Falling residential PV system prices suggest an unprecedented shift in the U.S. solar market and by extension the entire electricity market. How utilities decide to approach solar energy will significantly impact the direction of this shift. Read Shayle Kann’s commentary on the report below.
In the first quarter of this year there were 71.3 megawatts of
residential solar installed in California’s three investor-owned utility
territories, according to our just-released U.S. Solar Market Insight report. Of that total, 13.2 megawatts (18.5 percent) were installed without the support of rebates from the California Solar Initiative (CSI) or any other state-level program.
It would be hard to overstate the significance of this, so I’ll
reiterate. In the first three months of this year, around 3,000
residential solar installations were completed in California with no
state incentives. These installations did benefit from a number of
things: full retail net metering (we’ll come back to this), the federal
Investment Tax Credit and accelerated depreciation, and California’s
relatively solar-friendly rate structures. But even so, this is emblematic of a sea change in the solar industry and, even more importantly, the energy industry.
Historically, residential solar markets in the U.S. were exclusively
driven, and constrained, by state- and utility-level incentives, often
in rebate form. When a sufficiently large rebate was introduced, the
market reacted, but once rebate funding was depleted, the market
disappeared. This served as a de facto cap on residential solar growth,
and it is why the California statistic is so significant. If state-level
incentives are no longer required, there are 3.5 years of runway before
the ITC expires for the market to adapt, expand and mature. Assuming
nothing else serves as a major barrier — and this is a big “if” given
net metering battles and the ever-increasing need for project finance —
the sky is the limit.
From a guest editorial in by Scott Karel in the La Crosse Tribune support of Clean Energy Choice, a 2013 policy goal of RENEW Wisconsin:
Wisconsin citizens have only have two ways to purchase energy for their homes or businesses: either they buy it from the local electric utility or they pay to have their own alternative energy sources installed on their property.
This effectively gives utility companies a monopoly because most people don’t have the disposable income to install such devices on their own.
However, with a little help from state legislators, Wisconsin residents could benefit from more competition in this market while at the same time producing green energy for their own personal consumption.
Third-party owned renewable-energy systems have become an effective method to promote the growth and production of green energy at no additional cost to ratepayers or taxpayers. This system, known as “clean energy choice,” allows a third party to enter into a contract with a farmer, homeowner or business to lease their roof space.
In return, the third-party company will install, operate and maintain, at no cost to the landowner, a solar panel, manure digester, wind turbine or other renewable energy system on their property. The energy from these systems either passes directly to the customer or is sold to the local utility.
Clean energy choice systems are a benefit to all Wisconsin residents for a variety of reasons. For the customers who enter into these agreements, they are able to lock in their utility rates at a fixed amount for the length of the contract, which is typically anywhere from 10 to 20 years.
A fixed energy rate is one of the main reasons that Kohl’s department stores chose to install solar panels on around 100 of its stores located in states that expressly allow third-party ownership of renewable energy systems.
Clean energy choice also creates more competition in the energy market and promotes renewable energy without using government subsidies.
Finally, allowing third-party energy agreements will support the state’s economy by creating more business for the estimated 135 companies in Wisconsin that participate in the solar market.
Currently, laws in more than 20 states — including Illinois, Michigan and Ohio — specifically allow third-party sale of renewable energy to their customers. However, in about 20 other states, including Wisconsin, the law is unclear about whether this type of agreement is allowable.
Third-party energy companies will not attempt to enter into contracts with landowners until there is clarification on this law for fear of being regulated as a public utility.
We think that the energy certainty provided by these agreements would benefit many farmers in Wisconsin who happen to have plenty of wind or open roof space on their buildings but may not have the extra money to install their own wind turbines or solar panels. No law should prevent customers who want to have access to clean energy simply because they cannot afford to install the system on their own.
If you would like to learn more about the Clean Energy Choice legislation being advanced in the Legislature this year, contact me at skarel@wisconsinfarmers union.com or 608-234-3741.
Awards Will Recognize “Engines” for Clean Energy Development
(Madison) – In keeping with the theme of “Powering Positive Action,” RENEW Wisconsin will honor eight companies and organizations whose initiatives and investments in local, clean energy sources set inspiring examples for others to follow.
RENEW will also present its Joel Gaalswyk Public Official of the Year award to Sen. Dale Schultz (R-Richland Center), recognizing his effectiveness as a champion and defender of renewable energy development in Wisconsin.
Sen. Schultz’s award is named after a long-time advocate who lent his strong voice to the cause of advancing renewable energy while a Sauk County supervisor.
The awards ceremony will take place Friday, January 11, 2013, at RENEW Wisconsin’s energy policy summit at UW-Madison’s Pyle Center.
“The Energy Policy Summit is a fitting venue to honor the people and organizations that embraced the vision of energy self-sufficiency and job creation, and made it happen in Wisconsin,” said Michael Vickerman, program and policy director for RENEW Wisconsin, a statewide renewable energy advocacy organization.
“Their solar, wind, and bioenergy installations created jobs, reduced the flow of imported fossil fuels into Wisconsin, and demonstrated responsible environmental stewardship. They truly deserve the recognition, as well as everyone’s appreciation,” Vickerman said.
The following Customer-Generators of the Year will receive recognition for integrating on-site renewable energy to serve their own operations or constituents:
Richland Center Renewable Energy(RCRE), a partnership of Foremost Farms USA and Schreiber Foods
RCRE’s 1.7 megawatt biogas plant in Richland Center converts wastewater supplied by these two local food producers into renewable electricity.
SC Johnson, Racine
SC Johnson’s two-turbine, 3 megawatt windpower installation enables the company to operate its Waxdale production plant with 100% renewable energy generated on site.
Dane County, sponsor of Wisconsin’s first community biogas generating plant.
Dane County’s leadership made possible a 2 megawatt installation near Waunakee that converts manure from nearby dairy farms into clean electricity while reducing nutrient flows into the Yahara Lakes.
Organic Valley Cooperative, La Farge
Its solar and wind generation systems, including a new 2.5 MW turbine in Cashton, supply nearly 90% of the electricity used in Organic Valley’s operations.
Gundersen Health System, La Crosse
With sizable investments in biogas and wind, renewable sources now account for 50% of the electricity used in the company’s facilities in Wisconsin, Minnesota and Iowa.
Epic Systems, Verona
Its 2.2 MW solar installation is the largest in the state, and its 9 MW wind installation was the largest built in Wisconsin in 2012.
The following firms will receive recognition as Renewable Energy Businesses of the Year for the critical roles they played in the development and construction of renewable energy installations for customers:
DVO, Inc., Chilton
In 2012, DVO, Inc. developed, designed, and built five Wisconsin on-farm biogas generation systems with an aggregate generating capacity of 4 megawatts.
WES Engineering, Madison
In its capacity as a wind engineering firm, WES Engineering was instrumental in advancing 18 megawatts of community-based wind energy in three different locations in Wisconsin (Cashton, Mount Pleasant, and Dane County).
The Public Official of the Year award will be given to State Senator Dale Schultz for his thoughtful, forceful and bipartisan advocacy on behalf of local clean energy development.
Michael Vickerman’s commentary in Midwest Energy News on the recent changes in WI renewable energy. Find the original post here.
Commentary: How Wisconsin regulators ‘tax’ renewable energy
|RENEW Wisconsin’s Michael Vickerman
Starting next January, the price of purchasing renewable energy voluntarily through monthly utility bills will spike to all-time highs, thanks to recent decisions rendered by the Public Service Commission of Wisconsin (PSCW) on two popular “green pricing” programs.
The thousands of Madison Gas & Electric (MGE) customers participating in the utility’s Green Power Tomorrow program will see their premiums jump from 2.5 cents/kWh to 4 cents/kWh. That’s an increase of 60 percent. To translate this into dollars and cents, an average MGE customer consuming 500 kWh of electricity per month and subscribing at the 100 percent level will pay $90 more in 2013 for the same amount of renewable kWh sold this year.
Residential customers of Milwaukee-based We Energies (WE) will see an even larger percentage increase next year. In that utility’s rate case, the PSCW jacked up the premium paid by Energy for Tomorrow subscribers by nearly 73 percent, from 1.39 cents to 2.4 cents/kWh. Energy for Tomorrow has more than 20,000 subscribers.
Back in 1999, the year both programs were launched, MGE and WE customers paid an extra 3.33 cents and 2.04 cents/kWh, respectively, for the renewable energy they sponsored. Come January 1st, MGE and WE will likely share the dubious distinction of being the only utilities in the country offering renewable energy at a higher rate than they did in the 1990’s. So much for progress.
Adding insult to injury, renewable program subscribers will be subject to general rate increases approved by the PSCW this November. The utilities sought higher rates to recover the costs of retrofitting older coal-fired power stations with modern pollution controls. The fact that the renewable generators leveraged by program participants will never need pollution control retrofits is wholly disregarded in determining the size of the premium.
This is unquestionably a subsidy that flows from program participants to all ratepayers.
How did this happen?
Since 1999, renewable generation costs have tumbled, while productivity has improved.
A frustrated program subscriber might well ask: If base utility rates are going up, and the cost of renewable electricity is declining, why are premiums going up instead of down?
The short answer is that wholesale electricity prices have sagged in recent years, owing to a combination of unsustainably low natural gas prices, stagnant demand, and rapid expansion of wind power displacing higher-cost generation. In contrast, the price of renewable energy procured under long-term contracts held steady. When prices dropped in the wholesale market beginning in late 2008, the gap between system energy and renewable sources widened.
Though accurate, the above explanation is deeply unsatisfying, because the wholesale “market” is concerned about one thing only: the marginal cost of producing electricity into the grid. Nothing else matters, including the expenditures approved by the PSCW to reduce emissions from older generators. Even though retail customers wind up footing the bill for those upgrades, the wholesale market does not treat pollution control retrofits as marginal costs. Not one cent paid by ratepayers for these expenditures is reflected in the prices that renewable generators compete against.
The net effect of this disconnect is to artificially suppress the price of electricity from older and dirtier generators relative to newer and cleaner electricity producers. Real markets factor in the cost of upgrading and replacing capital equipment that manufacture the product bought by customers. What we have instead is an artificial contrivance that sacrifices long-term considerations like clean air, resource diversity and regulatory risk for the short-term reward of low prices.
Indeed, it would be difficult to design a more punitive market structure for renewables than the one we have at present.
‘Swimming up a waterfall’
Pricing renewable energy against a market operating in real time also undermines a valuable attribute of renewable energy, namely its inherent price stability. In this environment, the only way a customer can directly benefit from a fixed-price energy source like solar is to self-generate at his or her premises to reduce consumption of grid-supplied electricity.
In setting the premium size, the PSCW relied on pricing data at a time when the regional wholesale market was near its cyclical bottom. Electricity prices are now edging upward as forward prices of natural gas have rebounded from historic lows earlier this year. It’s a safe bet that wholesale electricity prices will continue to increase in 2013.
This sets up the very real possibility that WE and MGE will collect more revenue than is necessary to cover the cost spread between system energy and the renewable energy supplies servicing their customers. Unfortunately, the next time the base premium for each utility can be adjusted is January 1, 2015.
For at least a century now, fossil fuels have been the default resource option for most utilities. Against this institutional bias, switching to renewable energy is akin to swimming upstream. But given how far backward the PSCW bent to accommodate utilities’ continued reliance on coal and natural gas, quite a few renewable energy subscribers may balk at the prospect of swimming up a waterfall.
In fairness to MGE and WE, the price hikes approved by the PSCW went well beyond the incremental increases proposed by the two utilities. That’s because the agency relies solely on the wholesale “market” metric described above that filters out all societal benefits from the equation. To the agency, renewables are another source of electrons that deserve no special consideration. And, in reaching its decision, the PSCW disregarded the potential impact that abrupt price hikes might have on customer participation.
Programs outliving their usefulness?
A significant loss in subscribership would be a regrettable outcome if the programs were still viable vehicles for leveraging new sources of renewable energy. Sadly, that is no longer the case.
Earlier this decade, WE and MGE pulled the plug on a popular feature of their programs, specifically the special solar energy buyback rates that were funded with participant dollars. This innovation, which spurred the installation of hundreds of solar electric systems in their territories, succeeded in elevating MGE and WE’s stature while achieving the aims of their participating customers. However, when the utilities eliminated their solar incentives, they also removed the principal rationale for subscribing to their programs.
It seems quite clear that the current crop of voluntary renewable energy programs have outlived their usefulness. They are stagnating under a market structure that distorts and amplifies their true costs as well as a regulatory climate that greatly discounts their benefits to ratepayers. What were once dynamic vehicles for increasing supplies of renewable energy are now little more than feel-good marketing exercises running on autopilot. The value proposition to customers just isn’t there anymore.
There is nothing out there to prevent utilities from revitalizing their green pricing programs and making them useful once again. Such an undertaking, however, would require them to do something they haven’t done before: present an affirmative case for adding more renewables into their energy mix.
To do that effectively, utilities would need to recognize that the fossil energy path leads to a dead-end and that renewables ought to be the default resource option going forward. From that starting point, designing a program in which modest customer premiums actually result in additional supplies of renewable energy should be a simple and straightforward exercise.
It’s the very least a responsible utility should do to reduce the impact of generating electricity on the one planet we are privileged to call home.
Michael Vickerman is program and policy director of RENEW Wisconsin, a sustainable energy advocacy organization. RENEW Wisconsin is a member of RE-AMP, which also publishes Midwest Energy News.
Find the original article post here.
608.255.4044, ext. 2
State’s Renewable Standard Delivers Positive Results
Most utilities already meeting 2015 targets
Most Wisconsin electricity providers have already acquired all the renewable energy supplies they need to meet the state’s 10% target in 2015, according to the Public Service Commission (PSCW). The agency’s annual compliance review showed that nearly 9% of electricity sold by in-state electricity providers in 2011 originated from such renewable energy resources as sunlight, biogas, hydro, landfill gas and wind, compared with 3% in 2006.
“By any measure, the state’s Renewable Energy Standard (RES) has been an unqualified success,” said Michael Vickerman, program and policy director for RENEW Wisconsin. “From the standpoint of job creation, resource diversity, price stability, environmental protection and revenue generation, the RES has delivered exceptional value to a state that is very dependent on imported fossil fuels for electricity generation.”
Passed in 2006, the RES has been the most powerful policy for driving growth in renewable electricity sales. Yet with so many electricity providers already in compliance with their 2015 requirements, the prospects for new investments in home-grown energy sources are uncertain.
“Right now, we don’t have a policy in place for directing investments into clean energy after 2015,” Vickerman said. “If we want to reap the economic and environmental benefits that come with renewables, state lawmakers will have to extend the Renewable Energy Standard or adopt a successor policy.”
“Investments in renewable resources not only supply Wisconsin utility customers with clean energy, they also generate work opportunities for local manufacturers and businesses, additional revenue for local governments, and income for farmers,” said Vickerman.
“Renewable energy should be the cornerstone of an economic development strategy that aims to increase the state’s workforce and expand investment opportunities,” Vickerman said. “We look forward to working with the Governor and the next Legislature to put in place a realistic, low-cost policy framework that maintains the momentum building from the current RES.”
RENEW Wisconsin is an independent, nonprofit 501(c)(3) that leads and represents businesses, and individuals who seek more clean, renewable energy in Wisconsin. More information on RENEW’s Web site at www.renewwisconsin.org.