Arizona Corporation Commission Chairman Bob Stump issued a statement last week concerning the Commission’s desire for further discussions on how to count rooftop solar toward fulfilling the state’s Renewable Energy Standard (REST) requirements. The REST requires that by 2025 Arizona utilities must generate 15 percent of their overall energy portfolio from renewable sources with 30 percent of that total coming from distributed resources such as rooftop solar.
In his statement, Chairman Stump implored “all the parties to act in good faith and to refrain from demagoguing an issue of great importance to Arizonans.”
Chairman Stump is right -- the reasons Arizona adopted its Renewable Energy Standard in the first place (to benefit the grid, the economy, our air, our health) are too important for our conversations to be ruled by emotion rather than reason. That hasn’t always been the case.
For the past year the ACC and utilities have been attempting to control the rapid growth of the solar electric industry through changes to the state’s REST. First, the commercial incentives to install rooftop solar were nixed; then came a failed attempt to roll back the REST altogether, and finally the net metering rules (cost-shift tax) debate.
The reason for all the concern is because the REST is working better than expected and as a result there is more solar in Arizona than the utilities anticipated in their implementation plans. The good news, all the direct and in-direct benefits that go with solar utilization, such as jobs, clean air and less stress on the grid – are also higher than estimated.
The current focus seems to be directed at changing the REST piecemeal in an effort to control this market transformation. But the rapid transformation we are now experiencing isn’t because of a technology breakthrough -- this market transformation is being driven by an innovative business model. To adapt, the Commission needs to look at both sides of the meter including implementing changes to the way utilities do business.
Several analogies have been used to describe the big picture involving today’s solar marketplace. Among them is one forwarded by Stanford University Professor Tony Saba, who makes the case that today's solar industry success mirrors that of the automobile industry a century ago.
Saba contends that it was not a technology innovation, rather a financial innovation, that fueled the automobile market in the U.S. in the 1910s.
Cars had been around for more than a decade with limited market penetration; however, the introduction of financing in 1918 through GMAC finance was one factor that took the American auto market from 7.7 percent adoption to 80 percent adoption in less than a decade.
A financial innovation helped unlock the car market 100 years ago and financial innovation is having a similar impact in the solar marketplace today. In 2008, a company called SunEdison introduced a version of what is known today as the solar lease. Residential and commercial solar customers no longer needed to invest capital in purchasing solar rooftop systems. As a result, leasing has fueled an increased adoption rate for rooftop solar systems, which in turn is pushing costs down and further fueling the market.
SunEdison offered to finance, install, own and maintain the solar panels on its customers' rooftops. Property owners did not have to take any risks. At the end of the (20-year) contract, the customer has a choice of purchasing the equipment at deep discounts or having them taken off the roof.
Soon after SunEdison, Solar City started offering a solar lease option and the solar market began to explode. The concept caught on and other companies such as Sungevity and SunRun as well as local and regional companies joined the growing list offering solar leases or Solar Power Purchase Agreements.
As a result of these financial innovations, the solar market in America quadrupled from 2008 to 2012. Since 2012 the market has expanded even further, as about 80 percent of all residential and commercial installations nationwide are now financed by third party-companies. In Arizona the number is closer to 90 percent.
If the Commission really wants to demonstrate its commitment to growing renewable energy in Arizona, it needs to seriously look at the reason why solar energy is succeeding and give our utilities the flexibility to become innovative right alongside solar companies.
Jim Arwood
Communications Director
Arizona Solar Center
Question: The question currently before the ACC is how to count rooftop solar units if the property owner did not receive an upfront incentive and thus has not assigned their RECs to a utility. Is there a solution that doesn’t involve waiving the distributed generation portion of the REST? Would allowing utilities to claim RECs for any solar-kWh they purchase through net metering be a solution? Should utilities be allowed to offer their own solar leases as a way to obtain credits toward meeting their DG requirement? What are some other ways to make the counting process work for everybody?
