A commentary by Michael Vickerman, Director, Policy and Programs, RENEW Wisconsin
Once dismissed by electric utilities as a boutique energy resource, solar power has become the go-to renewable resource for a wide variety of electricity customers. From data centers to department stores, from airports to auto dealerships, more and more customers around the country are tapping into this clean and quiet energy source that shines on their rooftops every day.
Nationally, solar energy’s growth has been nothing short of phenomenal. In the first quarter of 2013, solar energy accounted for nearly half (49%) of the new generating capacity built, elbowing out wind and natural gas as the fastest-growing energy source in the United States. Declining installation costs coupled with easier access to third-party owned systems account for solar’s rapid advancement, especially in the residential sector. Even utilities in select states have begun diversifying their resource mix with large solar arrays.
For-profit businesses and homeowners in all 50 states can take advantage of the 30% federal investment tax credit in place through 2016. However, not all 50 states have flourishing solar markets. This is true even in states where electric rates are high enough to tempt homeowners and businesses to supply themselves with energy from the sun. Unfortunately, Wisconsin happens to be one of those states with a languishing solar market, though it wasn’t always that way.
Five years ago, Wisconsin was a regional leader in encouraging customer investments in rooftop solar. Early adopters then could avail themselves of special solar buyback rates which most electric providers offered on a limited basis. For customers of utilities that did not offer these higher rates, a fair and transparent net metering service was available. The state’s Focus on Energy program contributed significantly to solar’s early success with grants and incentives that supported start-up installation contractors. In fact, that program instilled them with confidence that Wisconsin was a solid place to do business.
Fast forward to today, and you see a very different market environment for solar energy here. Attractive buyback rates in Wisconsin have become a distant memory. Some utilities have restructured their net metering service to make self-generation substantially less appealing to customers. And while state incentives for solar installations are still available, the flow of dollars has been reduced to a modest trickle. Solar contractors, like the rest of Wisconsin’s renewable energy business community, cope with the hard times by pursuing work opportunities in neighboring states like Iowa and Minnesota.
The installed costs of solar today are about half of what they were in 2008, while the price of utility-supplied electricity continues to move higher. Given the fact that solar’s return on investment to customers has never been higher, the attitudinal about-face we’re seeing is as inexplicable as it is counterproductive.
While Wisconsin raises the proverbial drawbridge to protect utilities from solar’s advances, the state of Minnesota, in stark contrast, has rolled out the welcome mat to this emerging industry. Just one month ago, Minnesota became the first state in the Upper Midwest to establish a solar electric standard. By 2020, the state’s largest utilities will need to source 1.5% of the electricity they sell at retail from solar generation systems.
Through the same law, Minnesota strengthened its net metering policy, and required Xcel Energy, the state’s largest utility, to provide a community solar service to its customers. This innovative provision will enable Xcel customers who can’t host a solar system on their premises to invest in a nearby installation and receive a modest return through their monthly bills.
What does Minnesota hope to achieve by adopting such an aggressive solar energy policy?
The list of objectives is long:
Ø Promote manufacturing and contracting opportunities for solar energy and “green” construction firms;
Ø Expand employment opportunities for the state’s work force;
Ø Enhance the ability of business and residential customers to manage their electricity costs;
Ø Modernize the state’s electrical infrastructure and diversify its resource mix;
Ø Attract private investment capital into its energy sector from both in-state and out-of-state sources;
Ø Minimize exposure to fuel price volatility, especially during on-peak hours;
Ø Reduce greenhouse gas emissions associated with electricity generation;
Ø Reduce imports of fossil fuel; and
Ø Promote the state as a destination location for clean–tech companies.
Ironically, the ingredients are now in place for an instructive side-by-side study on the value of state policy in advancing solar energy, with Minnesota serving as the test case and Wisconsin serving as the control. In terms of both solar resource and utility regulatory structure, the two states are very similar to each other. And, with each state having about 14 megawatts of installed solar capacity, both share the same baseline from which to measure progress.
Indeed, the only significant difference going forward is state energy policy. In Minnesota, solar is subject to a state mandate that is projected to increase current capacity, in seven short years, by a factor of 30. In adjoining Wisconsin, solar operates within a policy vacuum.
This raises the question, what do we gain from participating in an experiment in which Minnesota reaps all the economic and environmental benefits from its solar investments while we get to send more dollars out of state for fuel to feed 40-year-old power plants?
The fact is that Wisconsin cannot afford to stand idly by while Minnesota plugs itself squarely into a dynamic industry segment and exerts a gravitational pull on private investment and start-up companies in the region. It’s no secret that Wisconsin has struggled to find its economic bearings in the wake of the Great Recession. In contrast, clean energy has provided a great lift in other states that had the foresight to sow the marketplace with some well-thought and welcoming policy seeds.
In a popular two-part Simpsons episode, the diabolical Montgomery Burns builds a giant disc to block the sun’s rays from reaching Springfield, forcing city residents to become even more reliant on the power plant he owns. Though clearly cartoon satire, those of us who are watching the ongoing retreat from solar energy know that if Wisconsin has any chance of capturing at least its proportional share of an industry that yielded $11.5 billion in new projects in 2012, it has to ditch the Mr. Burns act and begin designing a policy to let the sunshine in.