Are Utilities Wilting From Heat of Solar Competition?

A man brooms in front of a house with solar panels on the roof in Grevenbroich near Aachen, southern Germany on September 11, 2012. (National Journal)

Solar energy has become increasingly powerful. Its rise to the top, however, hasn't been without a few bumps along the way.

Regulatory battles pitting the solar industry against power companies in a fight over payment models played out in several states this year. As the dust settles, solar providers are claiming victory. Utilities, on the other hand, are trying to reframe the conversation entirely by insisting they aren't an enemy of the industry.

Much of the debate so far has centered around a policy on the books in 43 states called net-metering. Net-metering allows rooftop solar owners to sell excess electricity back to the grid, with utilities issuing full retail credit to the customer based on the amount of power they provide.

Utilities are pushing to scale back or get rid of net-metering, calling it a subsidy that solar has outgrown. The rooftop solar industry, on the other hand, has resisted the fight to dismantle net-metering, arguing that it's an equitable way of paying for power generation.

In a series of high-profile cases this year in Arizona, California, Idaho, and Louisiana, state lawmakers and regulatory commissioners sided with industry and moved to either uphold or strengthen net-metering.

"The national story right now is quite clear," said Bryan Miller, the president of the Alliance for Solar Choice, a solar-advocacy organization. "There have now been four major verdicts on net-metering, and in every case proposed regulatory changes to the policy have been rejected."

A second point of contention has been whether utilities should charge solar customers extra. Utilities say additional fees are needed to defray the cost of grid upkeep. Opponents say power companies simply want to stamp out competition.

In November, Georgia Power backed down from a proposal to tack on fees for rooftop solar customers amid pressure from consumer advocates and solar boosters. And in Idaho, the state public utilities commission rejected a similar proposal.

Arizona bucked the trend when the Arizona Corporation Commission decided that Arizona Public Service, the state's largest utility company, could hike rates for solar customers.

It sounds like a win for the utility. But solar groups say it's not.

"In Arizona, APS got a lot less [in terms of the fee] then what they were asking for," Miller commented. "They wanted the fees to be somewhere in the range of 50 to 100 dollars so the final ruling shows the political boundaries of the issue. And at the same time the commission upheld net-metering."

Utilities providers, unsurprisingly, have a somewhat different perspective.

"The commission's decision recognizes there is a cost shift occurring where solar users aren't paying what they should for use of the grid," said David Owens, the executive vice president of the Edison Electric Institute, a trade association for U.S. investor-owned electric companies.

Solar groups gained more ground than they lost this year. But declarations of victory by either side fail to capture the whole picture.

"There is an unfair characterization of utilities versus solar," Owens said. "I'm not afraid of rooftop solar. We see opportunities there and we're investing in utility scale and other solar projects. We're not anti-solar at all."

What is clear is that heading into next year the question of solar power payment has not been resolved.

State-level decisions impacting net-metering and fees for solar customers are begining to look like just the start of a much larger conversation around reworking utility payment structures in the age of distributed generation, an era whose hallmark will be customers that create their own electricity without needing to rely on a centralized power generator.

Both sides know the conversation is coming, if it hasn't already arrived.

"What we need to be talking about is what's the best way to allocate costs and how can we do this equitably and continue to enhance the grid," Owens said. "What we've seen this year is a recognition in various states that current rate-design structures are not working and they need to be revisited."

For once, rooftop solar advocates don't disagree.

"I think we're seeing is that regulators realize that you have to address these issues in the context of rate design," Miller said. "The main thing is that when we look at rate design as a whole, solar shouldn't be made a target."