One of the sunniest regions in the United States threatens to shut down solar power

One of the sunniest regions in the United States threatens to shut down solar power

Regulators in Arizona voted Wednesday to consider lowering the rates electric utilities must pay homeowners using rooftop solar for excess power. Clean energy advocates say the move would undermine the state's booming solar industry and unfairly increase utility profits.

The decision comes on the heels of a significant cut in solar benefits in neighboring California and indicates how states with high rates of rooftop solar — regardless of their political leanings — struggle to integrate solar with the aging electric grid.

"It was a straight-up dumpster fire," Jason Gallagher, chief operating officer of Chandler-based solar installer Fusion Power, told Semaphore of the Arizona meeting.

The decision in Arizona illustrates how solar energy remains subject to local political whims and rehashes decade-old arguments despite its low global prices and unprecedented federal support.

In Arizona, as in most states, when rooftop solar panels generate more electricity than the home needs, the excess can be sold into the grid, a practice called net metering. The utility price offered for this energy varies between jurisdictions; It's usually the same price a home would pay to buy power from the grid or slightly less. In 2016, after a costly lobbying campaign by the nation's largest utilities, regulators adopted a plan to gradually lower the price over time (pre-2016 customers were able to maintain the higher price). The justification was that the retail price, being higher than the wholesale price utilities typically pay for electricity, raised utility costs in a way that was ultimately passed on to non-solar customers.

Over the past few years, Arizona's net metering rate has fallen below the wholesale rate, so excess rooftop solar is effectively a buy-in for utilities. However, the perception that net metering constitutes an unfair shift in costs or subsidies persists in some corners. At a hearing Wednesday by the Arizona Corporation Commission, which regulates utilities in the state, its Chairman, Jim O'Connor, a Republican, said anyone who wants a solar roof "should not do so at the expense of their neighbors and their communities." O'Connor, along with two other Republicans on the five-member panel, voted to reopen the 2016 policy and potentially allow much larger annual reductions in the net metering rate.

The decision makes it difficult to sell solar power to homeowners in one of the sunniest states in the country, Gallagher said, because it is impossible to calculate a realistic payback period and likely extends any such period. That view was echoed in a filing by Tesla, which sells solar and battery systems in the state, which said the decision "will harm investor and customer confidence in Arizona." Even the utility companies that originally pushed for the rate cut were against reopening the current policy.

"They're setting a precedent that whatever they decide in one meeting doesn't matter" because they could be re-litigated every two years when commissioners are up for re-election, Gallagher said. "There is no major renewable energy company in the country that, if you look at what happened [Wednesday], would feel comfortable investing in Arizona."

In defending his vote, O'Connor pointed to the example of California, which dramatically reduced its net metering rates in April despite its liberal, climate-focused policies. That state is the nation's largest solar market ever, and net metering has become a legitimate problem for the grid. California's midday solar peak is now so high that it sometimes covers the entire state's electricity needs but then forces power companies to dramatically ramp up other forms of generation as the sun sets, raising costs and the risk of blackouts. 

The new system's net metering rate is variable, increasing during low solar production and falling to near zero at midday. Kunal Girotra, CEO of California-based home battery startup Lunar Energy, explained that the effect is essentially a subsidy for home battery systems that can conserve excess solar power: "Utilities will insist on storage so they can get power when they want it." Not when the weather dictates." Girota expects variable metering rates to be soon rolled out across the United States. Currently, this idea has yet to be discussed in Arizona.

Renewable energy also suffered a setback from regulators this week in New York state. On Thursday, the state Public Service Commission voted against raising the rates offshore wind developers can charge utilities for their energy. Ørsted, Equinor, and other large wind companies are locked into contracts to deliver power at rates set over the past few years.

It is now too low to turn a profit, as inflation and supply chain bottlenecks have increased developers' costs. The message from New York this week: Too bad. It is easy to understand this position from the point of view of the regulatory authorities, which would otherwise have to explain what might happen.