|
Energy & Clean Technology Article
June 14‚ 2013
Solar PV Capacity Quickly Expands When States Provide the
Right Incentives
By
David O’Connor
[1]
The American solar photovoltaic (PV) industry
has grown tremendously in recent years. In 2012, more than 3,300
MW of solar power were installed throughout the United States,
with a record 1,300 MW installed in the last three months of the
year alone.2
Falling costs for hardware and installation have accelerated
this trend, but it has mainly been driven by public policies
that generously reward those who install solar systems. The
importance of these policies has been illustrated by adoption in
states that have shown the most rapid PV growth. Interstingly,
the growth has not been limited to sun drenched southern and
western states with their vast treeless plains. Indeed, there
has been significant growth in states further north that are
known to be often cool and cloudy, and where land for solar
development is often in short supply.
Nowhere is the impact of supportive public
policies more vivid than in Massachusetts, which has in recent
years been transformed into a shining example of explosive PV
growth. In 2007, shortly after taking office for the first time,
Governor Deval Patrick called for Massachusetts to develop 250
MW of new solar PV capacity by 2017. He led the way to passage
of legislation that dramatically expanded the public support for
solar PV development. By the spring of 2013, a full four years
earlier than first proposed, the Commonwealth had reached the
250 MW goal. Recently, the Governor announced a new,
dramatically expanded goal of installing 1,600 MWs of solar
capacity by 2020. If that target is reached, solar would equal
roughly 12 percent of the state’s total currently-installed
electric generating capacity and, at that time, would be
expected to contribute about 4 percent of the state's annual
electricity supply.3
A symposium was recently held in Boston to
understand this phenomenon, and the role of public policy in
creating it.
The
New England Clean Energy Council (NECEC) and Mintz Levin
invited solar industry experts and current and former
policy-makers to analyze the trends that had fueled the growth
of solar in Massachusetts, and beyond. Speakers included
representatives of the national solar business association, a
solar development company, a state energy agency and consultant
to clean energy companies. The panel was moderated by NECEC’s
Vice President of Policy & Government Affairs, Janet Gail
Besser.
Carrie Cullen Hitt, Senior Vice President of
State Affairs for the Solar Energy Industries Association
observed that residential and utility solar installations led
the solar PV market nationwide. She predicted continued strong
growth in PV installations in 2013, with a predicted
installation of approximately 4,300 MW of solar PV capacity and
almost 1,000 MW of concentrated solar power capability.4
She noted that some states, such as Arizona, have met their
Renewable Portfolio Standard (RPS) goals and have begun public
debates about whether or not to continue their incentive
programs. Still, these states are expected to remain important
areas for future solar development. Other states, however,
continue to undertake aggressive policy initiatives. For
example, New York, led by Governor Mario Cuomo, has pursued a NY
Sun Initiative, which looks to increase the amount of
customer-sited solar PV installations in the state by at least
double the existing levels. Nevertheless, because the recent
sharp decline in hardware costs can be expected to slow down
over time, Ms. Hitt urged policy makers to focus policy
initiatives on lowering “soft costs,” such as taxes or labor.
Despite the uncertain future of some states’
incentive programs, solar developers express excitement about
the prospects for solar power. Pat Daly, CEO of Nexamp, pointed
out that, even with the rapid growth of solar in recent years,
solar constitutes barely 1/10 of 1% of the national electricity
market, which means it has enormous room to grow. He believes
that the best prospects for future development of solar lie in
distributed generating projects in the densely developed areas
of the country, rather than in the large utility-scale projects
in the deserts of Western states that are located far from
energy demand centers. To take advantage of this opportunity,
developers of distributed projects will have to aggregate them
and show that they can produce a competitive return for
institutional investors. He has found that investors who provide
the capital necessary for development of solar projects want
strong, consistent, and transparent public policies and
regulations.
Mark Sylvia, Massachusetts’ Commissioner of
Energy Resources (DOER), noted that the seeds of the solar boom
in Massachusetts were planted when Governor Patrick set his goal
to install 250 megawatts of solar by 2017 and when he proposed
legislation at the start of his administration that was enacted
into law in 2008 as the Green Communities Act. That law allowed
his energy agency to “carve out”, from its renewable energy
portfolio, a separate obligation on retail electricity suppliers
to purchase minimum amounts of power each year from distributed
generating technologies. DOER chose to focus this obligation on
solar PV and took action to increase the value of solar
renewable energy credits compared to regular renewable energy
credits. This incentive was coupled with another that allows
“net metering” of solar-produced electricity that is not used on
site. Surplus power is purchased by other consumers at a price
roughly equal to the retail price of utility-delivered
electricity. As a result of these incentives, Massachusetts’
solar capacity has increased by over 700% since the introduction
of these programs. These strong financial incentives put the Bay
State on a development trajectory that has taken it to 7th among
the states in terms of cumulative installed solar capacity.5
This author was one of the speakers at the
symposium and discussed Governor Patrick’s dramatic new goal for
installing solar PV capacity by 2020. As the state expands the
opportunity to qualify for solar incentives, it seems very
likely it can make those incentives less generous. At the same
time, there will be an imperative to preserve the value of
incentives for investors that had stimulated the first phase of
solar development.
Having reached its initial goals more quickly
than originally planned, Massachusetts is not stepping away from
the strong, consistent public policies that brought the
Commonwealth its recent success. Quite the opposite, it is
redoubling its commitment to solar power production. This bodes
well for states with similar strong public policies. It also
should provide continuing evidence that strong public
incentives, properly targeted, can drive down solar installation
costs. Finally, it may provide support for the hope that, one
day, solar PV can compete with utility scale central generation
without the need for public subsidies.
* * *
View Mintz Levin’s Energy & Clean Technology professionals.
Endnotes
1 The author is the Senior Vice
President for Energy and Technology at ML Strategies, LLC, a
subsidiary of the law firm Mintz Levin. He was assisted in the
preparation of this article by
James Sasso, a
Project Analyst at Mintz Levin.
2 “U.S. Solar Market Insight 2012
Year in Review,” Solar Energy Industries Association,
http://www.seia.org/research-resources/us-solar-market-insight-2012-year-review.
3 “Massachusetts 2012-13 State
Profile,” ISO New England Inc., February 2013,
http://www.iso-ne.com/nwsiss/grid_mkts/key_facts/final_ma_profile_2012-13.pdf.
4 “Next Steps for Solar in
Massachusetts and Beyond,” Hosted by the New England Clean
Energy Council and Mintz Levin at One Financial Center, Boston,
MA 02111 on April 25, 2013. Here and below, the speakers’
comments reflect those made at the conference; The 2013
prediction (and also further years) can be seen in the Solar
Energy Industries Association report, “U.S. Solar Market Insight
2012 Year in Review,”
http://www.seia.org/research-resources/us-solar-market-insight-2012-year-review.
5 “Solar Energy Facts: 2012
Year-In Review,” Solar Energy Industries Association,
March 14, 2013,
http://www.seia.org/sites/default/files/Q4%20SMI%20Fact%20Sheet%20FINAL.pdf.
Copyright © 2013 Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
http://www.mintz.com/newsletter/2013/Advisories/3138-0613-NAT-ECT_OConnor/index.html
|