As rooftop solar costs drop, utility attempts to raise barriers may not work

A solar array at Duke Energy Florida's  3.8 megawatt solar array in Osceola County, near St. Cloud. [Times files]
A solar array at Duke Energy Florida's 3.8 megawatt solar array in Osceola County, near St. Cloud. [Times files]
Published Nov. 13, 2016

TALLAHASSEE — Florida's utility industry steered more than $20 million of their profits into a failed constitutional amendment to impose new barriers to the expansion of rooftop solar energy generation, but developers say that as the cost of installing solar panels drops, the state could quickly become a leader in private solar energy expansion no matter what the energy giants do.

The Florida Solar Energy Industry Association estimates that over the next five years, Florida homeowners, businesses and utilities are projected to take advantage of the falling prices and install 2,315 megawatts of solar electric capacity — 19 times more than the amount of solar installed in the last five years.

"Solar prices are in free-fall, and no one knows where the bottom is," said Chris Delp, an attorney with the Tampa law office of Shumaker, Loop & Kendrick.

Large companies, such as Elon Musk's Solar City, are offering zero down, low-interest loans and people can also cut their expenses by deducting 30 percent of their costs under a federal Investment Tax Credit program that was extended last year, he said. "The economics are just going to make these regulatory barriers irrelevant. Florida's utilities could work with customers to roll out solar or they could work to rule it out."

What approach will Florida's investor-owned utilities take?

Will they encourage homeowners and businesses to install their own solar systems — as utilities in Georgia, California, New York and dozens of others states have done — or will they ask regulators to stifle rooftop solar expansion, as they attempted to do with Amendment 1, so that they can control the development of solar themselves and limit the hit to their bottom line?

According to the Florida Public Service Commission 10-year site plan, utilities plan to increase their solar generation, but solar will make up only a tiny fraction of all energy generation supplied by the regulated utilities in the next 10 years. Gulf Power has announced it will add up to 500 megawatts of solar power to its fleet by 2024 and Florida Power & Light has asked the PSC for permission to add 1,200 megawatts over the next four years as a part of a settlement agreement to raise its electric rates.

Florida ranks third in the nation for rooftop solar potential, according to SEIA, but is only 14th for cumulative solar capacity installed. That could change, Delp said, if the emerging interest in solar installation in Florida, fueled by the drops in prices, results in more people installing their own electricity generation, circumventing utilities.

"I don't think this was their intent, but what the utilities did with Amendment 1 was bring the discussion of solar energy development in Florida to the forefront," said Delp, who is working with a company building a 30-megawatt private solar farm in Leesburg. "It's now a kitchen table issue. There is awareness that there is a lack of solar in Florida and that we lag behind so many other states."

In the last year, the price of installing a solar photovoltaic system has dropped by at least 12 percent and prices are down 66 percent from 2010, according to the independent Energy Information Institute. Experts say that as the price of solar installation continues to plummet, the cost of installing it will drop no matter what the utilities attempt to do — unless they erect new barriers.

Amendment 1 was an attempt to do that by creating legal language intended to force regulators to change the so-called net metering law. Under that law, every Florida electric utility is required to provide customers that have installed solar panels the opportunity to sell their excess energy back to the utility through an interconnection agreement and net metering program. The program was intended to make it easier and more affordable for customers to invest in clean renewable energy generation and lower their utility bills. Utilities now are required to pay customers at the net retail rate.

Florida's two largest utilities, Florida Power & Light and Duke Energy Florida, have said it is time to change the net metering laws as utilities have done in other states and they have already begun asking Florida's PSC to address it. The changes include imposing a monthly service charge on people with solar systems or reducing the net metering rate to reflect the industry's claim that solar users subsidize other ratepayers.

But solar advocates counter that the subsidy argument is based on economic studies that do not take into consideration any of the environmental or efficiency benefits from solar installation. When those are calculated, they say, private solar installation produces cost savings for non-solar users.

In Nevada last year, the state's utility regulators changed their net metering law to split solar customers off into a separate rate class and lower the reimbursement rate for excess energy from 11 cents per kilowatt hour to 2.6 cents per kwh. After the change, applications for rooftop solar installations saw a steep drop, several solar installers like SolarCity left the market and protesters rallied outside the Public Utilities Commission headquarters in Las Vegas. Regulators initially also refused to grandfather in existing solar systems but, after public push back, they reversed it.

"You make rooftop solar power financially unattractive in one of two ways," said Jeff Prutsman, CEO of American Solar Energy Systems, a solar installation company with three offices in Florida. "You either get rid of net metering or you add surcharges to the electric bills of consumers who own rooftop solar power systems. Either way, you increase the number of years that it takes for a rooftop solar power system to pay for itself with utility electric bill savings."

Susan Glickman, Florida director of the Southern Alliance for Clean Energy which was one of the most outspoken opponents to Amendment 1, said the top priority of her organization is for regulators to "remove market barriers and allow the solar market to develop," rather than impose new barriers to entry.

Her group has not decided whether to continue to pursue a constitutional amendment promoted by the solar industry's political committee, Floridians for Solar Choice, which would have allowed homeowners to lease their solar system to companies that could sell solar energy produced to neighboring properties.

"Because costs have come down, we have not decided if that is still a top priority but it is still an option," she said.

She noted that in addition to rejecting the utility-backed Amendment 1, voters in August overwhelmingly approved Amendment 4, which extends a residential renewable-energy tax break to commercial and industrial properties. "Voters have spoken very loudly," she said. "It's now up to the Legislature to implement it."

Meanwhile, as the cost of solar installation falls, Duke Energy Florida is seeing more than 100 residential and business customers a month install solar panels, said Suzanne Barr Grant, Duke Energy spokesperson. There are now more than 3,800 business and individual customers that have installed solar power, a 400 percent increase in the last five years, she said.

Key to the utility's approach is how solar expansion is framed and defined, said Delp. "There has not been in Florida, like there has been in other states, a finding of fact of what the real costs of solar are and what is considered a subsidy."

Duke Energy and Florida Power & Light adopt language used by utilities in dozens of other states. Instead of rooftop solar, they call it "private" or "customer-owned" solar and instead of utility-controlled solar, they prefer to call it "universal solar."

Both companies say they want the net metering laws changed.

"The current net metering policy needs to be updated," said Grant, the Duke spokesperson, in an email. "As more customers net meter, we believe it will become increasingly important to appropriately value solar and grid resources so that customers who net meter are also paying their share for the electric grid services they receive while being appropriately compensated for the generation they produce."

Rob Gould, FPL spokesman, said his company believes that the net metering reimbursement rate needs to be lowered because it was designed to encourage customers to install solar when the cost for solar panels was higher. He also repeats the argument made by utility companies in other states that customers who install solar and rely on net metering reimbursement receive a "subsidy" from those who don't.

"As solar declines in cost and more customers choose to install, some argue that net metering can become an unfair, regressive subsidy because the bulk of the benefit goes to individuals and businesses that have the ability to install solar at the expense of low-income families, renters, schools, small businesses and all other utility customers who cannot choose private solar for themselves," Gould said in an email.

Glickman warned, however, that "the current market is working." She notes that several large retailers in Florida such as Ace Hardware, Whole Foods and IKEA have installed corporate photovoltaic systems in the state and new barriers will delay, not expand, solar in Florida.

Regulators should instead look to ways to encourage communities to develop solar cooperatives, community solar projects and other approaches that have proliferated in other states, she said.

Empowered by the broad-based group of solar energy supporters who defeated the utility-backed amendment, Glickman also believes that voters won't be happy with any delay in solar progress.

"If utilities try to do an end run on net metering through the Legislature or the PSC, we will fight that," she warned, referring to the Public Service Commission. "We don't believe the PSC needs to take any action now."

Contact Mary Ellen Klas at Follow @MaryEllenKlas.