There is a growing debate about the financing and subsidies of residential solar PV systems. How this turns out could have a significant impact on the market’s future. At the center of the discussion are Arizona Public Service (APS) and Tucson Electric Power (TEP), two regulated utilities that have proposed new rate-based solar programs for residential customers. Such a move threatens private solar installation-financing companies such as SolarCity and Sunrun, which currently lead the growing market by offering no-money-down leasing schemes that have attracted thousands of new customers.
The private solar companies argue that allowing the utilities to sell rate-based solar systems would create an uneven playing field. They believe the regulated utilities should set up their own separate, unregulated companies and compete for rooftop solar business with the independent installer-financing companies. That’s precisely what electricity providers operating in other states have done. For instance, NRG and Edison International have entered the rooftop solar market by establishing unregulated business units that operate in the Northeast and California, thus avoiding the controversy.
Keeping the Playing Field Level
This is a thorny question for Arizona, and both sides have convincing arguments, as my colleague Taylor Embury pointed in a recent blog post. The solar installers argue that permitting the Arizona utilities to go ahead with their rate-basing plans would set up unfair competition because of their monopoly status. The utilities say they just want to expand into solar because of customer demand for distributed generation (DG), and because it helps the utilities meet mandated goals for DG. But the solar installers and their financiers have advantages they can leverage as well, in the form of the 30% income tax credit and a depreciation method called Modified Accelerated Cost Recovery System (MACRS) that can make the investments quite attractive. A decision on whether to allow the utilities to move forward with their solar programs is pending before Arizona’s utility regulator, and a ruling is expected before the end of the year.
This topic is certain to be part of the upcoming discussion during Navigant Research’s “The Home as Micro Power Plant” webinar, which takes place on November 11. Besides the rooftop solar issue, panel members will examine the potential for residential energy storage, how plug-in electric vehicles could be used as grid assets, and whether residential combined heat and power can gain market traction. To register for the webinar, click here.
Tags: Policy & Regulation, Renewable Energy, Smart Utilities Program, Solar Power, Utility Innovations
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