A Midterm Lay of the Land: Solar Energy

We are at a critical moment for solar power. It is already on the rise, growing at an exponential rate.  And with the benefit of smart public policies, it could get very big, very fast. The International Energy Agency predicts solar energy will be the largest source of energy in the world by 2050. Will the rapid growth in solar energy continue? That depends, in part, on whether policymakers can resist a determined push by fossil fuel interests and utilities to derail the emerging solar energy economy.

Judee Burr

Policy Analyst

The 2014 election has come and gone. New state legislators, governors and members of Congress are waking up to the fact that they are now in charge of running the country and planning their transition to power.

There’s no better time to take a step back and take stock of where we are as a country on the issues that will shape our future. Over the coming weeks, Frontier Group analysts will be providing their take on the lay of the land on the issues on which they work in 1,000 words or less. Previous entries covered transportation, food policy and water policy. Today, Policy Analyst Judee Burr provides a lay of the land on solar energy.

We are at a critical moment for solar power. It is already on the rise, growing at an exponential rate.  And with the benefit of smart public policies, it could get very big, very fast. The International Energy Agency predicts solar energy will be the largest source of energy in the world by 2050.

Poll after poll demonstrates that Americans want more solar power, and progress toward a solar-powered world couldn’t happen a moment too soon. Our current, outdated electricity system, reliant on centralized, fossil-fuel fired powered plants, is threatening the future of the planet. Thousands of people each year die prematurely due to air pollution from power plants. U.S. power plants released as much global warming pollution as the entire nation of India in 2012, pollution that scientists say we must slash in order to prevent the worst impacts of global warming.

Solar energy can be a key part of a transition to a clean energy future. Solar energy is technically capable of meeting the world’s annual power needs more than 1,200 times over. Each of the 50 U.S. states has the potential to generate far more electricity from the sun than its residents consume each year.

We have the technology today to tap much of that potential, and, as technology continues to improve and prices continue to fall, solar energy’s potential to repower our economy will only grow. The price of installed solar photovoltaic systems in the United States fell by 35 percent from 2010 to 2013. Hawaii has already achieved “grid parity” – that is, solar electricity is now cheaper than power from the grid – and California is likely to hit it by 2017, followed closely by Arizona and New York. Solar cells are becoming more efficient at converting sunlight to electricity as researchers continue to innovate. Advances in energy storage technology are making it easier to incorporate large amounts of solar power onto the grid. And microgrids are being tested that can make the grid more flexible by allowing distributed energy resources to operate independently.

The recent fall in solar energy prices, coupled with strong public policies in some places, has spurred rapid growth in solar energy. In the United States, solar power increased 140-fold between 2003 and mid-2014. More than half of all new U.S. electricity generating capacity came from solar installations in the first half of 2014.

Will the rapid growth in solar energy continue? That depends, in part, on whether policymakers can resist a determined push by fossil fuel interests and utilities to derail the emerging solar energy economy.

The solar boom is making utilities very nervous. As solar energy and other forms of distributed electricity generation grow, America will transition from a “one-way” electric grid in which utilities produce power and consumers buy it, to a much more dynamic system in which more and more Americans are both producing and using power. It is a big change and one that threatens the core of the current utility business model. In Germany, where the renewable energy revolution has progressed the farthest, utilities are losing billions of dollars. Barclay’s, the financial services and banking company, recently downgraded U.S. electric utility bonds, citing a growing market for distributed solar energy. As Gary Radloff, a Wisconsin Energy Institute analyst, reported to NPR this December, “Basically the electric utility business model, which we’ve had for over 100 years, is starting to become obsolete.”

Given these fears, many utilities – including Arizona Public Service, Rocky Mountain Power in Utah, and Xcel Energy in Colorado –are putting up a fight by trying to undercut net metering and other mechanisms that allow those who own small, distributed power producers like those who own solar panels to gain fair compensation for the power they produce. Many utilities are trying to raise “fixed charges” – charges you are billed just for being an electricity customer – in order to hedge against funds lost to customers paying lower electricity bills.

However, some utilities are seeing that the new solar economy provides opportunities as well as challenges and are taking steps to adapt their business models. Last week, for example, Germany’s largest investor-owned utility announced a new business plan to split into two companies, with one focusing solely on renewable energy, energy distribution networks and energy efficiency measures. Forward-thinking utilities in the United States are beginning to investigate how they can profit from improving the effectiveness and efficiency of tomorrow’s electric grid rather than trying to keep us wedded to the grid of yesterday.

Strong public policies can help speed and guide the transition to a clean energy economy and are largely responsible for the rapid growth in solar power that leading countries and many U.S. states have experienced. Pro-solar policies work – the best ones set ambitious solar adoption goals and requirements (a national goal of obtaining 10 percent of our electricity from the sun by 2030 would be a start), allow customers to recoup the benefits of sharing solar electricity with the grid, provide flexible financial supports and tax incentives for solar adoption, and streamline regulations and permitting processes.

With the right policies in place, solar power can become one of the largest electricity sources in the country and the world. The policy decisions made at the local, state and federal levels today will determine how fast this future approaches. Let’s choose to “go solar.”

Authors

Judee Burr

Policy Analyst