The solar rooftop economy in Nevada

In 2014, many Nevada homebuilders and homeowners jumped on the rooftop solar bandwagon to save money and live the green life.

Photovoltaic solar panel installations on residential rooftops added jobs to the valley, allowing the local economy and construction industry to escape the Great Recession more quickly. By the end of 2015, SolarCity alone had hired over 2,000 employees in Nevada and partnered with 10 homebuilders to offer photovoltaic solar installation programs to 80 new-housing communities.

Things have changed drastically since then.

In December , the Public Utilities Commission of Nevada ruled to increase monthly connection fees and cut the value of credits to NV Energy ratepayers with rooftop solar power arrays. On Jan. 1, SolarCity, Sunrun and smaller installation companies ceased operating in the state, citing an unfavorable market.

About 20,000 NV Energy customers had installed their own photovoltaic solar panel arrays; more than 75 percent of the installations were in Southern Nevada. These rooftop power systems were tied to the utility grid power under the utility’s net energy metering program.

Energy generated by rooftop solar panels but unused by the home would flow back to the electrical grid for local neighbors to consume. Solar panel owners were initially compensated for this excess energy with credits against their monthly utility bill at the same retail rate as they consumed it.

How homeowners, homebuilders are coping

The nationwide solar photovoltaic industry had a record year in 2015, installing 7.3 gigawatts of residential solar power and 4 gigawatts of utility-scale solar projects, the American Solar Energy Society reported. Nevertheless, many Nevada homebuilders and homeowners are sitting out 2016 until program guidelines clarify.

Rooftop solar industry representatives and NV Energy continue to negotiate through the PUC. Meanwhile, political action campaigns this election season are sharing their message about the direction of Nevada’s solar energy future.

Bring Back Solar, a nonprofit organization, has gathered signatures to bring the issue to a statewide vote in November, aiming to reverse the PUC’s decision. SolarCity has backed the campaign financially.

A competing campaign, Citizens for Solar and Energy Fairness campaign, backed financially by NV Energy, is urging Nevadans to uphold the PUC decision.

“It is hard to know what to tell our customers at this time,” Southern Nevada Home Builders Association President Frank Wyatt said.

Wyatt is also founder and president of Pinnacle Homes, which partnered with SolarCity to offer rooftop solar installation options to their development communities. His company built two model homes to showcase solar technologies before the end of 2015.

“Pinnacle Homes does prewire new homes to accommodate photovoltaic solar installations at the power panel and at the utility meter,” Wyatt said. “There is nothing to prevent a customer from choosing their own solar installer and proceeding. Residential battery backup power systems are another installation option that we may also need to accommodate in the near future.”

Deidre Radford, project manager at Bombard Renewable Energy, still sees a path forward for homebuilders and homeowners, noting that the cost of ownership for photovoltaic solar panels has continued to drop to $3 per watt installed.

The federal government’s 30 percent tax credit for photovoltaic solar installations has been extended through 2021. Small businesses can take advantage of accelerated depreciation incentives. Bank financing for home equity or commercial building improvements is still available with interest rates remaining at around 2 percent.

Also, NV Energy continues to administer a Renewable Generations program with solar rooftop power installation incentives. But participants are fewer.

What happened to unplug

Nevada’s solar industry

On Jan. 1, the Public Utilities Commission of Nevada increased monthly connection fees under the net-energy metering program to incrementally jump from $12.75 to $38.51 per month over a four-year period. The commission also decreased credits for excess energy generated by rooftop panels from a retail rate of 11 cents per kilowatt-hour to a wholesale rate of 2.6 cents per kilowatt-hour.

After reviewing net-energy-metering program’s costs on the state’s 1.3 million ratepayers, the commission calculated that NV Energy and its ratepayers were losing money on the net-energy metering program.

Under the new rate schedules, net-energy-metering clients got three-tenths of a penny discounted on the cost of each kilowatt-hour of power purchased from the grid for utility-generated electricity compared with standard ratepayers. By 2020, the monthly connection fee would increase by a factor of three while excess energy credit payments would decrease by a factor of four.

The dual rate changes threatened to turn a homeowner’s rooftop asset into a liability and damage the solar leasing business model for companies that operated on a slim margin just below NV Energy’s retail power rates.

Protests lead to compromises, task force

In February, after rooftop solar companies and consumer advocacy groups challenged the ruling, the commission compromised on rate structure changes.

The PUC extended the transition time from four years to 12 years, with incremental steps for rate schedule increases implemented every three years instead of annually.

This will let homeowners who invested in rooftop solar by the end of 2015 realize some return on investment by 2028, when rate changes go into full effect.

After the dust settled, Gov. Brian Sandoval convened a New Energy Industry Task Force to work out a way a distributed energy resource industry could coexist with a regulated monopoly utility.

The task force’s Distributed Energy Resources and Storage subcommittee continues to hammer out policy compromises during public meetings.

One proposal would “grandfather” existing rooftop solar owners at the same utility rate schedule that they were accustomed to before Jan. 1. The “grandfather” period would last 20 years at this rate, before becoming subject to the standard net metering rates implemented after Jan. 1.

Bill draft requests are being prepared for the 2017 Legislature. The task force’s final recommendations will be announced in September.

To become law, these recommendations will need bipartisan support and final approval from the state assembly and senate legislators.

SolarCity, Natural Resources Defense Council conduct study

Last month, SolarCity and the Natural Resources Defense Council produced a rooftop solar industry cost/benefit study.

A 19-page report provides updated data to the PUC re-evaluating distributed energy resources’ net effect on NV Energy ratepayers. The report and is downloadable as a PDF at www.solarcity.com.

The analysis concludes that there’s net benefit to all ratepayers from rooftop photovoltaic solar, from a minimum of 1.6 cents per kilowatt-hour produced to a maximum estimate of 3.4 cents per kilowatt-hour produced, depending on how many benefit variables the PUC considers. The report argued that rooftop solar generation would provide over $7 million in net benefits each year to all ratepayers.

The PUC is willing to evaluate 11 benefit-variable categories of for the rooftop solar industry, including the effects on energy produced, line losses, generation capacity, ancillary services, transmission capacity, distribution capacity, carbon dioxide regulatory pricing, voltage support, criteria pollutants, fuel hedging/diversity and environmental externalities.

Three cost-variable categories — utility administration costs, utility integration costs and participant bill savings costs —would offset the benefits and would create additional expenses for ratepayers.

The report by SolarCity and the council argues that the PUC, because of time restrictions during 2015’s final six months, did not have a chance to fully evaluate all 11 categories.

The new report justifies the calculation of a net benefit of 1.6 cents per kilowatt hour to all NV Energy ratepayers from rooftop solar power production. It highlights data showing how rooftop solar installations help NV Energy avoid increasing distribution costs and related capital equipment investments that would, in turn, be funded by ratepayers.

NV Energy engineers contest this argument. The utility’s analysis considers distributed solar generation as too unreliable a resource for distribution.