STATE LEGISLATURES MAGAZINE | february 2018
New solar energy developments are fueling local economies and providing jobs for thousands.
BY MEGAN CLEVELAND AND JOCELYN DURKAY
It’s getting harder to ignore solar energy, whether it’s the increasingly large installations and panels visible on rooftops or utilities’ decisions to include more of it in their resource mixes. In 2016, solar represented the largest share of energy resources added to the power grid for the second consecutive year, according to GTM Research, which tracks the global electricity industry. It now represents 2 percent of the nation’s total energy mix, according to the U.S. Energy Information Administration.
State legislators are noting this growth. Depending on the scale and forms of solar development in their states, legislators have different questions to consider. Where is solar generation best located? What economic development opportunities can solar energy bring to local communities? How can solar be accessible to all demographics? Is the current method of compensation for individual or rooftop solar the best approach?
How lawmakers ultimately answer these questions will have implications for state energy markets. “The policies we create in the legislature send the signals to the industry on whether to invest in our state or not,” Nevada Assemblyman Chris Brooks (D) says.
Solar photovoltaic technologies—aka solar panels—comprise the majority of new installations. Any number of panels can be clustered together, allowing for a range of sizes. Utility-scale applications, for example, can generate several hundred megawatts of electricity, the equivalent of a power plant. An average residential rooftop installation is around 6 kilowatts (1,000 kW is equivalent to 1 MW), and many commercial installations have about 100 kW of capacity. In between are “community” or “shared” solar setups allowing a small group of customers to share the output from a medium-size installation that has several megawatts of capacity.
This scalability is what makes solar so appealing for utilities and customers.
The majority of solar energy in the U.S. is commercial scale, owned by utilities or third parties, which provides electricity for thousands of customers.
Last year, a spike in solar development in North Carolina led legislators to address challenges to large-scale solar in the state. The state had the largest market for installations under the federal Public Utility Regulatory Policies Act, or PURPA, the 1978 law requiring energy companies to buy electricity from third-party-owned renewable facilities. But to accommodate all the new capacity, the state’s largest utility had to upgrade numerous substations, with customers covering the costs. In addition, the state’s military facilities were interested in increasing their energy security with on-site generation, such as rooftop solar on base housing. At the time, the state’s electricity laws prevented third parties from owning or leasing these installations.
Recognizing that every major stakeholder group could gain from updating the state’s renewable energy policies, North Carolina Representative John Szoka (R) introduced legislation to “look for market-based solutions to keep renewable energy—especially solar—alive and viable in our state.” The legislation modified the terms of and added a competitive procurement process to the PURPA-standard contracts in the state. The bill also addressed third-party leasing, expanded access for small- and medium-scale solar and created a rebate program. The bill passed and, most important, Szoka says, gave stakeholders certainty, as “business certainty leads to business growth and business profits.”
Solar’s economic potential also motivated Illinois lawmakers to pass the Future Energy Jobs Act of 2016. “The biggest opportunity that solar brings to Illinois is jobs,” Senator David Koehler (D) says. The legislation, notable for providing economic support for several nuclear plants in the state, included long-sought modifications to the state renewable portfolio standard, renewable energy job training investments and procurements for rooftop, community and brownfield-sited solar.
“Our biggest goal for the Future Energy Jobs Act is to create good-paying jobs in every corner of Illinois, which will allow us to continue to be the powerhouse of the nation,” Koehler says. “Under this legislation, Illinois will become the gold standard of renewable energy policy.”
A small, yet growing solar sector is community or shared solar, which allows several customers to invest in a medium-size solar energy project and directly benefit from the energy produced. These programs make solar energy available to customers who are unable or unwilling to install solar panels on their homes because they lack capital or are renters, or because their homes have old or shaded roofs. Policymakers in at least 17 states and Washington, D.C., have enacted legislation authorizing community solar.
Colorado boasts one of the country’s most active markets, with more than a dozen projects in operation. The state enacted legislation in 2010 authorizing investor-owned utilities to create community solar gardens. Five years later, Senator Kevin Grantham (R) co-sponsored legislation that expanded the concept, allowing electric cooperatives that install community solar gardens to apply the gardens’ output to new mandatory distributed generation obligations—allowing them to do so at a lower cost to cooperatives and customers than through other forms of distributed energy. “Although we support all forms of energy, including renewable energy, we don’t support mandates that increase costs to rural consumers,” Grantham says.
As demonstrated in Colorado, community solar can be a compromise, harnessing the economy of scale of utility solar but qualifying as a distributed energy resource. Community solar projects can be owned by a utility, a third party or even the participating customers. They are not confined to a specific location, so utilities and developers can build projects in areas where the grid is constrained, or where the land has limited uses, such as brownfields. In addition, since community solar connects to the distribution grid, utilities can avoid upgrades or infrastructure additions to the transmission grid.
Community solar presents policymakers with several challenges, including determining its rate structure and deciding whether utilities or customers receive the credits offered for generating solar energy. As a nascent market, community solar may not be well understood by consumers or policymakers, making it potentially difficult and costly to launch projects.
Customer-sited solar installations are dispersed across the electric grid, often on rooftops, and allow home and business owners to generate their own energy. Although this broader distribution can reduce transmission constraints, it also occurs behind a building’s meter, making it difficult for utilities and grid operators to manage.
Commonly debated customer-sited solar policies address interconnection—how systems are connected to the electric grid—and net energy metering, which is the most widespread form of economic compensation for customer-generators.
Many states are assessing their net metering policies and discussing alternative methods of compensating solar customers. The Nevada Legislature has debated this since a 2015 Public Utility Commission ruling ended net metering and brought Nevada’s solar industry to a halt. “It is the reason I ran for office,” says Assemblyman Chris Brooks, who made a career in the energy and solar industries. To revive rooftop solar, Brooks introduced legislation that, among other provisions, defined how utilities will treat the energy consumers send back to the grid. The successful legislation also created a “bill of rights” for customer-generators that “establishes the ability for everyone in the state to self-generate, store their energy and interconnect those systems to the grid,” Brooks says.
Lawmakers are also discussing strategies to decrease solar “soft costs,” which include nonhardware expenses such as customer acquisition, permitting, inspection and installation. While hardware costs have decreased in recent years, soft costs remain stubbornly high and continue to affect system costs. States like California, Maryland and Vermont have enacted legislation in recent years in an attempt to lower soft costs and streamline interconnection processes.
Their priorities vary and they favor different policies, but legislators across the country are engaging in the solar energy debate. “I feel my role as a legislator is to look at what the people of Nevada want to see for the future of energy in our state and craft responsive policy,” Brooks says. It does not end there, however.
“Passing a bill and getting it signed into law is never the end,” says Szoka of North Carolina. “You have to stay with it and make sure it gets implemented the way it was intended.”
Megan Cleveland is a policy associate in NCSL's Energy program. Jocelyn Durkay was a senior policy specialist at NCSL and is now policy analyst for low-ncome and residential energy services at the Colorado Energy Office.
Sidebar: Rooftop Rate Debate
Utilities increasingly are paying customers who send electricity to the grid. The most common way to compensate consumer-producers is net metering, which credits customers at the retail rate for the energy they produce. The idea developed when solar was a small player in the energy market. But now, with the rapid increase in the use of rooftop solar panels, legislators are discussing net metering and compensation rates in nearly every state. Legislators are debating whether these policies compensate customer-producers at a fair rate or whether nonparticipating customers bear an unfair cost burden.
Critics argue that the compensation received by net metering customers allows them to avoid paying for the cost of maintaining the electric grid’s infrastructure, shifting these costs to other customers. Supporters say rooftop solar benefits utilities by supplying energy at times when producing and acquiring it is most expensive and by reducing the need for new generation and infrastructure.
As lawmakers and regulators discuss compensation methodologies, whether to increase fixed bill costs or adjust broader business models, among other policy alternatives, they will also consider access, equity and stakeholder perspectives.
Sidebar: Policy Potential Is Wide and Deep
State policy can address a range of solar energy topics. A new report by NCSL and the National Association of State Energy Officials, “Here Comes the Sun: A State Policy Handbook for Distributed Solar Energy,” explores the many solar policy topics state legislatures are addressing: access and rights, building policies and codes, compensation for producers, consumer protection, financing, incentives and market-building policies, electric grid integration, ownership models, photovoltaic panel recycling and decommissioning, PV system soft costs, rate design, and training and certification.