The debate over how rooftop solar panels can be paid for in some Southeastern states will stay around until the laws change to something utilities and solar advocates can live with.
That may take a while.
In the meantime, private solar companies in states including Georgia, Florida, North and South Carolina cannot finance solar systems and sell that electricity to a homeowner or business at a fixed rate.
Solar advocates, especially the private companies that have made this third-party business model popular, say this is a major barrier to rooftop solar flourishing in the Southeast. In more than 20 states, residents and businesses can finance those solar systems in a way that alleviates those upfront costs and also allows the recipients to receive federal tax credits.
But what if the Southeast's large utilities -- Duke Energy Corp., Southern Co. and NextEra Energy -- created their own, separate subsidiaries to sell solar directly to customers?
The answer from almost all of the utilities and analysts interviewed by EnergyWire was the same: "That's an interesting question."
The reasons why this hasn't happened were also similar: regulatory barriers, creating more push-back from the solar industry and simply not fitting in with the requirements of an investor-owned utility.
"The business model of a responsible investor-owned utility is to kind of grow the base in ways that benefit all of their customers," said Scott Segal, a partner in the Policy Resolution Group at Bracewell & Giuliani and director of the Electric Reliability Coordinating Council.
Utility-scale solar farms, which act like power plants that put large amounts of electricity onto the grid to serve all customers, fit in with that model, he said.
The business model for third-party companies focuses on small solar arrays that generate power directly for a home or business. While this alleviates grid demand, it also transfers additional costs to non-solar users, Segal said, using a frequent argument from electric companies.
In short, some customers benefit; others do not.
"That's not in line with the 'rising tide lifts all boats' model," he said.
Solar contractors 'terrified' of utility participation
Solar advocates say it's unlikely that private companies would like it if utilities start offering third-party financing agreements. This would only give them more reason to push harder to enter the market. Otherwise, the companies would be afraid that they'd be run out of it.
"The solar contractors I talk to are terrified of that concept. If a utility gets into the game, they are so big and have so much capital that the other companies wouldn't be able to compete," said Steve Kalland, executive director of the North Carolina Solar Center.
Southern's investor-owned utilities have been resistant to deploying solar themselves but offer various incentives for residents and businesses that want to add solar panels. Gulf Power's incentives for certain solar photovoltaic and solar thermal systems are so popular that they are fully subscribed within 10 minutes, spokesman Jeff Rogers said.
Georgia Power has agreed to buy solar from rooftop arrays and utility-scale farms under a program that will add hundreds of megawatts of solar to the grid in the next couple of years.
It's unclear whether Georgia Power's sister utilities will replicate the program, which catapulted the utility to the top 10 of solar installations in 2013, according to solar industry data.
Keith Guillot, a spokesman for Mississippi Power, said in an email that the utility "is coordinating with our sister companies on this topic," referring to all solar and renewable energy programs offered by Southern and its subsidiaries.
Florida's largest utility, FPL, touts its ownership of 110 megawatts of solar power as well as a new community solar program.
"In Florida -- a heavily populated peninsula that experiences tropical weather unlike most other states -- the regulated electricity system helps ensure the reliability of the grid while also protecting residents and businesses from costs associated with the unnecessary duplication of expensive energy infrastructure," FPL spokesman Mark Bubriski said.
"In Florida, anyone is free to generate power from solar to use themselves or to sell to regulated utilities, but only regulated utilities can supply electricity to retail customers. This helps ensure the grid's reliability and keep costs down for all customers," he said.
Looking beyond the model
At least one energy lawyer says utilities need to think about selling solar panels and equipment when brainstorming ways to handle the "death spiral," a term coined in an Edison Electric Institute report last year.
"All of the utilities have their 'franchise areas,' and they want to be the only guy on the block," said Stuart Broom, a partner with Morris, Manning & Martin LLP's energy and infrastructure practice.
Broom points out that the worst-case scenario, one that utilities don't want to have, is putting so much solar on the grid that the electricity alleviates demand to the point that they have to close multibillion-dollar power plants or try and sell the electricity to another company.
"There's going to have to be a lot out there before there's a stranded investment," Broom said. "If I were a CEO of a corporation, and you see this [energy transformation] coming, you have to think, 'How do I participate, how do I deal with it or how do I stop it?'"
So far, NRG Energy Inc. is the only electric company going head-on into rooftop solar sales after buying a residential solar company. Unlike the Southeast's regulated utilities, NRG is an independent power generator, the nation's largest.
Its chief executive, David Crane, is also the most outspoken about solar and renewables and how utilities need to adapt quickly to how power is being produced and distributed (EnergyWire, March 31).
Third-party sales in particular make solar more affordable for tax-exempt entities such as churches, schools, local governments, nonprofits and the military. This is because the financing arrangement allows those entities to take advantage of a 30 percent tax credit passed on by the financier that owns the solar system.
Duke Energy spokesman Randy Wheeless said the utility prefers to review the concept of third-party financing in conjunction with other renewable energy issues, such as net metering. A comprehensive bill (S.B. 1189) to expand solar in South Carolina is one example, he said.
Duke last summer invested in the third-party financing group Clean Power Finance. Wheeless said that was done to help the company "learn some good lessons for leasing," but that Duke isn't going to make any changes to its business plans for a couple of years.
"We are definitely open to discussing solar leasing changes if they are bundled together with other solar-related topics," he said.
Like what you see?
We thought you might.
Start a free trial now.