Solar Conference Attendees Push Renewables, Seek Incentives
Solar advocates counter critics who say subsidies disguise true costs
RALEIGH — Facing stiff challenges from government-subsidized foreign competition and stifled by restrictive domestic regulations, solar energy advocates nationwide are seeking aggressive remedies.
In North Carolina, solar entities are pushing for policies and incentives to catapult the industry to a higher level of growth, including market-based approaches to deregulate century-old power monopolies in favor of more-flexible alternatives.
More than 200 solar entrepreneurs, academics, engineers, investors, supporters, and government officials gathered at Solar Exchange East 2011 Sept. 21. The daylong conference was held at the McKimmon Center at N.C. State University. “Policies and incentives are the building blocks” for the solar industry, Larry Shirley, director of the Green Economy program in the N.C. Department of Commerce’s Energy Division, told the conference.While participants called for an end to what they see as the favorable government treatment of fossil fuels, critics believe the more traditional route of letting private investment and the market dictate the industry’s direction is a better policy. They contend that letting government pick winners with financial incentives distorts market signals for cautious research and development. Better for investors to put their own money on the table, critics say, than lobby for tax dollars.
Daren Bakst, director of legal and regulatory studies at the John Locke Foundation, said Energy Information Association data show solar projects already collect 1,212 times more federal subsidies per kilowatt hour of electricity produced than coal and gas plants receive.
And in the wake of the Solyndra failure, at which a solar company received $535 million in federal stimulus loans and then declared bankruptcy, some question whether government should be in the business of gambling with taxpayer money in a high-risk renewable energy sector.
“Subsidies are basically a waste of taxpayers’ money, a form of corporate welfare. It’s an unjustified tax loophole [that] should be closed,” said Roy Cordato, JLF’s vice president for research and resident scholar. “These [renewable energy ventures] are grossly inefficient. If they weren’t, they wouldn’t need government subsidies.”
Dan Rosen, an account executive with Siemens Financial Services, focuses on commercial-scale solar photovoltaic projects in the Southeast. He conceded the Solyndra scandal could turn public opinion against taxpayer-backed incentives and make state governments wary of implementing or expanding subsidy programs.
“People will demagogue on that,” he said of the Solyndra meltdown. But he believes government should invest in research and development when private capital is unavailable. Nor should it be expected that all government-backed companies will succeed.
Solyndra’s problem was that it “focused on technology and not cost structuring. It will be part of an ongoing shakeout in the industry,” said Steve Kalland, executive director of the North Carolina Solar Center, a renewable energy think tank at N.C. State that co-hosted the conference. “This is an industry where there is going to be a lot of that going on in the next couple of years.”
Despite Solyndra’s high-profile demise, “This a robust environment,” said Rick Myers, director of the Solar Vertical Market Management program for Siemens, an international conglomerate with industry, energy, and healthcare divisions. Siemens co-sponsored the conference.
“The U.S. solar market grew 67 percent, from $3.6 billion in 2009 to $6 billion in 2010. Solar electric installation in 2010 totaled 956 megawatts. There’s no doubt the U.S. government needs to get more involved in this effort from a policy standpoint,” Myers said.
“The solar panels are 50 percent of the cost for installation, and those prices are going way down,” Myers said. “The fact of the matter is the competition is extremely difficult in that area. It’s coming from the Pacific Rim and China.”
“We’re at risk of losing the industry,” Kalland warned. “When you look at what the global competition is doing, they’re investing heavily” in government projects.
But those investments have a dark side, Cordato said.
“In countries where they’ve invested massive amounts of money, it’s costing their economy” by redistributing wealth. Research from Spain concluded that every job in the renewable sector created with incentives cost 2.7 jobs in the rest of economy, Cordato said.
But Rosen argues incentives “don’t have to be in place forever.” California, the nation’s leader in solar energy, has weaned solar companies from state incentives because it now costs less to produce a kilowatt of solar energy there than it costs a utility company to produce electricity using traditional fuels.
In North Carolina, tax credits at the state and federal levels have helped the renewable energy industry blossom, Rosen said. North Carolina has “a brilliant state tax credit” of 35 percent. He said banks and financial institutions, the largest investors in the state’s solar energy sector, are the biggest users of the tax credits.
“The state doesn’t require one penny from the taxpayers” for the tax credits, he said.
“If you say we’re going to give a tax credit here, we’re going to cut education over there, then yes, that’s true” there is no cost, Cordato said. Otherwise, “the question is what is the state not getting done because of the tax credit … there’s revenue the state is not getting” to fund its operations.
Ivan Urlaub, executive director of the North Carolina Sustainable Energy Association, supports tax credits. He believes they had a role in reducing solar energy costs in North Carolina from $12,000 per kilowatt hour in 2004 to about $3,500 per kilowatt hour this year.
But, he warned, “It’s very important especially in a tax credit environment that you have tax investors. And tax investors in a down economy are much harder to find.”
Rosen praised the state’s renewable portfolio standards passed by the General Assembly. North Carolina is the only state in the Southeast with such standards. They include a “carve-out” requirement for green power in utility companies’ energy mix.
The state’s mandate for solar rises from .02 percent in 2010 to .2 percent by 2018. The requirements for power generated by solar, swine waste, and poultry waste combined rise from 3 percent of the energy mix in 2012 to 12.5 percent in 2021.
Rosen and other speakers said mandates are critical because utility companies enjoy state-sanctioned monopoly status. Those monopolies may be the largest barrier to renewable energy growth in North Carolina. By law, solar companies must negotiate power purchase agreements with utilities.
Allowing third-party power providers to sell electricity directly to consumers instead of going through a utility middle man is “a policy difference they could make easily” in the General Assembly, Rosen said. In New Jersey, for example, third-party providers created 35,000 new jobs and $283 million in investment in 2 ½ years.
Bakst opposes solar mandates but “if it’s just me providing solar directly to someone without putting it on the grid, there should be no prohibition on that,” he said.
“Utility companies don’t want to use solar power because it’s too expensive and unreliable” because the sun isn’t always out and solar energy can’t be stored, Bakst said. Those shortcomings require backup generation availability from coal or natural gas plants.
“Solar is the worst option,” Bakst said. “In fact, it makes wind [energy] look good.”
Owen Smith, managing director of renewable strategy and compliance for Duke Energy, heads up a team responsible for compliance with renewable energy requirements while delivering the lowest cost possible to ratepayers.
“Price is really what defines the size of the solar market,” Smith said.
“Policies have a cost. In some form or another, citizens … will pay,” either through higher taxes or utility rates when the state requires the purchase of higher cost green energy, he said.
Dan Way is a contributor to Carolina Journal.