Published on April 2nd, 2014 | by Zachary Shahan25
Is Protectionism & Cronyism Hurting The Minnesota Solar Industry?
April 2nd, 2014 by Zachary Shahan
State-based solar incentives that require local solar products be used may be driving up solar costs considerably. Of course, this sort of issue is not exclusive to solar power and it is not exclusive to the United States, but there does seem to be fairly good evidence that it is keeping the price of solar artificially high in some places.
Let’s take a look at Minnesota, which has Made in Minnesota solar photovoltaic legislation. A solar expert I’ve been in communication with is convinced that this policy creates higher installed prices, gives fewer options to customers, and creates fewer jobs for Minnesota. The legislation is reportedly starting via the lobbying efforts of one company, and then later modified a bit as a second company came in and wanted the legislation to benefit it as well. The result? Legislation that benefits two companies to the detriment of essentially all the others and solar customers.
The Minnesota statute in question is 116C.7791. The main clauses are:
1. Solar photovoltaic modules must be manufactured in Minnesota to be Rebate Eligible;
2. “Manufactured” means:
a. the material production of solar photovoltaic modules, including the tabbing, stringing, and lamination processes; or
b. the production of interconnections of low-voltage photoactive elements that produce the final useful photovoltaic output by a manufacturer operating in this state on May 18, 2010.
3. Solar photovoltaic modules must be certified by Underwriters Laboratory, must have received the ETL listed mark from Intertek, or an equivalent certification from an independent testing agency;
4. Rebate amount and payment:
(a) to the applicant of $5 per watt of installed generating capacity.
(b) rebate paid, (net) must not exceed 60 percent of the total installed cost.
5. Rebate program funding:
(1) $2,000,000 in fiscal year 2011;
(2) $4,000,000 in fiscal year 2012;
(3) $5,000,000 in fiscal year 2013;
(4) $5,000,000 in fiscal year 2014; and
(5) $5,000,000 in fiscal year 2015.
Can you guess which parts were critical pieces stuck in by one company to deter helpful, free-market competition?
That would be this one: “manufactured means solar photovoltaic modules, including the tabbing, stringing, and lamination processes.”
Can you guess the obscure requirement that benefits the second solar company to the detriment of helpful, free-market competition?
That would be this one: “the production of interconnections of low-voltage photoactive elements that produce the final useful photovoltaic output by a manufacturer operating in this state on May 18, 2010.”
Oddly, a rather important piece of the legislation — UL certification — was reportedly overlooked for these two companies in May 2010, as they didn’t have it.
Now, I’m not particularly interested in picking on specific companies that used political maneuvering to compete, but I’m interested in pointing out harmful policies that result in a net harm to society. So, let’s get to the rather clear results of this policy.
Important to note is that there’s also an incentive for solar projects that don’t meet the very specific local content requirements. It’s just much smaller. In the table below regarding solar projects installed in 2013 and 2013, obtained from the Minnesota Department of Commerce, you can see (highlighted by me) that the two companies benefiting from the local content incentive are installing solar power projects for a considerably higher cost than other installers in the state.
That’s a big difference. Actually, if you do the math, 1,941 kW x ($8.3/W – $5.02/W) = a $6,366,000 premium. Somehow, I have a hard time believing that results in a net benefit to the state. And remember that installers working for the companies that don’t qualify for the Minnesota Made bonus are still installing solar projects using Minnesota residents. They aren’t importing installers from Tibet.
2013 Brings Even More Exclusive Policies
Sorry to bring more bad news to the story, but in 2013 the Minnesota legislature passed another solar-related bill, HF 729, that provides $15 million per year (starting in 2014) for 10 years for companies that qualify for the “Made in Minnesota” program.
Let’s put this another way: that’s $150 million for companies installing solar power for a price about 62% more than their competitors in the state.
Furthermore, where’s the incentive for these solar companies to cut their prices? There isn’t a reduction in available bonuses each year. There’s $15 million a year from 2014 to 2023.
Here’s an example of a 2010 “Minnesota Made” solar project:
Where’s the incentive to cut costs when a $167,000 solar project comes in at $3,900, or about 97.66% less than the actual installation cost?
And how can other Minnesota-based companies compete? How can they cut $55,000 off the cost of a 20 kW solar system?
Ironically, one of the Minnesota companies locked out of this incentive uses solar panels which are completely “Made in America,” while one of the two companies benefiting uses panels with components imported from China and the other isn’t actually based in Minnesota.
Here’s a Thought
What if that $6,366,000 mentioned above was used more broadly to bring down the costs of more competitive solar companies? how much more competitive could that make solar in the state? How many more people and companies would then think it made sense for them to go solar? How many solar installation jobs would that create?
I have plenty more info on the matters above that could be shared. I could go on. But I think the case has been made: this “Made in Minnesota” policy looks like unhelpful protectionism and cronyism, and it hurts Minnesota.
Unfortunately, there are probably similarly harmful policies in other states as well.
If you have info to share that counters any of the above, or critical information to further support it, I’d be happy to see it. If you live in Minnesota and would like to see a more inclusive solar incentive that will make solar more competitive, push for it politically.
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