia University last summer, fresh from unveiling a microgrid in New Jersey that will help resilience in the wake of Superstorm Sandy in 2012. “Eighty-four percent of carbon emissions are power-related. Mother Nature seems to be returning the favor with a long-term toll on energy infrastructure.”

The battle lines over this transformation are forming. In Georgia a Southern Co. subsidiary has blocked solar power development. That caused the local Tea Party, led by activist Debbie Dooley, to form what she called the “Green Tea Coalition” with local environmentalists from the Natural Resources Defense Council, Sierra Club and other groups to push for more solar in the state, rather than costly projects such as the new nuclear reactors being built at the Vogtle power plant—the first new nuclear to be approved in the U.S. since 1978—and financed through fees collected before any electricity is produced from new fission. It’s a similar coalition to the one that has achieved the legalization of marijuana in states like Colorado and Washington. “Solar is a natural fit for conservatives,” Dooley says, noting her amazement at conservatives who claim to be in favor of a free market but support a government-mandated monopoly like local utilities. “The bottom line is energy has to compete on a level playing field and let the consumer decide.”

As a result of this unlikely alliance, the Georgia Public Service Commission—an all-Republican committee that regulates the electricity monopoly in the state—voted to require Georgia Power to include more solar power in its plans for future generation. Georgia Power also dropped a plan, at least for the moment, to charge solar homeowners a grid fee. But it remains to be seen whether a state law that blocks homeowners from leasing solar power from companies like SolarCity or SunRun will be overturned.

A schism of sorts is forming within the Republican Party: Libertarians and Tea Partiers like Dooley who support a homeowner’s property rights have sided against other conservative groups like Americans for Prosperity (a group largely funded by oil magnates the Koch brothers) and think tanks like the Heartland Institute. Grover Norquist of the Republican-group Americans for Tax Reform has decried the Georgia “green tea” alliance. “The rooftop solar industry has attempted to co-opt countless conservative groups in its fight to protect crony capitalism,” he wrote in a November submission to the Arizona regulators. “Solar homes effectively avoid paying for the fixed costs of the grid. These costs are like taxes being shifted to nonsolar homes.”

But property rights and self-reliance seem to be issues that Americans of most political persuasions can support, from the primarily blue state of California to the reliably red state of Georgia—and has led to “solar rights” laws in purple Midwestern states such as Wisconsin and Iowa. Barry Goldwater, Jr., son of the famed conservative presidential candidate and a former congressman in his own right, heads the Tell Utilities Solar won’t be Killed, or TUSK, coalition in Arizona. “Rather than innovate or find ways to profit from solar power, APS decries the solar industry and opines that its revenue is heading downward… That’s not the ratepayers problem,” he wrote in a June op-ed. “Instead of trying to fix the problem, APS is trying to fix the game. It’s looking to rig the system so the utility doesn’t have to pay fair market value for the excess electricity that rooftop solar customers send back to the grid.”

So far, the utilities best efforts have not succeeded. According to the Solar Energy Industries Association, more than 100,000 homes went solar in 2013. And a “solar project will be installed, on average, every four minutes in the U.S.”

The full costs and benefits of solar rooftops on homes remain unknown. But a survey of home sales in California found that photovoltaic systems boosted home sale prices by nearly $25,000 in 2009, according to research from Lawrence Berkeley National Laboratory. And solar advocates point to the fact that photovoltaics on rooftops save on the costs of investing in new conventional power plants and grid infrastructure as well as the cost of meeting pollution limits or other regulations, while reducing electricity loss.

Beyond the U.S., solar energy leaders such as Germany and Spain are also now considering a kind of “solar tax” for access to the grid in order to ensure maintenance of their legacy infrastructure. To calm the furor in this country, the Electric Power Research Institute (EPRI) plans ongoing studies to better understand how to integrate into the U.S. grid both solar and traditional power plants. “These systems can be complementary and not competitive,” noted EPRI CEO Michael Howard, when announcing the new research effort on February 10.

In the end, solar may prove an unstoppable force. If solar module prices drop to 50 cents per watt, then solar power becomes as cheap as other forms of electricity in all 50 states, once installation costs are included. In addition, the technology offers some additional benefits, from far fewer climate-changing greenhouse gas emissions than even power plants burning natural gas to reduced use of water compared with the cooling needs of a big coal-fired or nuclear power plant.

As the Edison Electric Institute notes, the proportion of regions where solar at home will be cheaper than electricity purchased from the grid could grow to as much as one third of the nation as soon as 2017. Nowhere is that more true than the desert Southwest of the U.S., in states like Arizona.

In that future of cheap solar the home would be a self-sufficient energy fortress, and perhaps self-driving electric cars would plug in there, to recharge from sunshine. Batteries or even technologies that transform newly abundant natural gas to electricity inside the home could serve as backup for cloudy days. In fact, solar systems paired with batteries or fuel cells could become cost-effective in states besides Hawaii (where it is already so) by the 2020s, according to a new analysis from energy think tank the Rocky Mountain Institute, and partners. “How shockingly stupid is it to build a 21st-century electricity system based on a system of 130 million wooden poles?” asked NRG’s David Crane at the ARPA–E summit on February 25. “The day is coming, within a generation, where the grid is, at best, an antiquated backup system.”

His company helped open the world’s largest solar thermal power plant on February 20, where 347,000 mirrors concentrate sunlight on three nearly five story-tall central power towers at Ivanpah in the California desert, near Bakersfield. But he sees an even bigger future for photovoltaics, and NRG has already installed them at football stadiums across the country, including at Lincoln Field in Philadelphia. Last year nearly one third of new U.S. electric capacity was solar power.

At the same time, NRG is investing in natural gas generators to fit in people’s basements that could either provide all the electricity a house needs or to be paired with rooftop solar cells to offer electricity after sunset—freeing homes in Arizona, Georgia or anywhere else from the grid forever. War is coming, and when it comes, it may sweep away not only the American electric utility as it has been for the last century—the world’s largest machine—but also the legacy car companies and even the most recent iteration of the American way of life, making the bucolic lifestyle of the suburbs sustainable in a novel way. But only if the powers that be stop fighting the sunshine. “All they need is a gizmo in the basement that turns natural gas into electricity and you’re done,” he noted. “You tell your electric company to go jump in a lake.”
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