PROJECT EASY GREEN

California Governor Jerry Brown charged solar leaders with finding a way to install 12,000 megawatts of distributed solar by 2020. “Find the path through the thicket,” he told them. “On the other side, we will have our solar future.”

The 12,000 megawatts are part of a 20,000-megawatt solar capacity goal Brown set for the coming decade. Distributed solar is, Brown said in the keynote session of a two-day UCLA conference on the sector’s opportunities and challenges, “resilient and secure because it is so distributed.”

California’s proposed centralized solar power plants will quickly place it among the installed capacity world leaders, but “it will be a little harder to become the leader in distributed solar power,” Brown said, noting Germany’s 11,000 megawatts and China’s rapid rise. But distributed solar energy, he said, is a “great breakthrough technology that can be invested in, generate the jobs, generate the energy security and keep California among the world’s leading innovators.”

Energy, Brown said, “is a huge part of a modern economy and the sun is abundant power.” But, he added, “there are technical problems, there are financial problems, there are regulatory problems, there are coordination problems."

“The various agencies — the California Independent System Operator (ISO), the PUC and the California Energy Commission — are going to be working together,” he promised. And if local communities or regulators block development, he said, his office will act, because “some kinds of opposition you have to crush.”

Lyndon Rive, CEO of Solar City, noted that while the building of a rooftop solar system takes two to three days, “the whole process takes an average of two months.” Over-the-counter permits are available in San Jose, he said, while “L.A. is not so great.” Rive laughed off the question of who needs to be crushed in L.A., but noted that with innovative no-upfront-payment models like the one offered by his company, the cost of burdensome permitting processes looms larger.

A bigger obstacle, Rive also said, may be the fact that people still don’t know that rooftop solar “is real and is viable” and that “it puts local jobs in every community. I know there’s a lot of emphasis on the jobs exported to China for panel manufacturing,” he said, “but two to three times more jobs are actually created in delivery. And you cannot outsource delivery.”

“The average American,” David Crane, CEO of NRG Energy, said, “spends 2.4 percent of their disposable income on electricity and twice that on fueling their car.” California’s role as a leader in both electric vehicles (EVs) and distributed solar, he said, puts the state in a position “to incent businesses to tie those two together.” Raising consumer awareness, he added, would create a more active market for both.

“No one argues that rooftops generally are a non-controversial place to put distributed solar,” Crane said. “But how do you get businesses to lead?” With a synthesis of distributed generation, EVs and smart grid technology, Crane said, “what we’re talking about is the democratization of energy use.” It is about, he explained, “individuals having choices and controlling their own energy destiny.”

Asked how he would answer Washington politicians who don’t see solar technology as viable, Crane said Washington politicians “have no credibility,” and added, “We’re much more focused on what’s being done at the state level because we don’t have any faith that anything is going to be done at the federal level.”

To the point that the Obama administration has at least removed obstacles, Brown responded, “It’s not enough just to not put up hurdles. That’s a very low bar. What about getting stuff done?” The 2008-09 stimulus programs were, Brown acknowledged, “the biggest renewable energy investment program America ever had.” But they were the product of a “massive fear,” he said. "You can’t get that very often.”

“When we made a commitment to be carbon neutral in 2007,” said Rick Needham, Director of Green Business Operations and Strategy for Google, Inc., “there weren’t a lot of great options.” So Google started investing in R&D and in building. “We’ve committed over $780 million to renewables, in projects alone, and over half of that is in the state of California.”

The investments have brought Google satisfactory returns, Needham said, but are also intended to communicate to other investors that “there are opportunities to make good returns and diversify your cash holdings while promoting an industry that makes good sense.”

The discussion homed in on the conference topic, identifying resolutions to the things holding distributed solar back. Brown talked about streamlining regulatory hurdles in California’s 58 counties and 400+ cities. “It is true when you have 38 million people,” he said, “that there’s always going to be somebody who says no to change” — and in our participatory system, “any old fool can object to anything.”

"The system has evolved tens of thousands of laws, hundreds of thousands of regulations,” Brown continued. The way forward? “You have to push,” he said, because “if we let the process unfold, we’re not going to get to the goal.”

Obstruction can come from distributed political power within any of the permitting authorities, Brown said, “especially when we’re in a position of deficit instead of surplus.” As such, “We need a centralized base of arbitrary intervention” to fight back. “Somebody has to think long term, that somebody has to have authority, and they have to exercise it.”

Arizona’s renewables standard requires 15 percent of the state’s power to come from renewable sources by 2025 and 30 percent of that must come from distributed sources like rooftop solar.

To meet the standard’s annually escalating requirements, Arizona’s utilities offer one-time, ratepayer-funded per-watt payments in addition to the 30 percent federal tax credit and $1,000 state incentive. The utility-regulating Arizona Corporation Commission (ACC) sets those per-watt amounts yearly, according to anticipated market dynamics.

As a result, demand has skyrocketed. Arizona Public Service (APS), Arizona’s biggest utility, is about to exhaust its incentive fund. Smaller utilities such Salt River Project (SRP) and Tucson Electric Power (TEP) still have incentive money to allot but industry watchers expect those funds to be used quickly.

“They’ve basically burned through all four quarters of the 2011 standard allotment for the residential incentives even though it’s only July,” said 10-year solar industry veteran Mark Holohan, Solar Division Manager for Wilson Electric, Arizona’s biggest commercial electrical contractor.

APS “started the year paying $1.75 per watt,” Holohan said. “Those funds were exhausted by January 16. Then it dropped to $1.60 per watt. That was exhausted by March 25. On March 25, it dropped to $1.45 per watt. That was exhausted on June 10. By that point, it had exhausted a total budget for the year of $27.9 million.” Barely two million dollars remain. “What’s left is only the budget for rapid reservations and only a dollar per watt,” Holohan said.

Some solar insiders say demand is now compromised. And solar installers, Holohan said, “have an interruption of their ability to sell and an interruption to their cash flow. And they will have idle people. That’s a difficult position for them to recover from.”

SolarCity is one of the biggest solar providers in Arizona. Though the situation is "not ideal," said Director of Communications Jonathan Bass, his company has been able to “manage around” the quarter-to-quarter starting and stopping. A lower incentive “makes a purchase more expensive,” Bass said, but SolarCity can still provide “affordable solar options” in Arizona, where “a solar system generates more electricity than almost anyplace else in the U.S.”

Commercial incentives from APS are structured differently and are largely based on auctions in which installers bid for jobs.

“Two years ago, when we first started, anybody who wanted could bid the limit of eighteen cents per kilowatt-hour and get it,” Holohan said. “Last year, approximately three-quarters of the submissions in any given auction did not win. So they had to come back for a second auction, or a third, or a fourth.”

This has driven the price for commercial-scale systems down so low, he said, that utilities could be “above compliance” for 2012, with no short term need for capacity to meet the standard, putting next year’s incentives in doubt. That would be a further blow to installers.

It is the way the program was designed, APS renewable energy spokesperson Steven Gotfried said in response to installers’ concerns. “The starting-and-stopping of the solar industry was addressed last year,” he explained. “We have pools of funds released each quarter” so that “throughout the year the market is still moving and there are still installations.”

“We have 81 megawatts of solar right now and another 495 being developed,” Gotfried said. “The market is just exploding.”

APS is on track, Gotfried said, to meet not only the state’s renewables standard and distributed energy requirement but to meet its own higher solar targets and to provide “more and more solar using fewer and fewer dollars.”

Being “a market-based approach,” Gotfried said, “if the incentives were used up too fast, it could mean they were too high.” Most installers, Gotfried thought, understood that “as demand increased, the incentives would decrease and, at some point, would go away as the market became self-sustaining.”

“They’ve been upfront with us throughout this last year about how they were going to handle their incentives,” agreed Gary Held, Harmon Electric’s Sales and Marketing manager. The process, including the stepped reductions, was entirely transparent. “They did what they said they were going to do.”

And, Held added, “there is still money available and, yes, we’re still selling at a dollar per watt. It still makes good financial sense for a consumer to purchase solar.” It changes the payback, Held said, but “return on investment is still double-digit, even with a dollar a watt.”

There are, Held admitted, consumers who “are scrutinizing and evaluating solar a lot more carefully because the incentive went from $1.45 to a dollar. But will people still go forward at a dollar a watt? Absolutely.”

Furthermore, Held insisted, “we are continuing to hire and add to our installation team.”

Arizona went from having 15 to 300 solar installers as it developed its incentives. However, newer and smaller companies could easily find the current situation is as challenging as Holohan described.

But because the incentives are funded by ratepayers, Gotfried pointed out, the utility has “a fiduciary responsibility to get the most amount of solar for our solar customers for the amount of money our other customers are investing.”

Undertaking greater expenditure of ratepayer funds to bring higher levels of renewables on line, Gotfried suggested, can only come from more demanding state policy.

Two employees with a major Arizona solar provider who did not want to be quoted giving policy advice pointed out that California’s solar initiative, a ten-year program that progressively lowers the incentive amount but continues the funding uninterrupted, offers more stability.