By Guest Columnist RHONE RESCH, president and CEO of the Solar Energy Industries Association
The numbers don’t lie – 2011 was a banner year for solar energy in America as consumers saw the cost of installing solar drop by 20 percent in just a single year.
The U.S. solar energy industry installed a record 1,855 megawatts of new solar capacity last year, more than doubling the previous record set in 2010. In the fourth quarter alone, the industry installed 755 megawatts of new capacity – more than the solar installation totals for the full years of 2008 and 2009 combined.
There was substantial growth in all market segments –residential, commercial and utility – as well as significant geographic diversification. And as the industry continues to scale, we are seeing larger projects being added to the grid. This is a trend that will continue as more and more utilities recognize the value of incorporating solar energy into their portfolios.
There are now more than 100,000 Americans employed at over 5,600 solar businesses in all 50 states. Many of these are small businesses that have been hit hard by the recession, but they are finding new opportunity for growth in the solar industry.
In Georgia, there are more than 80 companies in the solar value chain including Suniva, MAGE Solar, Inc. and Enfinity Corporation. I will be joining representatives of each of these fine companies – and many others – at the Southern Solar Summit on June 15 in the Georgia Tech Research Institute Conference Center in Midtown Atlanta to talk about the strides solar is making, and what remains to be done.
These companies are leading rapid innovation – across the entire value chain, from manufacturing improvements to new financing and sales mechanisms, that are allowing more and more Americans to go solar.
Looking ahead, the United States is poised for years of multi-gigawatt growth while becoming the largest market in the world for solar. The U.S. is on pace to install nearly 3,200 megawatts of new solar capacity this year with an annual growth rate of 30 percent through 2016.
At that rate, the United States would add more than 25,000 megawatts of new solar capacity between now and 2016. That is roughly the size of 25 coal-fired power plants and represents a significant opportunity for states that aggressively move to obtain a share of this exponentially growing market.
Georgia, with its prime solar resources in America’s Sunbelt, can also enjoy the benefits of a robust solar energy market. But first, policymakers here must remove artificial market barriers constructed at a different time and for a different purpose making it complicated and expensive for consumers to go solar.
In Georgia, if you are a homeowner or business that wants to install a solar system that will allow you to generate your own electricity and reduce your electric bills, odds are you can’t. If you are fortunate enough to get past these arcane, confusing state rules, you still may have to face off against your local homeowner association, which in Georgia has the right to tell you what you can or can’t put on your roof.
The truth is, in Georgia, free markets don’t exist when it comes to energy.
This is unfortunate, because the train is leaving the station. The United States will continue to be one of the hottest markets in the world for solar energy, and the states that open up their electricity markets will be best positioned to reap the thousands of new jobs and billions in economic investment from the solar industry. At this point, Georgia will not be one of them.
But things are changing and fortunately Georgians have strong advocates in the General Assembly, including Reps. Karla Drenner and Don Parsons, as well as Sens. Buddy Carter and David Shafer. These Georgia leaders from both sides of the aisle recognize that solar energy is driving job creation and economic growth as it continues to become more affordable for homeowners and businesses with every passing day.
While the legislative session has ended in Atlanta, there are still opportunities to build support for the 2013 session. As a first step, Georgia should allow homeowners, businesses, schools, churches, and government to sign power purchase agreements (PPAs), to cut their electricity bills with solar energy. Currently under dispute in Georgia, clearly authorized PPAs would introduce competition into the state’s energy market by allowing consumers to sign long-term contracts with companies that provide solar energy.
Carter championed bipartisan PPA legislation earlier this year, but unfortunately it ran into opposition that eventually killed the bill. But there is momentum.
The military has found long-term PPAs vital in its mission to generate more electricity from renewable sources. And lawmakers in Atlanta are hearing from base commanders back in their communities how important PPAs are as they look to cut energy costs and decrease our dependence on foreign sources of energy.
It is important that Georgia does not miss the opportunity it has to be a leading solar energy market in the United States. Stakeholders from across the state must come together – including everyone from the business community to the average citizen who wants the right to generate their own electricity – and tell their representatives in Atlanta that solar energy can work for Georgia, as it does for America, if they make the state’s electricity market a little more free.
Resch will be the morning keynote speaker at the Southern Solar Summit, which is open to the public. For more information and reservations, visit www.gasolar.org.
Photovoltaic (PV) power is only cost effective in Georgia because of large government and utility subsidies. The government subsidy is paid by the taxpayers and the utility subsidy (under government duress) is paid by the ratepayers. Europe has taken away their subsidies and the market is rapidly shrinking.
The reason the cost dropped last year is because of the low cost of PV panels made in China. The US government has recently slapped a large protective tariff on these panels to protect the domestic manufacturers, so look for the price to increase in 2012.
PV will not become cost effective in Georgia until the efficiency of the panels increases while holding the cost level or, better yet, reducing it.
@Burroughston Broch : the utilities really don’t want to talk about their efforts to keep private competition away from their government price controlled monopoly, huh? It’s interesting to watch how quickly they respond by trying to change the discusssion to subsidies or China or anything other than their efforts to keep a boot on the throat of Georgia ratepayers.
@ WOV31 The electric utilities are smart – when they are forced to take lemons, they make lemonade. In this case, they were forced to take PV power, so they decided to make money off it by forcing the ratepayers to foot the inflated bill for PV power, plus a profit for themselves.
Of course they now want to maximize their profit by keeping control of PV in Georgia.
It could be that they really wanted to be in this position and protested just for show. Remember Brer Fox saying to Brer Bear, “Whatever you do, don’t throw me in that brier patch.”
Strange, I don’t hear you complaining about fossil fuel exploration subsidies that exceed a billion dollars nor railroad subsidies for transporting coal? You completely dodge the issue of PPA’s which is key. Your rationale for costs is way out of line, because solar has followed a three decade perfectly straight-line logarithmic cost curve. So what’s your game? What have you really got against it? I don’t think it’s the business case. Because your arguments against the business case break down everywhere. We’re starting to cross grid parity as a country. “electric utilities…forced to take PV Power”….not even close: By aggressively blocking PPAs, Southern Company is stiff-arming solar out of the market. Georgia is one of the sunniest states on the planet. Meanwhile Southern Company is running 30 MW solar in New Mexico…1200 miles from home, because it doesn’t want technicians anywhere near its flagship state. Southern Company wants to own ALL production. So it goes other places to get its experience. PPA’s are key if you want to understand Southern Company’s intentions. Southern Company does not want people putting solar on own their roofs. PPA’s are NOT subsidies.
@KyleSager Let’s get past the buzzwords, please.
I’m an engineer and my company sometimes designs PV installations; 250kW is the largest so far. Solar is not cost effective in Georgia at this time – not even close. If you want to put PV on your house at your cost and keep the total benefit, I’m all for it. But don’t ask me to help you pay for it. The government and the electric utilities are taking my money to pay for somebody else’s PV installation. My game is to stop it.
@Burroughston Broch Solar is not cost effective in Georgia – First: because PPA’s (people’s rights) are being strong-armed out by Southern Company with aggressively heavy lobbying. Don’t even try to imply that PPAs are subsidies. Not even close. Second: Because Southern Company’s aggregate renewable buy-back caps are pathetically, embarrassingly low (they should have to match true aggregate cost of goods sold excluding only transmission and administrative for ANY renewable electrons available), and Third: because nuclear and coal are already massively subsidized all the way up to the end of their value chains. But you will never admit that you are already paying for $14.2 billion in nuclear capital four years before the expansion even goes 1/2 live…And show me a nuclear plant that’s ever been within budget, please do (there has been one, and only one, it’s been nearly 7 decades). Right now, renewable buy-backs have a firm aggregate cap somewhere in the ballpark of 10 MW (T-1 Tariff). That is a joke. Southern Company has this big Sunflower on their website with proclamations about how much they love renewable and they are fighting to avoid it: BECAUSE A SCALABLE POWER SUPPLY IMPLIES OTHER PEOPLE CAN PROVIDE IT. I’m not a fan of ridiculously high 17 cent buy-back but that’s not the point: Southern Company LIKES the high t-1 tariff: because the minute they have to throw the barn doors wide open at true aggregate cost of goods sold per watt, AND residents are permitted to do PPA’s with whomever they choose – You WATCH how fast it happens. You just WATCH. In one decade we’ll be adding hundreds of megawatts annually. So Southern Company likes the high T-1 tariff because it offers a big fat lazy excuse to keep the game negotiable and to keep them in tight control of the market. This way they piddle with a few additional MW’s of renewable buy-back here and there each year to look like they’re doing something. What a joke. I figured your game was to stop it: Real objective…The only real reason to structure in hard blocks for PPA’s and buy-backs is to protect incumbent bulk suppliers. It’s all just to protect big players. If you read the article above at all, the focus was ultimately directed at ARTIFICIAL BARRIERS to solar (NOT SUBSIDIES) – topics which you conveniently dodge. You never address artificial barriers. Your company “sometimes designs PV installations” but you’re against it enough to “stop it?” Toss a coin: It’s at least a 50-50 chance you either already work directly for a major utility player in the southeast or you are a contractor that is already tight with extant major utility players in the region. Who is your biggest customer? Or do you work for a utility? Do tell?
@KyleSager My company does not work for Southern Company, but has another major SE utility as a valued, but not major client. Our biggest customers are in the financial industry, not the utility industry. Our services apply to the back office and office areas, not to the generation, transmission, and distribution side. I once testified at a Georgia PSC hearing against Georgia Power. So, what’s your story? You seem to be trying to sell me something and I’m not buying.
If PV were the great boon that you say, then it would be widely applied across the country with no subsidies needed. It’s not. The $ value of the electricity it produces is not sufficient to pay for the installation and a financial return. Until both electricity prices and PV efficiency increase, it does not pay back. If you want to have one, please feel free. But don’t ask me to help you pay for it.
@Burroughston Broch You are courteous and patient. I am glad to hear that you are at least not deep in the power industry’s pocket. I am now taking sides on matter of conscience, having observed both industries for more than a decade. I am actively hopping down off the fence and very actively supporting renewables and especially solar because it is being legally obstructed among other things.
I perceive the “if there was a trend you’d see it everywhere” is an oversimplification: Solar is is now beginning to enter grid parity, precisely as predicted for decades, in disparate regions around the globe. It is all beginning to happen like clockwork exactly as expected because of the easy-to-see perfect cost curve…Perfect lockstep. They said it would happen. It is happening. We are seeing solar early adoption begin much more quickly in precisely those regions where we first enter grid parity: places like New York and California, but in places ALL AROUND THE GLOBE. It is not confined to latitude. It is not confined to country. It is not confined to continent. Global adoption is also occurring on a consistently accelerating pace globally, year on year, a curve that gets louder and more pronounced as time passes. No way around that. That is not some sort of global conspiracy. It just is what it is.
But that does not also imply solar does NOT pay for itself elsewhere right now (places away from early adoption regions). It just means the changes are beginning to be a bit easier in those places first because their electricity system costs are higher and solar falls down to meet those costs much sooner. The trend nonetheless continues marching inexorably forward precisely as predicted. It will not stop.
Solar power meanwhile surely DOES REQUIRE FINANCING to achieve meaningful traction. Because it is a lot like buying a house or car: It implies a very hefty one-time outlay. Creative financing is an absolute must. That is not about being too expensive nor about not paying for itself. That is about simply moving capital chunks from where the capital is readily available to where the capital is required: in this case rooftops. It is a plain ol’ vanilla capitalism problem. It is a cash-flow problem, a financing problem, and NOT a pay-off problem.
Solar does pay for itself over time. And many companies are waiting in the wings right now to provide PPAs in Georgia. They are prepared to step up and do business in this state right this minute. They are ready to finance the solar. They have the money. But they can not. They are being blocked at the state legislature and by Southern Company. Southern Company lobbied hard to block senate bill SB-401 and when future bills try to open the same doors for PPAs Southern Company will continue trying to block the way until ratepayers start paying attention. That is all there is to it. PPAs answer the capital outlay problem directly and perfectly. Too perfectly. PPAs are pure capitalism. They overcome structural barriers without subsidies.
Rhone’s article spoke to structural barriers that block free access to energy markets, like measures that make PPAs illegal. PPAs are unrelated to subsidies. None of the follow-up discussion here addressed Rhone’s observation of blockage to free energy markets which was central to his article. Somehow this post-discussion gravitated to paying subsidies for solar. That’s a bogus twist. Rhone was focused on PPAs
But incidentally if you do happen to do an honest and exhaustive survey of subsidies: You will easily discover that fossil and nuclear aggregate subsidies vastly outstrip solar subsidies: especially in Georgia where we can point this moment to subsidies in the hundreds of millions for a single coal plant alone as well as to unheard-of Federal guarantees for $14.2 billion worth of nuclear financing.
The subsidy argument just does not hold water against solar power; and to suggest that PPAs are subsidies is, well, extremely misleading.
@KyleSager I think that I should define the terms you are using, as you are over your audience’s head.
“Grid parity” is the price at which purchasing alternative energy (PV in our case) is equal to or lower than the cost of buying it from the utility. Only a few places in the US have grid parity, and Georgia is not one. The cost of even heavily subsidized PV in Georgia is higher than the utility’s price.
“PPA” is a Purchased Power Agreement between a producer of electricity and a utility. It is a legal document and nothing more. I disagree that PPAs are unrelated to subsidies. My company’s client in the NE has a PPA to sell all power produced to the utility at $0.38/kWH (2.5 times what the utility sells it for), and if that isn’t a subsidy then I don’t know what one is.
PV, like wind power, is not baseload power. Baseload power is the power that the utility must provide at all times, day and night. Coal and Nuclear are the primary sources of baseload power. It makes more economic sense to me to spend $14billion subsidizing coal or nuclear rather than PV. The net subsidy per kWH generated is much lower for baseload than it is for PV since PV generates less electricity.
I am not anti-PV per se, but I am not for it in Georgia until it is cost effective in Georgia. And if I am forced to subsidize it to make it appear cost effective, then I am against it and will fight it.
@Burroughston Broch (1) “Grid Parity” – Left out an important word. It’s the price at which the “levelized” cost is equal. Quoted as above implies payoff is never reached. Untrue. The payoff can be very long, but if companies providing PPAs directly to residents are willing to pay for it then who cares?? And somebody else is quite willing and ready to wait out the payoff. They are just being stiff-armed out of the game by Southern Company. (Incidentally, grid parity will progress through the entire country in about the span of about a decade. That is where we are. New nuclear and coal plants won’t even be third through their life by the time grid parity is passing them by here). Interestingly, grid parity is widely seen as a point at which even utilities begin shifting toward solar. And, gee wiz lookee there, suddenly many more plants are appearing in different places spread out all around the world. But residents achieve payoffs sooner than utilities…because they must pay the retail electricity rate to begin with. Power companies are comparing solar capital with coal capital. Residents are not making any capital comparison, only a payoff. And somebody else will wait for the payoff if we get rid of this stupid, inane, idiotic…and unfair barrier to PPAs.
(2) PPA – You can’t have it both ways. You can not say “a legal document and nothing more”…”but wait it is related to subsidies though and those are bad.” So PPAs already exist between big companies like Southern Company and power plants. Here, they represent something hugely different. They represent very real companies elsewhere with very real cash prepared right this moment to step up to the plate and start financing one-off installations so that residents don’t have to. Those companies are being blocked out of the game altogether. That is counter to free markets.
Your objection to high buy-back rates is, in my view, spot on. In Georgia the T-1 tariff is at 17 cents per kWH and that is still way high. I think its nuts, in fact. But wait, that’s basically for all practical purposes being negotiated between Southern Company and the PSC without really letting anybody else join in the conversation: With an insultingly low statewide cap at something like 10 MW capacity. So here is the truth: Southern Company is intentionally doing exactly what you do right here > Confusing the issues (in their case very much on purpose). Obfuscating the conversation as much as humanly possible: Commingling the buy-back rate on a very limited tariff with the entire issue of PPAs. Southern company WANTS that 17 cent rate high so they can point over at it and say, but “No PPAs in MY territory.” It’s a handy spin mechanism to close the door on PPAs with residents….BUT THEY’RE THE ONES NEGOTIATING THE BUY-BACK RATE IN THE FIRST PLACE. Southern Company is basically sitting right up there front and center at the table negotiating when high subsidies are set that you are so afraid of. THEY ARE CONTROLLING THE GAME…as much as they can. They are certainly spinning it to keep solar out altogether, because that 10 MW or so cap on the T-1 tariff is like the incentive does not even exist. It’s a waste of time. Spin. Hype. Useless.
So kill the high 17-cent rate for all I care as long as a truly fair close match for the true “cost of goods sold” per watt for coal is reached. Southern Company should very much be required to buy power from anybody at a rate that does not exceed their per watt cost for the entire coal plant and everything that feeds into the coal plant.
(3) “Baseload” You do realize you are paying for the 2.4 gigawatt baseload more than four years before even one half of it, 1.2 gigawatts, goes live and the that day it does go live they won’t nearly be able to consume nearly a fraction of aggregate output (or else they just turn off capacity elsewhere): Because the day before they turn it on guess what: Every single kWh was easily sourced elsewhere. So you pay for and subsidize this HUGE plant and all the wires to haul all that electricity 200 miles to Atlanta….years before the day it ever starts producing and then once it does start producing it takes you YEARS to grow into. I wish it were only baseload. That is not want Southern Company wants the nuclear or coal plants for. They want to lock the customers entirely into as large a bulk supply as possible. They want the whole game. They do not want to share the tiniest fraction of the business. OK, that’s rhetoric. More precisely the T-1 tariff is the “tiniest fraction.” Scientists will need to add zeros to calculators just to be able to express the fraction Southern Company is allowing into the game now. It’s definitely on a nano scale.
“It makes more economic sense:” I personally, don’t want you forced to pay for anything either. Because company’s providing PPAs are ready to play ball: You don’t have to. You should not have to pay one red cent. The solar will pay for itself on rooftops if PPA providers are permitted into the game to do deals directly with homeowners. Consider this: With PV people add capacity as they need/want it and somebody else (a company providing the PPA agreement) finances. The key is, though, the capacity is added AS NEEDED. So now not only is solar paying for itself: IT BEGINS DEFERRING THOSE SUBSIDIES THAT YOU ALSO PAY FOR NUCLEAR AND COAL BECAUSE THE NEED FOR MORE NUCLEAR AND COAL PLANTS STARTS GETTING PUSHED FARTHER AND FARTHER BACK. That is precisely what will happen, precisely why Southern Company is afraid, and precisely why they are trying to erect a hard structural barrier. The importance of baseload, the importance of their existence, is reduced when this powerful, scalable tool is permitted into the game. They become less significant as a baseload provider over the long-term. They have to start focusing more over the decades on transmission which is a smaller chunk of the whole pie.
And there is the dirty little secret: If you simply allow PPAs to work deals directly with homeowners, and offer perhaps some reasonable fraction of any of the subsidies provided today to competing sources: coal/solar/nuclear, then once people clue in and start installing solar you will eventually start massively rolling back the need for any additional baseload. You will start pushing back those huge plants that are installed 4 to 8 years before capacity is meaningfully used.
@Burroughston Broch Incidentally, I also think it’s absolutely crucial at this point not to confuse tax breaks with subsidies: Too much is on the line. If the $0.38/kWH rate is what you’re afraid of then…Believe it or not, you and I basically agree. In Georgia it is a $0.17/kWH tariff. With a cap in place around 10 MW, we’re just not getting that much mileage out of that high rate anyway. Tax breaks and the falling cost should be enough. The problem is structural barriers are locking participants out of the game and that is what Rhone was writing about. Solar is not growing in Georgia because players are being locked out.
Solar is not growing fast in Georgia for the most part because it is not cost effective. The solar power advocates (most of whom have a vested financial interest in growing solar power) want to blame Southern Company for their problem, but the real reason is that solar power doesn’t provide a reasonable return on investment.
I don’t want to invest my money in something that takes 20-25 years to pay back its initial cost, and is shot at the end of 20-25 years. Today’s solar panels only last 20-25 years, and their maximum output decreases every year.
The DOE is kicking in $294 million in coal subsidies for Southern Company to build a 285-MW Coal-based Birmingham transport gasifier. Southern Company’s big coal plant is more than 1/3 Federally Subsidized. If we stop blocking competitive companies from offering PPAs to Georgia and Alabama residents and force a fair buy-back for any electrons produced…Massive multi-hundred million dollar subsidies for one-time coal plant installations will end. Southern Company is blocking PPAs at the state legislature (Senate Bill 401 in 2012) because they do not want other sources competing with their subsidized plants. Rhone, GREAT article. You are spot on. Artificial barriers are indeed the biggest problem. Existing players are intentionally clouding issues so that residents do not know that they are being aggressively restricted from choices that would be very quickly offered if markets were opened and fair. kyle sager http://www.heliocurrent.com
@KyleSager Here’s an example of the sorts of subsidies that you seem to be advocating. My company designed a 250kW PV installation for a client in the NE. The client and the installer trumpet that it will pay back in 10 years. And it will – as far as the owner’s investment goes. State and Federal subsidies paid for 80% of the installation and the utility is forced to buy the PV production at $0.38/kWH (2.5 times the cost of purchased power). The schmucks left paying for the other 80% of installation and the inflated cost of power are State and Federal taxpayers, and the utility’s ratepayers. And the schmucks get zero, ZERO return on their investment.
Is this what you want for Georgia? It must be, because you seem to be in the PV industry food chain.
I don’t know how many different ways it can be said. People just don’t get it. If another company finances the purchase of solar panels and then simply charges the homeowner for the electricity via a PPA, then people will do this. But companies offering PPA’s are blocked out of the market.
So what is so frustrating to me is this: Rhone Resch says in the article, “Artificial barriers like blocks to PPAs must go away.” and then some readers respond as though we’re talking about something completely different, “Solar’s not cost effective in Georgia,” without remotely examining or addressing how PPAs work. With a PPAs, The consumer does not buy the panels: They just keep right on buying electricity by the kilowatt hour like they were before. Althought I do suppose if you stay on the grid here…you must still pay that hefty little jacked up addon that’s slapped onto bills for the plant Vogtle reactor expansion 4 years before it even goes live…in addition to paying later on for the electrons Plant Vogtle spits out 4 years later when it’s up and running. Cost effective? Sheesh.”Not cost effective” is a brushoff response to a blog article focused on discussing making PPAs legal and removing other artificial barriers. Basically I’m hearing people couch between the lines that artificial barriers just don’t exist in Georgia. That is patently false. The barriers are there, they are very much intentional, and they need to go away. They block open markets. Tell me what is wrong with making PPAs legal. That would be a fair response to Rhone’s artical. But a sort of fuzzy, hazy, afterthoughtish, “Oh, gee…solar just doesn’t seem cost effective” doesn’t remotely address his observations.
@KyleSager
If anyone wants an explanation of how Purchased Power Agreements (PPAs) are supposed to work, here is one: http://www.epa.gov/greenpower/buygp/solarpower.htm.
There is no magic about a PPA – it is a financing vehicle. The Seller has his PV system installed on the Purchaser’s property and the Purchaser agrees to buy thegenerated electricity at a set rate. The real allure to the Seller is the Federal and State tax benefits (read as taxpayer subsidies) which are of more benefit to the Seller than the Purchaser since the Seller is in a higher tax bracket. If the taxpayer subsidies are not available, the deal is not attractive to the Seller in most US locations, including Georgia.
The unavailability of PPAs isn’t your major problem in Georgia – the relatively low cost of electricity is.
@Burroughston Broch You basically just said there is no meaningful market for PPAs in Georgia. That is untrue. Companies are willing to come in and provide them right now. GSEA members have been in contact with willing sellers that are waiting for permission. In addition, Southern Company itself proves you wrong because they are lobbying very hard against PPAs.
If what you just wrote contained one iota of truth…Then there would be absolutely no motivation for a $17 billion power company to throw all of its weight against PPAs. Southern Company has emphatically declared that the rooftops of homeowners are its territory and they can not choose with whom they do business unless they go through it first. It has done so rather explicitly and publicly. In doing so, it has for all practical purposes said that it owns residents’ rooftops. Because they don’t get to decide how equipment that goes on the roof is financed. Only Southern Company gets to make that decision. That is trampling all over homeowners rights.
@KyleSager We have beat this subject to death and must agree to disagree. Perhaps you would be happier in a locations where PPAs are allowed and solar is cost effective – New Mexico?
@Burroughston Broch Nah. Thanks, but I grew up here. So I think I’ll stay. For now I’ll just continue asking the legislature and local power company to stop trampling on rights and telling people who they can and can’t do business with on their own rooftops.
@KyleSager Good for you! So am I. We will continue this discussion at a later date.