Are from MasterThe source
By Robert Bradley Jr. – January 5, 2022
“Because rooftop solar customers pay less for their utility bills, they contribute less to maintaining the grid they still use. That means the cost burden has been shifted to those who don’t have rooftop solar, and often those who can’t afford it. ” (The Wall Street Journal, below)
“For rooftop solar companies, the generous incentives are that the training wheel has to kick in at some point.” (The Wall Street Journal, below)
Solar as a grid source is uneconomical, from rooftops to large solar arrays. So the various government interventions promoted by the solar corridor must come to the rescue.
Solar’s Investment Tax Credit (ITC) provides a federal tax credit in dollars for 26% of the cost of a solar installation. Issued in 2006, it has been renewed several times and continues through 2023.
But then came net metering, a local/state program that requires utilities to buy solar energy from the same roof systems – at inflated prices.
Jinjoo Lee’s recent ‘Heard on the Street’ work, Solar starts the year with a long shadow, inside The Wall Street Journal (January 3, 2022) reveals how this subsidy is being affected, making the solar proposal a shaky political bet for the “energy transition”.
“Rooftop solar companies don’t exactly start the new year with the sun shining in their faces,” the article began.
Shares of residential solar companies Sunrun and Sunnova have fallen 19% and 14%, respectively, since the California Public Utilities Commission put subsidies for rooftop solar – so-called net metering – up tight block in December. The committee plans to vote on January 27 after public comment.
Florida is considering legislation that would cut such subsidies. The shock to their share price is not surprising as the two rooftop solar companies are yet to turn a profit; Their stocks trade largely on growth prospects.
California and Florida – two of the sunniest states. And just imagine if ITC expired too! Then it will be ‘game over’ for rooftops on the grid except for the wealthiest who want to signal.
California
Golden State has the highest electricity rate of the lower 48. It is a mecca for high-cost energy sources, including solar. Jinjoo Lee continued:
According to Wood Mackenzie and the Solar Energy Industry Association, California is a leader in rooftop solar adoption and as of 2020, accounts for about a third of all solar installations. New heaven for residential areas in America. According to estimates by RBC Capital Markets, the state’s customers account for about 40% of Sunrun’s total installed facilities and a quarter of Sunnova’s.
Why?
Much of California’s rooftop solar growth has been driven by a net metering system, which allows solar customers to sell excess electricity they don’t use back to the grid for value. quite generously, equal to the retail price they were charged for their home’s electricity. That helped promote the intended use of solar energy, but someone had to choose.
Specifically, other rate payers put their feet in the bill, which brought the matter into play:
Since rooftop solar customers pay less for their utility bills, they contribute less to maintaining the grid they still use. That means the cost burden has been shifted to those who don’t have rooftop solar, and often those who can’t afford it. Various groups pegged costs ranging from $1 billion to $3.4 billion a year.
The new rule will cut the percentage solar customers receive when selling their excess energy by a substantial fraction. According to estimates by Pol Lezcano, North American solar analyst at BloombergNEF, the rate will drop to 3 to 4 cents/kilowatt-hour during most sunny hours of the day, down from 17 to 44 cents/kWh before.
The ruined economy:
It also adds a carrot in the form of a credit for the installation and a stick in the form of a “grid charge” for solar users. The bottom line is that it will take about 11 years for new solar customers to pay back their upfront investment in solar panels through reduced electricity bills, a significant jump over 7 years now, according to estimates by BloombergNEF.
Intermittency, which creates the state’s infamous ‘duck curve’, is a big part of the problem:
Network metering rules have always been controversial across the country, but an overhaul seems inevitable in California. Its solar-intensive grid has ample electricity during the day but drops sharply as the sun goes down. That creates strains. Hawaii, which saw a ferocious growth in rooftop solar before phasing out net metering in 2015, had to do so largely out of necessity – grid components. Its electricity was overwhelmed by the amount of solar electricity generated during the day.
Battery memory?
“There’s some silver lining for this one,” added Lee. (Can’t be too important for a pillar of ‘energy transition.’)
One is that California’s rooftop solar market is no longer at its peak of growth, having slowed in recent years… [at] about 15% of California households live in single-family properties….
That means growth, to some extent, must come from selling battery storage to existing solar customers. According to Mr. Lezcano, the new regulations create a price incentive for households to add storage capacity to solar systems.
BloombergNEF estimates that with the new regulations, the payback period for solar-plus storage will drop to six years in 2027, down from eight years now.
For rooftop solar companies, the generous incentives are the training wheel that must kick in at some point. Expect some wobble ahead, but not a crash.
Or something goes wrong if the battery is not subsidized and the ITC goes away.
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