In Harness the Sun (Beacon Press, 2015), Philip Warburg shows how solar energy has won surprising support across the political spectrum. Prominent conservatives embrace solar power as an emblem of market freedom, while environmental advocates see it as a way to reduce America’s greenhouse gas emissions. At the same time, economic-justice activists celebrate solar’s potential to lift up low-income communities, and Native American leaders welcome the income and jobs that the industry will bring to their communities.
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Solar Energy's Promising Future in America
Solar energy’s time has come. Just a few years ago, as I was putting the finishing touches on a book about wind power, friends asked if my next would be about solar. I dismissed the idea at the time. If I ever wrote a book about solar, I told them, I’d have to call it “Dim Sun.”
How things have changed! On my computer screen, I marvel at the steady tick of kilowatt-hours produced by our home’s rooftop solar array. It generates about three-quarters of the electricity we need to run our appliances, light up our rooms, and keep a hybrid electric vehicle fully charged. Every year our solar panels spare the globe about 3.6 tons of CO2 emissions from the coal- and gas-fired plants that still supply most of New England’s power.
At last we have entered an era when solar energy is not just an environmental virtue but is also a boon to the economy. More than 640,000 Americans have already installed solar power on their homes and businesses, and almost 174,000 US workers have found jobs in the solar industry. Those jobs will grow in the years ahead, as solar energy reaches millions of American homes, businesses, farms, public buildings, and the portfolios of power companies large and small. Over a century has passed since Albert Einstein identified the sun’s photoelectric effect in 1905 — a discovery that later earned him the Nobel Prize for Physics. I can only imagine how delighted he would be by our progress, however belated, in harnessing this formidable source of power.
It seemed that a new solar era was dawning in the years following the 1973 Arab oil embargo. President Jimmy Carter proclaimed a solar revolution, calling for a fifth of America’s energy to come from the sun by the year 2000. The first federally designated Sun Day was held in 1978, and the government’s newly created Solar Energy Research Institute pressed ahead with a bold agenda for solar R&D. With strong bipartisan congressional support, Carter authorized tax incentives that created a burst of solar energy investment. While a few power plants were built using mirrors to concentrate the sun’s heat for electricity production, photovoltaic technology — converting sunlight to solar power — remained a rare luxury, primarily used on satellites where the need for electricity in orbital space justified the exorbitant cost. Solar water heaters, much cheaper and easier to build, were of greater practical value here on earth, and Carter — amid much fanfare — had one such system installed at the White House.
Then came the bust. In the 1980s Ronald Reagan purged federal support for renewable energy and ordered Carter’s solar water-heating panels stripped from the White House roof. Unable to compete with cheap western coal and deregulated natural gas, solar energy’s fate seemed to be sealed.
Yet today Americans are investing more money, and greater hope, in solar energy than ever before. Though solar energy has many applications, producing electric power from the sun has taken center stage as US and foreign companies vie for a share of this rapidly expanding market. Along with shrinking photovoltaic (PV) manufacturing and installation costs, favorable policies at the state and federal levels have created whole new cohorts of solar stakeholders ranging from homeowners and businesses to electric utilities and financial institutions. During 2014, a new solar system was completed at the rate of one every 2.5 minutes, reflecting an overall investment of $17.8 billion that year.
Even more impressive is solar power’s share of US investment in new electrical generation. In 2014, solar accounted for 32 percent of all new generating capacity, outpaced only by natural gas power plants, which captured 42 percent of new capacity. Wind came in third, at 23 percent, while investment in new coal plants was negligible.
Much more than an echo of our earlier flirtation with renewable energy, solar power is part of a sea change that is sweeping through university labs, policy think tanks, and corporate boardrooms, where recognition is growing that a fundamental shift away from carbon-based fuels is imminent and inevitable. The devastating impacts of climate change may be too seldom acknowledged by our political leaders, but the overwhelming scientific evidence has persuaded technology innovators as well as broad segments of the public to embrace a major push toward renewable energy.
Solar electricity supplies less than half a percent of America’s power today, yet it’s no idle dream to foresee a quarter or more of our electricity coming from the sun in a few decades’ time. The National Renewable Energy Laboratory (NREL) has estimated America’s solar potential at more than a hundred times our total electricity consumption, with rooftop installations alone capable of supplying over a fifth of our power needs — a contribution that could grow as solar technology improves. The same government lab has projected that solar and wind power could provide almost half of America’s electricity by 2050, using technology that is commercially available today. These technologies, together with hydro-power, biomass-fueled power plants, and other renewable sources of electricity, could generate 80 percent of our mid-century electric output, NREL predicts. Imagine the impact that would have on America’s carbon footprint!
Despite all this promise, America has some catching up to do. We may have far greater land resources and sunnier weather, on the whole, than much of Europe, yet we lag far behind many European nations in our per capita use of solar power. Germany leads the world in both per capita and total use of solar energy, despite its notoriously gray climate. A highly publicized 100,000 Roofs Program got the ball rolling back in 1998, and vigorous subsidies raised that country’s solar power to 436 watts per person by 2013 — more than 11 times our own reliance on the sun, which stood at 38 watts per capita that year. Italy earned second place with 294 watts of solar power per person; next came Belgium, Greece, and the Czech Republic. In all, eighteen European countries delivered higher per capita solar use than the United States.
But American solar power is growing fast. By the end of 2014, we had enough solar electric-generating capacity to supply all the needs of four million American households. The solar power installed during that year alone amounted to nearly half of all previously installed capacity. If we can maintain that momentum in the coming years, a robust, solar-powered future is within our reach.
My personal solar journey began in our century-old home, just a short trolley ride from downtown Boston. I have spent most of my career as an environmental watchdog, railing against corporate polluters and advocating for cleaner energy. My wife, Tamar, is an architect who has designed many green buildings for others. As the price of solar panels spiraled downward in recent years, we decided it was time to make renewable energy a part of our personal as well as our professional lives. Our new solar array does just that.
But solar power’s promise extends far beyond environmentally minded homeowners who are looking for ways to reduce their families’ out-sized carbon footprints. The dollars-and-cents reality today is that solar power is a good investment. Why else would business titan Warren Buffett buy up California solar farms worth several billion dollars? Why would Google be investing $280 million in a fund to finance home solar systems and hundreds of millions more in utility scale solar plants that feed their power into the grid? And what other motivation would drive Walmart to place rooftop solar arrays on 250 of its properties, with plans to reach a thousand of its stores and warehouses by 2020?
Installing solar panels on our home was the beginning of an exploration that took me to football arenas, big-box stores, industrial warehouses, and college campuses where the sun’s energy is being tapped. I also visited cities, towns, and counties whose political and business leaders are pioneers in advancing solar energy. Some of these communities defy easy stereotypes about renewable energy as the domain of enlightened liberals and well-to-do suburbanites. In Lancaster, California, ultra-right-wing mayor Rex Parris has set his formerly crime-ridden city on a course to becoming what he brashly calls “the solar capital of the world,” where solar power is mandated in all new residential neighborhoods, PV panels have been installed on nearly all public buildings, and utility-scale solar power plants are quickly going up on vacant land within the city’s borders. Lancaster’s demographics contrast sharply with upscale, super-progressive Marin County, where clean energy maverick Dawn Weisz has waged a successful campaign to create a community-based alternative to buying up power from utility giant PG&E. Here in my home state of Massachusetts, I saw how political savvy has fused with economic acumen to make the working-class city of New Bedford, once a center of whale oil production, a state leader in solar energy development.
America’s brownfields — our abandoned and under-used industrial sites — are a huge, yet largely unrecognized solar resource. My travels took me to several of these sites: a garbage mountain overlooking lower Manhattan, a contaminated former factory site on Chicago’s South Side, and a rocket propulsion test site east of Sacramento were among them. On these visits I met entrepreneurs and community leaders who have succeeded in turning gritty wastelands into renewable energy powerhouses. According to the US Environmental Protection Administration, harvesting the sun on brownfield properties like these could supply more than seven times the power needs of every household in the nation.
Appealing though it may be to capture the sun’s energy as it falls onto our built environment, some of our greatest solar power opportunities lie outside our cities and towns, in open spaces where we can build solar farms that — at their peak — can match the output of coal- and gas-fired generating stations. By deploying solar technology across thousands of acres, we can also achieve economies of scale that are beyond the reach of smaller, scattered solar installations on our homes, commercial and public buildings, and urban brownfields. About half of all solar power in America today comes from sprawling solar complexes like the ones I visited in the Arizona, California, and Nevada deserts. With proper access to the grid, these renewable energy powerhouses can be vital suppliers of electricity to major metropolitan areas hundreds of miles away.
America’s open spaces make for easy construction of large-scale solar power complexes, but I quickly learned that one person’s undeveloped land is another’s biodiversity treasure. Solar developers and conservationists are working hard — and often together — to ensure that utility-scale projects, when built, pose minimal harm to vulnerable earthbound species like the desert tortoise and the giant kangaroo rat. They are also grappling with the risks posed to bird life by solar power towers, which use thousands of giant mirrors to convert the sun’s heat to electricity-producing steam.
My travels also took me to a number of Native American communities, where I spoke with tribal officials and entrepreneurs about the solar initiatives that they are beginning to advance. Some tribal leaders see solar power as a way to build a more sustaining and respectful relationship to traditional lands while bringing much-needed income to their tribes. Others suspect that solar projects may simply be the latest attempt by non-Native peoples to exploit tribal energy resources. They remember the uranium mines that sickened so many of their people until they were finally banned a decade ago — on Navajo lands at least.
They are intimately aware of the hardships as well as the economic gains that have come from the coal mines and coal-fired power plants that they allowed to be built on their reservations. The jobs were — and still are — desperately needed, but at what cost to their traditional landscapes and their people’s health?
Making the sun a major American energy resource isn’t just about building new power plants; it’s also about producing and responsibly handling all the equipment we need to harness the sun’s energy. Along with taking the pulse of American solar manufacturing in the face of fierce competition from China, I investigated some of the knottier issues of solar waste management that will emerge in the years and decades ahead.
Industry leaders will soon need to come up with a responsible way to deal with the billions of discarded panels and other solar hardware that will accumulate as we ramp up our use of solar power.
Of paramount importance are the state and federal policies that are now making it possible for solar energy to compete in a marketplace still dominated by carbon-based fuels and nuclear power. Are energy pundits exaggerating when they warn of a utility death spiral brought on by a shift to solar and other decentralized modes of power generation, storage, and use? Is there a new role for electric utilities in balancing these new energy resources with conventional means of electricity generation and distribution? In grappling with these questions, I sought out the wisdom of cool-headed analysts and the emboldened visions of industry iconoclasts.
America’s shift toward solar power is one piece of an enormously challenging puzzle. The Intergovernmental Panel on Climate Change warns that we will need to reach 80 percent reliance on low-carbon fuel sources for our global electricity needs by 2050, and then move almost entirely away from the burning of fossil fuels for power generation by 2100, if we are to avert potentially catastrophic climate change. Our glaciers are already melting; our oceans are warming; and extreme weather events are exacting a mounting toll on human communities, natural habitats, and vulnerable wildlife species. What we are witnessing is no more than a gentle preview of the havoc that awaits us if we ignore the overwhelming scientific consensus about rising greenhouse gas concentrations and their global impact. Left unchecked, the burning of fossil fuels will disrupt the lives of millions of people, raise the specter of war over food and water scarcity, and irreparably damage terrestrial and aquatic ecosystems.
As one of the biggest producers of the greenhouse gases that threaten our global environment, America has a duty to lead the way, rather than lag behind, in making these momentous shifts. Through the personal choices we make, the policies we adopt, the technical genius we apply, and the entrepreneurial spirit we engage, we can make a difference.
Disrupting the Utility Status Quo
Solar power is a newcomer to an industry dominated by players with a strong interest in preserving their primacy in the energy field. For decades, our coal, gas, and oil industries have been showered with government subsidies ranging from bargain-basement leases on mineral rights to tax breaks amounting to billions of dollars per year. Civilian nuclear power, spun off from untold billions in federally funded weapons research, has enjoyed ongoing government support in the form of research funding, tax breaks, a federally guaranteed cap on nuclear plant liability in the event of a catastrophic accident, and the right to continue operating despite the lack of any accepted solution to the nuclear waste quandary.
Along with these overt subsidies, America’s fossil fuel–burning power plants have until recently been exempt from any meaningful restraints on their carbon emissions. The Obama administration’s efforts to regulate CO2 emissions from coal-fired power plants are an important first step, but we remain without a carbon tax, a nationwide emissions trading regime, or any other means of monetizing the environmental and public health costs of the greenhouse gas emissions produced when we generate electricity from carbon-based fuels. Recent government efforts to stimulate solar power development must be viewed against this backdrop of official neglect and government largest supporting carbon-based fuels and nuclear power.
Of all the government policies that have seeded the growth of American solar power, none has had a bigger impact than the 30 percent investment tax credit that the federal government has made available to solar investors large and small. Together with the precipitous drop in hardware costs, this incentive converted my own family from wait-and-see skeptics to enthusiastic buyers. To homeowners, businesses, and utility-scale solar developers, the tax credit has been an enormous boon.
Though Republicans have assailed the Obama administration for its pro-solar fiscal measures, the investment tax credit actually has its roots in the Energy Policy Act of 2005, signed into law by George W. Bush. Initially the tax credit applied only to residential and commercial investments in solar and other renewable energy technologies, but Bush later allowed utilities to claim the credit. He also approved an extended timeline for eligibility, making the credit available to all qualifying projects placed in active service by the end of 2016.
During the darkest days of the recession, Barack Obama took an additional step that made a huge difference to utility-scale solar developers as well as businesses installing their own solar systems. As part of his economic recovery package, the president allowed for the conversion of the investment tax credit to an outright Treasury grant. At a time when potential solar developers lacked sufficient taxable income to avail themselves of the tax credit, this move made the difference between “go” and “no go” on a number of major solar projects. As of May 2014, grants disbursed by this program added up to nearly $6.6 billion, allowing 5.4 gigawatts of new solar power to be built — equivalent to supplying all the electricity needs of roughly nine hundred thousand American homes. Though the application period for these grants ended in 2012, an additional $9 billion is available to developers that met this filing deadline so long as their projects enter into service by the end of 2016.
Even with these sizeable government grants, the developers of utility-scale solar projects were in a bind during the cash-strapped recession years. This was a time when utility-scale solar power had yet to gain a foothold, so institutional lenders were reluctant to risk their constrained capital resources on a technology that they still viewed as financially unproven. The Department of Energy’s clean energy loan guarantee program played a crucial role in filling this gap.
For most Americans, the politically charged furor over the failed loans to Solyndra and a few other clean energy companies obscured the broader, quite momentous accomplishments of the loan guarantee program. Obama administration officials pushed back against critics of the $34 billion program, asserting that investments in clean energy breakthroughs inevitably entail some level of risk. Why else, they reasoned, would government loan guarantees be needed? They also insisted that the program’s losses, including the $535 million default by Solyndra and a failed $70 million loan to another panel manufacturer, Abound Solar, stayed well within the margin of losses that the Department of Energy had budgeted for.
The federal loan guarantees played a particularly important role in launching utility-scale solar power plants. “The whole idea of utility-scale solar . . . did not exist before 2010,” the program’s executive director Peter Davidson reminded members of the Senate Energy and Natural Resources Committee when he was summoned to defend his program. During 2010–2011, the program ventured outside the comfort zone of private commercial lenders, extending credit to half a dozen photovoltaic facilities and another half-dozen concentrating solar power plants — all with generating capacities exceeding 100 megawatts. By July 2013, when Davidson reported to Congress, all of these projects were making good on their loans, creating a sufficiently safe investment environment for leading financial institutions — John Hancock, Bank of America, Citigroup, and others — to enter the field.
Indicative of the transformation that the loan guarantee program has helped catalyze over the past few years, utility-scale solar power has contributed more than half of all newly installed solar power capacity since 2012.
In its effort to help solar and other renewable energy technologies gain a foothold in utility-scale power generation, the federal government has gone beyond providing investment incentives and assurances. By opening up 285,000 acres of federal land for Solar Energy Zones, the Department of the Interior has sent a strong signal that Washington is serious about matching our nation’s enormous land resources to the climate crisis that we face and the renewable energy opportunities that are upon us. Through its RE-Powering America’s Land Initiative, the Environmental Protection Agency has cleared a different pathway to solar energy development by mapping out the solar resources embedded in America’s under-used and abandoned industrial lands. And the Department of Defense has begun looking closely at its own extensive land holdings as promising sites for large scale solar energy development, motivated by its mandate to make its overall energy consumption 25 percent reliant on renewable energy by 2025.
Though less grand in scale, a number of other federal agency programs have begun to play a role in opening up solar energy’s geographical and demographic horizons. With funds made available by the American Recovery and Reinvestment Act, the Department of Labor has given out grants to a number of nonprofits engaged in training unemployed minorities, veterans, and others to reenter the workforce with solar installation and other clean energy skills. Solar arrays are also among the investments covered by the Department of Housing and Urban Development’s $250 million Green Retrofit Program for Multifamily Housing.
As important as federal leadership has been to the mainstreaming of solar power, many of our states have been on the front lines of bringing solar technology to American households, farms, businesses, and electric utilities. Renewable electricity standards have been critical to creating a strong normative framework for deploying solar and other renewable energy technologies in twenty-nine states plus the District of Columbia, where they have been adopted. While California arguably leads the pack with its 33-percent-by-2020 mandate, Nevada has a standard calling for 25 percent of utility-supplied electricity to come from renewable sources by 2025, and as part of that broad requirement, solar energy must provide 6 percent of the electricity sold. New York’s renewable electricity standard has an interesting twist: it requires “customer-sited” renewable energy — electricity generated at homes and businesses or renewable technologies such as solar water heaters that reduce electricity demand — to meet roughly 8.44 percent of the state’s electricity needs, within a broader statewide commitment to achieving 30 percent reliance on renewable energy by 2015. To meet their renewable electricity mandates, many states offer a variety of economic incentives. Some, like the rebates offered to homeowners and businesses by state energy offices, are being scaled back as the economics of solar investments improve. Others, like the renewable energy certificates that solar system owners earn for the power they generate, fluctuate in value with utilities’ demand for renewable electricity, as needed to keep pace with their statutory obligations.
Of all the state-based solar incentives, solar net metering is perhaps the most controversial. Net metering has been adopted, in one form or another, by forty-six states plus the District of Columbia. In some of these jurisdictions, net-metered customers are credited for the full retail value of their surplus power, which is fed back into the grid and is available for other customers’ use. Typically the amount of this surplus is limited by a cap on the size of net-metered PV systems, often expressed as a percentage of the customer’s estimated annual electricity usage. In other states, fees and other pricing mechanisms are used to chip away at the economic gains of net-metered power. Utilities favoring these levies contend that solar customers should pay their fair share of the fixed costs for electric distribution and backup power; pro-solar advocates see utilities as penalizing net-metered customers for investing in a social good that actually saves utilities money. Nowhere has public debate over the shape of net metering policies been as bitter or high-profile as in Arizona.
Barry Goldwater Jr. may seem a strange champion of solar energy. After all, he’s the son and namesake of a man who, as Lyndon Johnson’s 1964 presidential challenger, declared that America would be a better country “if we could just saw off the Eastern Seaboard and let it float out to sea.” Barry Jr. established his own conservative credentials during fourteen years in Congress, but today he is Arizona’s most ardent advocate for a power source that, until fairly recently, was widely viewed as the domain of liberal idealists.
As it turns out, defending solar power flows naturally from Goldwater’s deeply held libertarian beliefs. Now the chair of Arizona’s pro-solar coalition, Tell Utilities Solar Won’t Be Killed (TUSK), he explains in a series of TV spots why he has become such a fierce defender of net metering. “Conservatives want — no, they demand — freedom of choice, whether it’s health care, education, or even energy,” Goldwater says in one of these ads. “We can’t let solar energy be driven aside by monopolies who want to limit that freedom of choice. It’s not the American way. It’s not the conservative way.” To drive the point home, a menacing wildlife scene flashes across the screen—of a large gorilla seizing and then tossing a much smaller gorilla to the ground. We then hear a deep male voice: “The 800-pound utility monopoly is trying to kill the independent solar industry in Arizona. . . It wants to harm the little guy.”
Arizona Public Service (APS), the 800-pound gorilla in this ad, is the state’s largest electric utility, serving most of the Phoenix metro area and several other cities. It became a magnet for solar advocates’ indignation when it sought to impose new charges on residential solar customers, to make up for revenues lost because of lower electricity sales to those households. For APS, like other electricity providers, many of the fixed costs of providing reliable power to its service territory are recovered through the fees it charges per kilowatt-hour. When power purchases plummet for a solar household, APS argues that ratepayers without solar arrays end up bearing a disproportionate share of the costs associated with building, upgrading, and maintaining transmission lines, distribution networks, and generating stations.
To get a better grasp of APS’s reasoning, I met with Greg Bernosky, manager of state regulation at APS and formerly head of the company’s renewable energy program. As recently as 2009, he told me, APS had just nine hundred solar customers. By 2013 that number had reached twenty-one thousand — out of a total of 1.1 million ratepayers. Solar installations were almost nowhere in sight as I scanned miles and miles of sunny sprawl from an upper-story window at the APS headquarters in downtown Phoenix, but APS is looking toward a future when customers with their own solar power systems will make up a much bigger share of the company’s portfolio. This isn’t just a fear; it’s mandated by Arizona law, which requires 15 percent of retail electricity sales to be based on renewable energy by 2025. Of that renewable energy, at least 30 percent must come from “distributed resources” like solar arrays on residential, commercial, and public buildings, adding up to about 4.5 percent of total retail electricity. And of that 4.5 percent, half must come from residential installations.
Bernosky tells me that by 2015, his company will get 11 to 12 percent of its power from renewable energy — way ahead of the 5 percent threshold mandated for that year by the state. While most of that power will come from large, utility-scale solar farms like the Solana parabolic-trough facility I visited in Gila Bend, he focuses on the problems posed by residential solar systems. He offers a hypothetical: a new residential development where most of the homes are equipped with solar. “There’s still all the required infrastructure to get power delivery to everyone,” he says. “We can’t not provide the infrastructure assuming that solar will do the job.” He has a point: solar arrays only produce power when the sun is out, so when householders cook their dinners, wash their dishes, run their washing machines, watch TV, and go online during the evening hours, APS has to supply all the power they need. And APS also has to be ready to absorb any surplus power that these same households feed into the grid during peak sunlight hours when their electricity use may be less than the output of their solar arrays. To qualify for net metering under Arizona law, a home solar installation must be sized to produce no more than 125 percent of the household’s “total connected load” — the power consumed when all appliances, from light bulbs and computers to air conditioners and clothes dryers — are operating at their full rated capacity. Since normal use falls far short of this maximum, solar arrays can run up a sizeable surplus that APS and the state’s other utilities are obligated to credit at the applicable retail rate.
In the summer of 2013, APS laid out a number of options for recouping more of its fixed costs from solar customers, including a surcharge per kilowatt-hour that would add at least $50 to the monthly electric bills of new solar customers. This triggered what Bernosky remembers as a “sound byte war,” pitting APS against TUSK and other solar industry proponents who felt the utility was seeking to strangle the state’s future prospects for distributed solar power.16 Through its parent company, Pinnacle West, APS channeled $3.7 million into ads aired by the utility-supported Edison Electric Institute and two antitax groups called Prosper and 60 Plus. “We are in a political battle,” APS spokesman Jim McDonald said to the local press. “We didn’t ask for it. But we are not going to lie down and get our heads kicked in.”
In addition to their dueling ads, APS and its detractors deployed experts to catalog the costs and benefits of distributed solar. Drawing on a study it commissioned, APS estimated that each home solar array shifts $1,000 in costs per year to customers without solar. A report commissioned by the Solar Energy Industries Association came to a very different conclusion. It found the economic benefits of residential arrays to exceed the costs to APS ratepayers by more than 50 percent, factoring in the avoided fuel, transmission, and distribution costs as well as the reduced need to build new conventional power plants.
Weighing the different sides’ widely divergent assessments, the Arizona Corporation Commission voted to impose a monthly fee of 70 cents per installed kilowatt on all new home solar installations, or about $5 per month for the average solar customer. That was much less than APS had hoped to recover, but it did reflect an attempt to balance the state’s interest in promoting distributed solar energy with its concerns about fairness to non-solar ratepayers. Commissioner Susan Bitter Smith stressed her state’s important role in setting “the appropriate tenor for the conversation” in the many states where the debate about net metering has been heating up.
That “conversation” has spread quickly. Colorado’s biggest retail electric company has sought to limit the amount of new net-metered solar capacity in its network while pro-solar advocates have set their sights on a Million Roofs campaign that would raise solar electricity from distributed and utility-scale projects to nearly one-fifth of the state’s total power use. Free-marketeering Tea Party activists in Georgia have created a Green Tea Coalition, echoing TUSK’s support for solar net metering as a matter of unhampered individual choice.
And a high-profile legislative debate in California led to the adoption of a law that extends net-metered solar power to new as well as existing customers through July 2017, but with a cap limiting it to 5 percent of each utility’s aggregated peak customer demand.
Along with bringing to the surface disparate views on the costs and benefits of distributed solar, the net-metering debate raises much more fundamental questions about the future of electricity production in America — a sector that NRG Energy’s CEO David Crane has bluntly called “an industry of Neanderthals.” Crane’s company, with two-and-a-half million customers, is the nation’s largest independent power producer. Its assets run the gamut from coal, gas, and nuclear plants to rooftop solar installations like the ones I toured at Arizona State University and Gillette Stadium. Crane’s often brash observations have shaken the electric power industry from within. Though he clearly revels in being the utility sector’s bad boy, his words feel genuine when he warns that our nation’s big electric power providers must adapt to a much more decentralized, customer-driven model if they are to survive beyond the next few decades. Speaking to a crowded audience at the Massachusetts Institute of Technology, Crane said: “Hopefully before the end of my life, we’ll actually be pulling down high-voltage transmission lines around the country.” He foresees a new electric order in which electricity consumers will exercise much greater individual choice in the way they purchase and produce the power they need.
In Crane’s imagined future, rooftop solar and other distributed power sources will be backed up by compact gas-fired power plants that transform neighborhoods, corporate campuses, and even individual homes into self-sufficient energy islands. When this happens, he asserts, “big centralized power stations will be a thing of the past.” Revealing just how far down the power-production food chain his company is willing to go, Crane can point to NRG Home Solar’s scramble for a share of US residential PV installations.
Though his company lags behind SolarCity and several competitors in this market niche, Crane is committed to expanding NRG’s home-focused presence in California and other solar-friendly states. He can also describe NRG’s recent acquisition of a start-up company called Goal Zero, which manufactures handbag-sized, solar-charged battery packs and solar-powered mobile generators for household emergencies.
When I began getting really interested in renewable energy in the 1970s, people who advocated for local energy self-reliance were seen as anti-corporate radicals, communal utopians, survivalists, or all of the above. Breaking free of distant, profit-hungry utility giants ran hand-in-hand with the aspiration to tap seemingly limitless sources of clean energy such as the wind and sun. Today energy autonomy for localities, businesses, public institutions, and even individual households is moving toward the mainstream, espoused by corporate executives like David Crane as well as political conservatives like Barry Goldwater Jr. This reflects a momentous shift away from a status quo that keeps electricity consumers wholly dependent on industrial-scale power plants and a vast network of transmission and distribution lines. Along with the emergence of technologies that can deliver electricity on a much more localized scale, we are developing a whole new vocabulary to represent this shift toward a decentralized energy future. Most benignly, we speak of “distributed energy systems” that can ease, if not eliminate, our dependence on big power plants and the fossil and nuclear fuels they rely on. To reflect the transformative nature of innovations like rooftop photovoltaics, decentralized power storage, and smart energy metering, we refer with excitement or anxiety (depending on our particular perspective) to “disruptive technologies” that will change the way we produce, store, and use electric power. And in a growing number of utility boardrooms, company executives and their advisers warn of a “utility death spiral” in which central generating stations and costly transmission investments lose their value as more and more customers develop their own independent power resources.
The Edison Electric Institute (EEI) sees itself as the voice for America’s investor-owned electric utilities, which serve 220 million Americans in all 50 states and employ more than half a million people. A study recently commissioned by EEI, Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business, takes little comfort in the fact that distributed energy resources make up less than 1 percent of America’s total electric load today. The study anticipates a loss in utility revenues in the short term, as customers generate and store more of their power on-site. Investor profits will then decline, making it harder to raise capital for new facilities or necessary upgrades to existing ones. Rate increases may help fill revenue gaps in the short term, but over the longer haul, the higher cost of power will raise the risk of customers’ “fully exiting from the grid,” causing “irreparable damages to revenues and growth prospects.” This is the utility death spiral as EEI foresees it.
Those who ponder the fate of electric utilities in the face of rapid technology changes and expanding consumer choice tell various cautionary tales — of the airlines that evaporated as a result of that industry’s deregulation in the 1970s; of Kodak’s and Polaroid’s failure to make the leap to digital photography; of the phone companies that didn’t keep pace with the shift toward mobile telephony and bundled media services. To be sure, EEI is right: distributed energy resources do pose a threat to utilities as they are currently structured. So long as utilities view their primary function as pumping electrons through wires rather than satisfying a more diversified set of energy needs, their business model will be vulnerable to the innovations in energy supply, storage, and management that are now penetrating the retail electricity marketplace. That threat may be marginal today, but if a quarter or more of our power needs will someday be met through distributed energy systems, the impact on utility bottom lines will be momentous — unless those companies radically reshape their business models.
What exactly might those new business models and services be? The EEI study expresses skepticism about utility programs that offer incentives for energy efficiency and demand-side management; past efforts to recover those investments from ratepayers have not been a pleasant experience, it says. (Of course, that is exactly where some of the biggest progress can be made in cutting our greenhouse gas emissions, and utilities need to be working actively with their customers to help them reap those opportunities.) A more promising opportunity for future profits, the study maintains, lies in utilities claiming “ownership of distributed resources with the receipt of an ongoing service fee.”
Applying this general model, utilities can step into the role now played by SolarCity and other private companies that retain third-party ownership of rooftop solar arrays on homes and businesses, either leasing them to their customers or selling them the electricity produced via power purchase agreements. German utilities, facing much higher levels of solar penetration than most US utilities, are actively considering this option as a way to recover some of the revenues they have lost to distributed solar generation. And in Arizona, two of the state’s biggest utilities — APS and Tucson Electric Power — have provisionally won the right to lease rooftop solar arrays to their residential customers.
Another way for utilities to secure a share of the distributed solar realm is to own and operate community solar installations. This avenue is already being pursued by a number of utilities that have built their own community-scale PV installations and have invited customers to buy a share of the power produced by them. As project owners, the utilities — so long as they are privately owned — can take advantage of the federal investment tax credit and other tax benefits attributable to solar energy. They also can count the output from these facilities toward their renewable energy quotas in the states that have adopted renewable electricity standards.
We may not achieve full autonomy from the grid in the foreseeable future, and that probably isn’t desirable as a long-term goal in any case. Even if we make a sweeping shift to renewable energy, there will still be notable advantages to maintaining and even expanding the US grid. A highly integrated grid will give us access to prodigious amounts of renewable energy in remote sections of the country where nearby populations are small relative to the available clean energy riches. The sunlight that saturates so much of the Southwest is one such asset; the winds that blow through the Rockies and Great Plains are another. As we draw more fully on these resources, there are major reliability gains to be achieved by balancing the variable output of solar plants and wind farms, taking advantage of natural differences in weather conditions across broad geographical expanses. When the wind blows strong in South Dakota, Oklahoma may be suffering summer doldrums. When the sun is beaming down on the Solana solar thermal power plant in Gila Bend, there may be cloud cover at the California Valley Solar Ranch in San Luis Obispo County. And in the evening, after the sun has set on solar power production, wind farms remain a potent energy resource.
The imperative that we maintain a healthy, resilient grid should not, however, allow us to be complacent about fostering a much higher level of local and sublocal energy self-reliance. Solar photovoltaics are just one of many change agents that call for a fundamental restructuring of the way we produce, store, and consume electricity. We can thank iconoclasts like David Crane for challenging the relevance of centrally produced electricity to the environmental imperatives and technological possibilities of the twenty-first century. We can also thank activists like Barry Goldwater Jr. for championing the role of individual consumers in shaping our electricity future. Just as we need to jettison old assumptions about the role of conventional power plants in meeting our electricity requirements, we need to engage creative minds and principled passions across America’s political spectrum as we forge a new set of power dynamics for the nation.
Excerpted from Harness the Sun by Philip Warburg (Beacon Press, 2015). Reprinted with permission from Beacon Press.