Importance of Favorable Regulation for Solar Power

Solar power becomes a very attractive investment when sunlight is available in generous amounts, since one obtains more energy and savings for a given PV system capacity. The southwest of the USA has excellent natural conditions for solar power, particularly in states like Arizona, Nevada, California and New Mexico. Some locations in these states receive more than six peak sun hours per day, which greatly increases the energy output a photovoltaic system while reducing its payback period. However, even with excellent site conditions and affordable solar panels, the local regulatory framework has a considerable impact on the financial attractiveness of solar power. The case of California and Nevada is a clear example of this; both states have plenty of sunshine throughout the year, but very different regulatory approaches to solar power:

  • In Nevada, the government has sided with electric utility companies and is creating less favorable conditions for solar power: On January 1, the fixed monthly fee for solar power customers was raised by 40 percent, while also lowering the payments received for exporting the surplus production of solar PV systems to the grid.
  • California, on the other hand, has plenty of government incentives for solar power, including generous rebates. The state also has a thriving entrepreneurial community, and thanks to these factors the installed solar power capacity in California is currently half of the total national capacity!

In addition, these changes are retroactive(!), which means customers using solar power can expect large bills this month… just for being users of photovoltaic technology. The new regulations were pushed forth mostly by NV Energy Inc, the owner of Nevada’s two largest electric utilities.

Trends Shaping the Future of Solar Power

Solar photovoltaic systems have already proven their financial viability, and their costs are rapidly declining. In utility-scale projects, for example, installed costs are about to drop below the $1000/kilowatt mark. Also, there are now plenty of solar farms in the world producing energy at prices below 5 cents/kWh, and an 800-MW project in Dubai just broke the price record for solar power at 2.99 cents/kWh. Cost is no longer an issue for photovoltaic solar systems, which means the future of the industry will be defined by other factors. According to industry experts, the trends that could have the most significant impact are the following:

  • Regulatory changes by governments and utility companies
  • Evolution of energy storage methods

The Role of Regulation – The regulatory framework for solar power is a wild card, which can have either positive or negative effects on the industry:

  • New York and New Jersey are two examples of how favorable regulations can boost the solar industry. Although sunshine is modest in both states, they’re currently among the top markets for solar power in the USA.
  • Nevada is an opposite example: In spite of the generous amounts of sunlight available, local regulations have slowed down a once thriving solar industry. Local utilities have placed hefty charges on customers who use PV systems, and compensation for energy exported to the grid has been drastically reduced.

How regulation changes in the future will play a significant role on the evolution of the solar industry. Favorable regulations can result in a smarter and more integrated power grid, while unfavorable regulations can result in more customers preferring off-grid photovoltaic systems.

Energy Storage – Solar power is already competing against established fossil fuels such as coal and natural gas in terms of price, but providing a 24/7 energy supply has proven to be a challenge. Considering that solar PV systems are only productive during daytime, energy storage is mandatory to achieve a 24/7 supply. Storage can be based on a few large-scale facilities or distributed among thousands of small-scale systems deployed by individual energy consumers. Of course, a combination of both approaches is also possible. The evolution of energy storage is strongly related to how regulations change in the near future:

  • Unfavorable regulations for small- scale PV systems will drive the construction of large-scale storage facilities, operated by utility companies themselves or by private investors. If small-scale energy storage becomes affordable enough, homeowners might consider going completely off the grid to avoid the extra charges on PV systems.
  • Favorable regulations for small- scale systems will incentive more home and business owners to deploy local energy storage, and all of these systems would be able to operate in a coordinated fashion with the use of automation (Internet of Things).

If distributed energy storage becomes mainstream, information technologies are expected to play a very important role. Control and automation will be required for tasks such as:

  • Allowing a storage system to determine the optimal times for storing and supplying energy.
  • Aggregating multiple systems to absorb surplus production from intermittent energy sources (wind and solar farms).

These new regulations have placed considerable pressure on the main players of the solar power industry in Nevada. For example, SolarCity Corp. and Sunrun Inc. were both forced to cut down their staff by hundreds of employees. Governments throughout the world must realize that solar power is a booming industry which can create considerable economic growth and hundreds of jobs. When limitations are placed on the solar power industry to protect older business models, such as those of traditional electric utilities, the resulting damage far outweighs any benefit.

Of course, there has been backlash from solar power companies in Nevada. A group of 18 venture capital investors is pressuring the state governor to void the recent regulatory changes, and rallies to protest against the new fees are being organized in Las Vegas and Carson City. Regulations like those recently approved in Nevada cause great damage to innovation, but the greatest impact is suffered by homeowners who have invested in solar photovoltaic systems. They have to face reduced payments for the surplus energy they sell to the grid, while also being charged a retroactive fee. It is unfair to punish homeowners for using a technology which brings both environmental and economic benefits. The case of California and Nevada clearly demonstrates the importance of favorable laws and regulations for the solar power industry.

If you plan to install a photovoltaic system, make sure the make the most out of any benefits available in your location! You can have a talk and a discussion with our solar experts for guidance on this topic, or for any questions or inquiries you might have.

 

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