"Guaranteed grid access is critical"
Anya Schoolman directs the Community Power Network, which started off with the Mt Pleasant Solar Coop in 2006. Since then, she has helped create 11 other energy co-ops in the Washington DC area. Instead of telling consumers what they can do to buy power, she argues that environmental groups should organize citizens and start building projects – make their own power. Community Power Network is a national network of similar local groups that work to build and promote renewable energy in their neighborhoods.
Renewables International: Ms Schoolman, Germany is switching to renewables largely thanks to community -driven projects and citizen involvement , and energy cooperatives are quite common . I have the impression that things are much different in the US, where the government wants to reach its targets for renewables by forcing utilities to produce more green power. Citizens are largely left out of building their own wind farms, and homeowners can generally switch to solar only under net-metering programs and with third-party ownership, as with Solarcity . Is this an accurate depiction?
Anya Schoolman: Partially yes, and partially no. It is true that Federal Government policy to promote renewable energy favors large companies and third party ownership—largely because the Federal Government uses tax incentives to promote renewable energy. While those tax incentives are a very strong incentive for homeowners and businesses, they aren’t available for non-profits – such as schools, churches, community organizations and local government. The tax incentives give a very strong leg up to renewable energy companies that have teamed up with Wall Street in order to take advantage of the tax advantages.
One of the primary bottlenecks in the development of renewable energy projects in the US the availability of tax equity finance. The companies that have teamed up with tax investors and have sufficient working capital to wade through the complicated legal statutes and hire the best lawyers have a real leg up on local companies. They can offer people that want to go solar up-front financing for their systems.
All that being said, however, there is a very strong local power movement in the US very much like what is taking place in Germany. For the most part, it is taking place off the radar of both the environmental movement as well as energy policy makers or renewable energy industry. We are starting to see a string of really interesting companies specializing in products or technical assistance for community owned-renewable energy. For example, Clean Energy Collective in Colorado specializes in software to allow the integration of community-owned solar gardens with a traditional utility structure. Juhl Energy specializes and supports a large number of community-owned wind projects. Tangerine Solar is developing a for-profit company based on the idea that cooperatively owned solar can be a viable business model.
On the other end of the spectrum, there are all sorts of examples of community groups that are going ahead and deploying renewable energy even without the support of generous incentives like the FIT in Germany. For example, in New Hampshire and West Virginia the groups PAREI and New Visions are deploying solar by using a “barn-raising model” where citizens share labor and help one another go solar. In Missouri, Show Me Solar is training people to install their own panels and working collectively to build and develop solar across the state. There are examples in every state in the US, and like Germany we often find the practitioners are those most closely engaged with local economic development.
RI: If we focus on one of the projects you were involved in, how do such things come about? Do you have town hall meetings? Do people buy shares of the project and get a return on their investment?
Schoolman: In DC we hold neighborhood meetings. We negotiate as a group, but each person signs a unique bilateral contract with the installer. They get the return on their investment through net-metering their electricity production and through SREC (Solar Renewable Energy Credit) payments (roughly $900/year). They also buy down the initial investment with DC grants and a Federal Tax credit worth 30% of the total cost. Overall, payback is usually 3-5 years.
RI: So small projects pay for themselves thanks to a combination of net-metering, which is directly linked to personal power consumption. But doesn't that discourage conservation? If people produce more power than they consume, there is the problem of how "excess production" is paid for – if at all, right?
Schoolman: Net metering rarely discourages conservation. The reason is that most people cannot cover their entire load with the panels on their roof. What we have seen is profound behavior change and conservation after people go solar. Before going solar if you talk to someone about conservation – even hard core environmentalists – they say they are for it, but they rarely do it.
Conservation measures are largely very incremental, and the payback is hard to calculate. After people go solar, they typically cover about 2/3 of their electric usage. Then it becomes an exciting and reachable challenge to reduce the final third to get the electric bill down to zero. Not only do we see people suddenly taking aggressive measures to reduce their electricity, but they also start reducing their heating consumption as well. It all fits together. The teen agers get excited and inspired by solar and they start turning out the lights! We have seen people with larger solar systems shift to electric vehicles but we don't think that increase in electric usage is a bad thing. One of the advantages of net metering is that the benefit you get is a reduced bill-- it is not taxable income!
RI: Tax incentives are directly linked to personal tax rates, not the cost of the array. German-style feed-in tariffs focus on a single item: the cost of the power a properly installed system should produce.
Schoolman: Tax incentives are not linked to personal peak rates; they are linked to the cost of the system (30% of the cost of the array). They are tax credits, not tax deductions. So after your taxes are figured out, the credit is deducted from what you owe the government. Your tax rate has no bearing on the situation. If you already pre-paid your taxes, the government will send you a rebate check. There are also a number of state income and property taxes that are really driving solar development in some states.
The big problem with using tax incentives to drive solar development is that the incentive is not equally available to all participants. If you live in poverty-- you do not pay federal taxes so there is no advantage to a credit. Similarly, if you are a non-profit such as a school, community organization, church, or local government you do not pay taxes.
In the US, a third-party ownership model has grown up whereby for profit companies back by large investment banks with a large tax appetite finance and own the systems for people. These third-party ownership models are becoming the dominant ownership model in the US. This is fine from a carbon perspective in that these companies are rolling out solar at a high rate, with a zero cost to the participants. From an economic development perspective, it is quite disturbing in that the economic benefits of the solar transition are quite concentrated in the US rather than distributed broadly as they are in Germany.
We also have an incentive that in some ways is similar to the FIT. It is called Solar Renewable Energy Credits (SRECs). It represents the green value of the solar power – over and above the value of the electricity. It is a market created and regulated on a state level. It is administered and managed very differently from state to state. Where I am, for example, in addition to the incentives described above I receive about $900 a year from the sale of my SRECs.
It is a very dynamic market. When state mandated solar targets are being met or exceeded, the SREC value drops toward zero. When the targets are not being met, the price escalates toward a cap (or Alternative Compliance Price) set by the government. While far from perfect, the SREC approach has some real advantages in that it is cost-effective and creates long-term political incentives for existing solar owners to push for an ever-expanding market.
RI: Other incentives include upfront grants, which are based on system size, not the amount of power produced.
Schoolman: The grants are based on the size of the system measured in installed KW. Therefore a "larger" system by definition has a larger output. There is nothing wrong with this program. It is very efficient and flexible, and a very effective incentive to promote solar. The biggest program with the grant program from a consumer point of view is that the funding is limited and often runs out. So my greatest critique of the grants is that they come and go in a cycle that is not conducive to building a small business. When the grants are around you need staff or you get a big back log and un-happy customers. When there are no grants, you will go under if you maintain your large staff or don't have other lines of business--such as commercial solar.
RI: You say there is "nothing wrong" with grants, but isn't it a waste of money – inefficient – to promote kilowatts instead of kilowatt-hours, which feed-in tariffs do? Think of it this way, and I am taking examples I have heard anecdotally from the US: Let's say I put three kilowatts of PV on my house. I get a grant for that system size regardless of whether it is properly installed – it could be shaded, poorly oriented, or technically malfunction. So isn't it better to directly incentivize what you want – solar power – rather than just pay people to put stuff up?
One of the main incentives for solar on your roof is net metering. That is where you off-set your electric bill with the energy you use. Off-setting one's electric bill is the main long term incentive (the grant helps pay for the installation, but one time only and only 1/4 of the cost or less) so there is a strong incentive to cite the panels to maximize output. As your electric bill increases—over time the value of the energy you produce increases as well. That is why in the US people really expect solar to take off when it reaches grid parity.
One of the main differences than a FIT in that there is no incentive for individuals to oversize their systems beyond their own usage. For residential solar, this is rarely a problem as most homes still use more energy than they produce over the course of a year. However, in more rural areas, there is no incentive in most locales for people to put in larger community scale systems. New legislation in some states (CO, MA, CA, and OR) allows larger systems where the capacity is shared among multiple owners (called solar gardens). These are driven by the fact that the principle incentive is, in fact, net metering rather than a production payment like the FIT.
It is true that panels are sometimes poorly sited. But this isn't because they are just trying to take advantage of the grants. It is usually due to unscrupulous installers overselling the product or taking advantage of ill informed customers.
RI: Are Americans happy with their current policy environment, or do they see room for improvement? And are average Americans even aware of feed-in tariffs?
Schoolman: I think most Americans are aware of the FIT. There are many states experimenting with it. As with all things the devil is in the details. FITs can be implemented very poorly and create boom-bust cycles similar to what I described with the grant program above. Because of some poor early starts with FIT, much of the solar industry in the US is skeptical. Also, policy makers are worried about the costs of the program. However, a large ambitious long-term FIT that gives steady growth and consistency to the market would be a huge improvement over the complicated mishmash we have in the US.
The SREC approach isn't actually as different as some people think, except that we disaggregate the green value of the electricity from the conventional energy. As we approach grid parity, the difference between net-metering and the FIT becomes less important in terms of a financial incentive. The key issues are the consistency and growth of the markets, the ability to borrow money on future energy revenue or contracts, and utility barriers to interconnection.
In the US, if I were to take one thing from the FIT, it wouldn't be the money. It would be the guaranteed access to the grid. That is critical! What we are really concerned about in the US is the overall limits put on solar by the utilities that have not yet gotten comfortable with the idea of managing a distributed grid. The FIT in Germany sends a clear signal to the utilities that this is not optional, but a mandatory part of their job. Many utilities in the US are still in the position of fighting rather than adapting to the arrival of renewable energy as a major part of the energy mix. (Craig Morris)