The Solar Bottleneck

Bottleneck was the word of the day at the recently held Distributed Solar Summit. The good news is that solar panel prices are at historically low levels. The increasing price competitiveness of solar is attracting a growing number of customers. However, the potential for explosive growth in solar installations is bottlenecked by regulation, rule-making and pricing threats.

Fingers are pointing in every direction.

Companies selling solar power systems point the finger at the tax-based system for financing solar power. The US does not reflect the real price of energy at the meter or the pump. For example, coal-fired electricity looks really cheap at the meter and solar looks expensive. But the real costs of coal fired electricity generation that include environmental and health impacts are not included at the meter. How significant are the costs not included at the meter? Think about whether you would rather live downwind from a coal-fired power plant or next to a house with a roof top solar system.

The US solution for balancing this pricing inequality is to offer tax credits to people who buy solar systems, thus lowering their cost of electricity to a level close to the cost of utility-supplied electricity. However, this adds a huge layer of financing complexity. The result is a bottleneck where today there are only about 20 banks that can finance a solar power system and the system for implementing financing involves lawyers, tax accountants and stacks of paper documentation. The result is a costly, cumbersome and restrictive financing system.

Installation is another bottleneck. Every utility has their rules. Every local city and county has their rules. The result is a layer of complexity that significantly adds to the cost of a solar system. Why is installing a solar system that much more complex than installing a refrigerator?

Utilities are also beginning to undermine the economics of solar through rate revisions designed to be "fairer" to non-solar customers. These utilities claim that a rooftop solar system customer doesn't pay enough to have the utility system available when the solar system is not generating enough electricity to satisfy the solar customer's demand for electricity. On the one hand this is a very legitimate rate issue. On the other hand, it smacks of a utility using its monopoly pricing power to restrict the growth of a technology that is an alternative to buying from the utility.

This battle is now fully enjoined by the San Diego utility SDG&E owned by Sempra, a company that also develops utility scale power plants including solar. SDG&E is proposing rate revisions that dramatically undermine the economics of current and potentially future rooftop solar systems. Walmart, which has a goal of using 100 percent renewable energy in their California stores, has now entered into this pricing fray against SDG&E's effort. However, the immediate result of this type of action by utilities is a bottleneck as customers who are thinking about buying a solar system are stopping in their tracks to see how this price threat will play out.

A final bottleneck is the emergence of a trade war between China and the U.S. over the pricing of solar panels. The US claims China is dumping panels at prices that are below manufacturing costs to squeeze out US competitors. The result is greater uncertainty among solar installers on whether buying from China, now the world's leading supplier of solar panels, could result in an unknown risk if the the World Trade Organization does rule in favor of the United States' claim.

Solar is a microcosm of the inefficiency of the United States' energy policy. For example, the US subsidizes ALL energy supplies including fossil fuels, nuclear, ethanol, wind and solar. Why?

And our pricing at the pump and meter reflects only the cost of production and not the true costs that include the very real cost impacts upon the health of people and the planet. How can a consumer really tell in today's system what the true cost of their decisions are upon their budgets, their community's environment, and their health?

Why is buying electricity so complex for the average customer? Only our cell phone bills are more lacking in comprehensible information that can be used to actually influence our cost savings and human health decisions.

The solutions are easy to implement and have been proven by other countries. They include:

Eliminate All Subsidies. Why are American taxpayers being asked to subsidize, through tax policy, any technology or energy resource? And because all of our energy sources are subsidized, who among us can figure out the true price of energy? Eliminating all energy subsidies could reduce taxes and the increased price transparency will enable consumers to make better procurement decisions.

Tax Externality Costs. Pollution creates a real cost upon humans and our planet. Wars protecting other people's oil fields is a very real trillion dollar cost. Why are we charging these costs to taxpayers through income taxes? Isn't the obvious answer to charge for these costs at the pump, cash register and meter? Doing so would then clearly communicate through price the real cost of consumption empowering consumers to vote with their wallet for their energy preferences.

Standardize Solar Policy. A national set of installation protocols for installing solar power that all utilities and local governments must follow would dramatically lower solar's costs to all. Germany has this system and their cost to install roof top solar is 30 percent LESS than in the United States. Similarly, a federal policy that establishes a common net metering protocol for all utilities would enable the economies of scale for solar that could also drive down solar's costs. We have national standards for most other products, why not solar?

Here's the great news in all of this. Our challenge for restoring our jobs, economy, health and environment does not require a technology breakthrough. What we need is a breakthrough in the bottlenecks of our systems that will enable consumers to make prudent choices.

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Bill Roth is the founder of Earth 2017. His book, The Secret Green Sauce, profiles case studies of business best practices that make money going green. Through his implementation of the U.S. Hispanic Chamber of Commerce Foundation's Green Builds Business program, Bill has coached hundreds of businesses across the country on project design that makes money and a positive difference within 120 days.