Over the past five years, the sun has definitely been rising for the solar industry. In 2016, the industry installed nearly twice as many megawatts of solar than 2015’s record-setting year, according to the Solar Energy Industries Association (SEIA). The same report shows that Utah solar jobs grew 65 percent last year—in fact, one in 50 new U.S. jobs are in the solar industry—and Utah is now the sixth-largest solar state in the country.
But it’s not all sunshine for the industry, even though prices for installing residential solar have come down significantly and awareness of the efficacy of the solar cells has gone up. Utah is ramping down its solar incentives program, with tax credits for residents installing rooftop arrays slated for elimination by 2021. The sharp increase of residential solar owners has also affected Rocky Mountain Power’s (RMP) net metering program, which hitherto has allowed solar customers to sell back excess power to the utility company at extremely competitive rates. And last, the industry’s recent boom—coupled with potential roadblocks on the horizon—has some fearing that a solar bubble could be forming, and soon pop.
A new industry
Seven years ago, when Auric Solar was a tiny company just starting out, Jess Phillips would drive to work, passing dozens of houses. Maybe, just maybe, he’d see a single house equipped with rooftop solar. These days, he sees a lot more.
“It used to be ‘are those solar panels?’ But now you’re not pointing them out anymore. It’s becoming something you can see every day,” says Phillips. “When we started up my company, we could’ve driven around all day without finding one.”
Solar has been exploding in Utah for a variety of reasons, says Bryan Christiansen, COO of Vivint Solar. The first thing is simply that awareness has increased—and now, customers are no longer stunned by the sticker price of solar panels. According to SEIA, U.S. photovoltaic system pricing has dropped by 20 percent, and Utah’s solar-friendly tax rebates (allowing those with rooftop solar to seek tax credits of up to $2,000) have also helped get people to sign up.
“When solar consumers look at what solar cost 10 years ago, it’s like they’re getting a Groupon now. The price has dropped so much. They look at it and say, ‘I can’t pass it up,’” says Christiansen. “They reengage and ask questions and see it’s a good idea.”
With the way solar is financed now, Christiansen continues, many customers in Utah save immediately after installing their rooftop panels. “What we’re seeing from a rate perspective is that sometimes customers can automatically save on their bills by financing the system,” he says. “So if they had a bill for $150 and they then bought solar, then their combined bill, with the payment for their solar system, is $135. It’s still less than what they had before.”
Phillips says that modest savings or even breaking even will prompt a customer to buy solar, because environmental issues are becoming more and more important to customers.
“[Utah’s] only black eye is our air quality. It’s huge,” says Phillips, who explains that Auric Solar surveys its customers to see what their primary reason for purchasing solar is, whether that be financial, home value improvement, environmental or something else. “The environmental impact of solar is starting to become a real thing. When we started our company seven years ago, 1-2 percent of [respondents indicated] the primary reason was environmental. Now it’s 20 percent.”
The call of solar has beckoned even for those who don’t want to set up a photovoltaic array on their houses—or for those who can’t. RMP purchased a 20-megawatt solar plant and created its Solar Subscriber Program, which allows customers to get their energy from the plant rather than through traditional methods. Customers can keep that subscription for 20 years, and so long as they move to a place that RMP services, they can keep it with them if they move. The Solar Subscriber program has sold out and now has a waiting list.
Paul Murphy, spokesman for RMP, says the first program was a pilot—but it worked so well that the company has plans to build another solar plant. “People are voluntarily making a change that says, ‘I’m supporting clean energy and I’m giving money to make sure that happens,’” he says.
Until recently, the fledgling solar industry seemed to be a pet project of conservationists—good in theory, but practically complicated and expensive to implement. A few short years has made all the difference for the industry, with a mountain of support from the state in the form of subsidies and from RMP’s net metering program.
With the immense growth of the industry, the federal government, the state of Utah and the utility companies are all saying: Enough. Solar’s big enough now that the scaffolding can come off, and the industry can shift for itself.
In 2015, Congress extended the Investment Tax Credit, which includes a full 30 percent tax credit for commercial solar instillations, by five years. In 2020, the tax credit will bump down to 26 percent, then 22 percent in 2021, then 10 percent in 2022. Utah modelled the phase-out of its own tax credits for rooftop solar instillations similarly, dropping from the current $2,000 credit to $1,600 in 2018, then it continues to decrease by $400 every year after until the program disappears.
“If we’d had a cap on it, or cut it off all at once—because it creates a logjam—that would hurt our industry,” says Phillips. “So it’s good for the public to know that there are incentives. They’re awesome. But they’re expiring. Now is the time to take advantage.”
It’s not the only thing that will be changing for new residential solar customers. RMP’s net metering program is also slated to change in the near future. The net metering program allowed people to sell their excess solar energy back to RMP and to purchase electricity from the grid when needed. RMP purchases the excess power at a rate of 10.7 cents per kilowatt hour—but that number is simply not sustainable, says Murphy.
“We did a study where we put sophisticated meters on houses to see the costs and benefits for rooftop solar customers. We found out they were being subsidized about $400 each year from customers without solar panels. We are paying extra on our bills to provide a subsidy for the use of the grid for rooftop solar customers,” says Murphy. “If you look at what it would cost us to get that energy from a plant, it would cost us 4 cents, but we’re paying 10.7 cents.”
As more people buy solar, the cost of subsidizing solar will skyrocket, he adds. RMP’s study claims “the cost shift currently amounts to $6.5 million each year to other residential customers and is forecast to grow to as much as $78 million annually if the rate is not addressed.”
To address the issue, RMP wants to change the structure of its net metering program to have rooftop solar customers pay what it believes is their fair share. However, a similar shift from the Nevada Public Utilities Commission all but killed the solar industry in that state—and many are worried the same could happen in Utah. Murphy doesn’t share those fears, saying that solar “started out needing support, which is why there were tax incentives. But now the industry is doubling every year. The rates are costing everyone without solar panels more for their energy to support it.”
Phillips believes there’s two sides to the story—that rooftop solar energy is cheaper than it looks on paper because it’s generated where the energy is most needed, rather than far away. “There’s electricity being generated onsite, and there’s benefit to that happening. You don’t have to ‘ship’ the power from far away. If you want to generate X amount of power, you have to generate three times that power from that original spot, because you lose it,” he says.
Conversations between the solar industry and RMP are ongoing, although both sides are quick to say the process has been collaborative and respectful, and they are optimistic a solution that benefits all will be found.
A solar bubble?
Despite that optimism, some are concerned about the possibility for a solar bubble to emerge. As more people demand solar power, more companies crop up offering to make their dreams a reality, sometimes for absurd prices.
Christiansen believes the solar bubble has already popped. He points to the value of publicly traded solar companies, which have come down from overvalued highs. And when it comes to the rapid proliferation of solar installation companies, he says the market is in the process of “filtering out the winners, the strong operators and those who are operating on the premise that growth will save the day.”
Those startup companies who behave illogically—selling discounted solar and losing money, with the hope that growing rapidly will make up the difference—will soon be eliminated from the market, says Christiansen.
“I was talking to someone who told me, if you want to further a cause, run it like a profitable business. If you want to kill a cause, run it like an unprofitable business,” he says. “If bringing a green energy to the masses is our cause, we should run it like a profitable business.”