Published on January 4th, 2018 | by Tina Casey0
In Face Of Looming Threats, US Solar Industry Rolls Out The Big Guns
January 4th, 2018 by Tina Casey
The US Solar Energy Industries Association is facing down a pair of near-existential threats with two mighty weapons of its own: a new model contract and white paper demonstrating the bottom line benefits of solar installations for commercial and industrial properties. The two documents alone are not likely to sway decision makers at the White House, but they could pile on the grief for the beleaguered Trump administration.
Bad News: Tariff Deadline Coming Up Soon
To be clear, the US solar industry has two overlapping but distinct interests. One is the manufacturing side and the other is the sales/installation side. The problem is that the domestic manufacturing industry has struggled against a tide of low cost imports from China and elsewhere, but the sales side is all too happy to provide customers with the lowest possible prices.
Last fall, the US International Trade Commission voted in favor of a new tariff that purported to help US manufacturers. However, it would most likely hurt the sales side by raising prices. According to one estimate, the nation’s 260,000-strong solar labor force could shed upwards of 88,000 jobs if a tariff is imposed.
The new tariff is also not a win-win for US manufacturers. If prices rise and sales go down, manufacturing could also slow. The pro-tariff lobby may have made sense under former President Obama’s energy policy, but the Trump administration has been vaporizing incentives and regulatory pressure that would otherwise help spur continued growth in demand, tariff or no tariff.
Unsurprisingly, some of the tariff pain will be felt in states that supported the Trump presidential campaign.
Indiana, for example, voted in President* Trump at 56.5%, a healthy margin over rival Hillary Clinton’s 35.5%. A Trump-approved tariff could send the state’s solar industry into a spiral, coming on top of fallout from recent state legislation that killed net metering. IndyStar.com reports:
Depending on its size, the tariff could have a cooling effect on an industry in Indiana that is already wondering what a future without net metering will mean for business. The Indiana solar market is particularly sensitive to these kind of price changes, due to the low cost of electricity in the state.
Although the World Trade Organization has shot down similar tariffs in the past, as of last month Trump seemed likely to approve ITC’s position, possibly as early as January 13.
More Bad News: New Protections For Coal & Nuclear
Another deadline is coming up slightly earlier, on January 10. That’s the deadline for the Federal Energy Regulatory Commission to rule on a new Energy Department policy designed to protect coal and nuclear power plants, even if more attractive alternatives are available.
Basically, the Energy Department is asking for a new rate structure that would force ratepayers to foot the bill for keeping centralized, 20th-century power generation facilities operating, even as the 21st century grid pushes forward with a more diverse, flexible, and decentralized model.
I know, right?
Unfortunately for the US solar industry, this one seems like an easy win for the 20th century. Trump has made the coal industry a central pillar of his appeal. With public support for his presidency dwindling to historic lows, a chance to put some muscle behind his coal-friendly rhetoric would be hard to pass up.
Good News! Solar Wins … Eventually!
Unfavorable outcomes for the ITC and FERC decisions would have a significant impact on the US solar industry, though the outlook is complicated because buyers have been stockpiling low cost imports in anticipation of the new tariff. If and when prices start to spike upwards, the consequences may be painful but they are likely to be temporary, considering high demand at the consumer end for a more sustainable, healthful, and reliable supply of electricity.
That leads us to the two new SEIA documents. Regardless of the ITC and FERC outcomes, the new model contract and white paper make a solid case for continued investment in on site solar.
The model contract (available for download) integrates the familiar Power Purchase Agreement financing mechanism with another financing agreement through PACE, the Property Assessed Clean Energy program.
PACE enables local authorities to fund clean energy and energy efficiency projects on private property. The upgrades are paid back by the property owners through their tax bill. The program is voluntary. It is modeled on assessment districts, which are typically established to enlist property owners in paying for public upgrades like street lights, sewers and utility lines.
Here’s SEIA senior director Mike Mendelsohn enthusing over the benefits:
The PACE PPA further builds out SEIA’s suite of model contracts so all solar transactions can be efficiently negotiated and financed. Our goal is to broadly open the U.S. commercial real estate sector for solar deployment, and the PACE PPA is a valuable tool to allow that progress to happen.
The report provides evidence supporting nine distinct benefits. The most obvious one for property owners and/or tenants is lower energy bills. There is also a perceived advantage for tenants. The report cites a Department of Energy study indicating that buildings with solar and other LEED features can attract higher paying tenants and experience lower vacancy rates.
Advances in metering technology are also having an impact, because individual tenants can now “claim” solar energy from installations in common areas.
In addition to direct owner/tenant benefits, the report outlines other relevant elements including solar + storage, government incentives, new financing mechanisms, and the potential for property owners to monetize the solar installation in a variety of ways.
The new report basically demonstrates that Trump’s solar policies could prevent commercial and industrial owners from realizing the full value of their property.
The Trump administration is already in hot water with the powerful real estate lobby over the impacts of the new tax law on residential property owners, and SEIA is adding fuel to the fire.
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