Chasing Subsidies
The largest rooftop solar company doing business in Arizona recently announced it will reduce its Arizona workforce by 85 workers (about 9.5 percent) with more layoffs and transfers possible. As part of the strategy, it was reported SolarCity was moving portions of its workforce to California and adding the State of New Hampshire to its sales footprint.
Representatives of rooftop solar companies point to SRP’s recent adoption of new charges on solar installations as the reason for moving on to more profitable markets.
SRP’s action was designed to stem the cost shift that existed under the previous rate. The old rates did not recover solar’s fair share of fixed grid-related costs, despite the fact that solar customers use and depend on the grid for supplemental and backup power and for selling portions of their power production back through the grid. Non-solar customers picked-up this additional cost burden. Under the new rates, however, solar installations will pay for what they use of the electricity grid.
Lyndon Rive, CEO of SolarCity, said moving the company’s workforce to other markets “. . . is not a bad thing for the company.” He also stated, “Strange enough, it actually ends up better for SolarCity” (LINK).
Of course it will . . . especially with California Governor Jerry Brown assisting, and the “live free or die” state of New Hampshire, serving up some of the highest residential electricity rates in the nation along with a generous rebate program for rooftop solar. Nothing “strange” about it.
Back in January Governor Brown announced his plan to increase California’s renewable energy requirement from 33 percent to 50 percent by 2030 (in 2011, the target was increased from 20 percent to 33 percent). , currently working its way through the legislature, would codify the new mandate in law and require the California Public Utilities Commission to implement it.
California’s government and utility customers have already contributed some in explicit incentives to the renewable energy industry toward meeting the original 33 percent goal. Additional subsidies are provided courtesy of net metering. The subsidies that favor solar and other renewable energy sources are paid for out of the pockets of non-solar customers and taxpayers. Continuing along this path and extending even more aggressive targets out for 10 additional years will shift hundreds of $millions more onto an increasingly smaller non-solar customer base, thus raising electricity prices further.
Today, some exist on homes in California. Thousands more rooftop solar arrays will be coming to California to meet current and future renewables mandates.
It’s an economic opportunity most rooftop solar companies can’t refuse.
Back in Arizona and hidden amongst the solar debate is the question of precisely how far should Arizona decision makers go to subsidize rooftop solar businesses at the expense of other electricity customers and taxpayers. So far, Arizona utilities are generally meeting or slightly exceeding annual targets to reach the renewables mandate of 15 percent by 2025. As the price of solar panels has declined making ownership of rooftop solar more affordable, subsidies to encourage more rooftop solar in Arizona have also been lowered.
Let’s face it, a business model, like rooftop solar, based and dependent on subsidies is simply unsustainable in the long run, even in California. The jobs attached to such an industry will always be at risk, until and unless solar companies move to a business platform responsive to market forces rather than subsidies.
Should Arizona policymakers get into a rooftop solar incentives bidding war with California, as that state stretches to reach its aggressive renewables target?
Let’s hope not.
According to Energy Information Administration data for 2013 (the latest available), electricity rates for residential customers in Arizona (11.71 cents per kWh) are substantially lower on average than those in California (16.19 cents per kWh), or New Hampshire for that matter at 16.33 cents per kWh).
We should keep it that way.