By Adam Browning, GTM, Dec 27, 2018 A look at the most important forces guiding renewables in 2018. Original article here
In 2002, when solar was $9 a watt, I co-founded an advocacy organization to bring solar into the mainstream. Solar’s made a lot of progress since then, and 2018 feels like a crucial year in many ways, with some key successes and pivotal developments. Here’s my list of the most important stories in solar in 2018, and predictions for 2019.
1. 100% is the new black
Hawaii did it first, but California’s SB 100, committing the world’s fifth-largest economy to 60 percent renewable energy by 2030 and 100 percent carbon-free by 2045, is the biggest and most important climate action taken to date in the U.S.
It’s big because California is big, and important because it sets the bar higher for what’s possible. Since then, Xcel Energy, a major utility serving 3.3 million customers, announced its own decision to go 100 percent carbon-free by 2050, New York Governor Cuomo pledged to work with lawmakers to pass 100 percent carbon-free legislation in 2019, and New Jersey Governor Phil Murphy is backing a target of 100 percent clean energy by 2050. Washington, D.C. (the city, not the federal government) also just passed its own bill to go 100 percent carbon-free, topping the list of 101 cities that have already committed to that goal.
2. There are votes in solar
While politicians have long given a nod to pro-renewables sentiment, in 2018 this phenomenon reached a new level of precision and power.
The League of Conservation Voters counted 1,400 candidates on the November ballot that committed to a 100 percent clean energy platform, including eight winning governors. That’s amazing and is already having an impact. Xcel, which voluntarily committed to 100 percent clean energy in December, operates in eight states. Five of those states have new governors signed onto 100 percent clean energy. Elections matter.
3. Old coal and new nukes did not have a good year
Coal usage has fallen to its lowest since 1979, retiring about 14 gigawatts this year. And what happened in South Carolina drove another nail in the coffin of the nuclear industry’s future prospects.
For those who didn’t follow the Post and Courier’s excellent coverage of the demise of the VC Summer nuclear plant: After the $9 billion project was abandoned while only 40 percent finished, and ratepayers were paying $27/month for a boondoggle that may never produce a single kilowatt-hour of electricity, the South Carolina House voted 107-1 to fire the regulators who approved construction-work-in-progress payments, and the regulators, in turn, threatened to claw back money from utilities.
I can’t think of a commission in the country where there are three votes to sign up for that ride. To have a future going forward, nukes will have to get radically cheaper and try a business model that isn’t political suicide for policymakers. And it’s not just me who thinks so. An executive of Exelon, the largest owner of nuclear assets in the U.S., said he doesn’t think new nuclear, including small modular reactors, will be built in the U.S. due to high costs and performance of renewables and storage. This is definitely a turning point and reinforces my belief that the future of carbon-free energy is renewables.
4. Peak peaker?
Solar-plus-storage is emerging as a gas killer. Lithium-ion battery prices have improved 85 percent in the past eight years, per Bloomberg New Energy Finance.
Over the past several years utilities have signed solar-plus-storage deals at increasingly competitive terms. What’s new and different this year is that solar-plus-storage bids are winning all-source RFPs (such as this 50-megawatt battery deal with Arizona Public Service) — and the trust of regulators to rely on these clean solutions as replacements for gas peakers.
Calpine tried to make an end-run around the California Public Utilities Commission to get reliability-must-run status for some of its peakers. The CPUC was not amused, and now we have approval for the world’s largest batteries replacing three gas plants. Notably, both NextEra CEO Jim Robo and AES CEO Andres Gluski have said they don’t expect to build a peaker past 2020. Why not start the stopping now and save us the future stranded assets?
5. New dawn for new utility regulatory and business models
Distributed energy resources have the potential to more efficiently deliver services and reduce costs for everyone. But as long as regulated utilities’ revenues are linked to deploying more capital, there’s a structural barrier to success that needs to be addressed.
The growth of community-choice aggregation in California is one model for more local control. Hawaii, which just passed a crucially important law introducing performance-based regulation to the state, offers another model. The premise is to pay for — and therefore incentivize — results, not capital deployment. Rhode Island and Vermont have initiated exploratory dockets, but having an actual example of how this can work in Hawaii will be enormously helpful for replication.
6. Solar on new home construction
The California Energy Commission has a mandate to include cost-effective energy saving measures in building codes. Their last revision to Title 24, which underwent years of public input and scrutiny, found that requiring solar as a part of new housing construction is a clear net economic benefit to owners.
Starting in 2020, new homes built in California will come with solar. Because installations on new construction are cheaper than retrofits, our calculations show that energy savings will exceed marginal increases in mortgage payments upwards of $60 a month for an average home. Scaling this nationally would add 203 gigawatts of solar and cut CO2 emissions by 9 percent by 2045, and polls well with 63 percent support.
Time to start building like we plan to stay on this planet for a while.
Predictions for 2019
Here’s what I see happening over the next year to accelerate these trends.
1. Multiple new states will pass major new renewable portfolio standards
Maryland, New Mexico, Nevada and New York top the list, with many more contenders in play. Other states will lift major new renewable goals through integrated resource plans or equivalents.
2. The Green New Deal resets the conversation
Kudos to the new generation of activists who have really forced the climate crisis on the next Congress’ agenda and are doing a masterful job framing the conversation around the benefits to people’s lives, not wonky acronyms or clunky policy pathways (as the saying goes, there are only two problems with carbon tax messaging: carbon and tax).
At the same time, let’s be clear: This is welcome mojo, but the states are where the deal will actually get done.
3. Federal government headwinds
The Trump administration’s 30 percent tariffs on solar panels resulted in the cancellation of about $8 billion in solar projects in 2018, eliminating about 9,000 jobs. And while efforts at both the DOE and FERC to blow up competitive energy markets and provide billions in subsidies to out-of-market coal and nukes on unsupported reliability grounds haven’t yet come to fruition, the new FERC Commissioner Bernard McNamee’s history of radical antipathy toward renewables is really concerning.
The fight over whether the U.S. energy markets will go full oligarchy will heat up in 2019.
4. Building electrification
The real savings come from not having to build fossil infrastructure in the first place, and the push to electrify everything will boost renewable generation further. With solar on the roof, induction cooking and heat pumps, we’re going to see new communities increasingly pass on gas.
5. Footholds for equity and access
California’s 100 percent clean law would not have happened without the leadership of environmental justice activists, full stop. Energy justice and community-based organizations all across the country are on the frontline of the fight to make the clean energy economy work for everyone.
This year, the NAACP partnered with justice, industry and advocacy organizations (including Vote Solar) for the Solar Equity Initiative to bring jobs and bill savings where they’re need most. Groups like GRID Alternatives, Power52 and others have done great work expanding job training and opportunities to disadvantaged communities. Policymakers from New Jersey to Illinois to California are increasing focused on developing programs that ensure equity and access in energy.
The industry is catching on to that leadership: SEIA has made a commitment to diversity in the solar industry, and The Solar Foundation is now publishing important benchmarking studies to track its progress. This country has a long way to go, but I’m excited about the possibilities and believe 2019 will be a pivotal year in this transformation.
6. Heartland heats up
NIPSCO, a municipal utility in Indiana, made headlines when it announced that after crunching the numbers, shutting down all its coal plants and replacing them with largely renewables would save ratepayers $4 billion over 20 years. Math combined with a real consideration of ratepayer interests can be a powerful thing.
There’s been a lot of groundwork and progress in the region — the Illinois Future Energy Jobs Act; PURPA progress and Consumers Energy’s integrated resource plan with plans for 6 gigawatts of solar in Michigan; and Minnesota’s renewable portfolio standard and community solar program. With a bevy of new governors committed to renewable progress, I predict it will be one of the hottest regions for new solar growth.
That’s my take on the highlights — your mileage may vary. What’s indisputable is that it’s an exciting time to be alive as we aim to transform one of the largest and most politically entrenched industries. Best to you all in the new year, and may solar shine in 2019.
Adam Browning is the executive director of Vote Solar.
With the solar industry chaos of 2018 behind us, many of us are looking toward more predictable growth from 2019…at least until the Investment Tax Credit goes to zero for residential and 10% for commercial on December 31, 2021. Then again, we’re on the solar coaster, so it is unwise to be complacent about a rosy solar future — or the broader economy, for that matter. If both Republicans and Democrats collaborate a bit more on energy policy in Washington, D.C., we have the potential for more stability in the coming years. Luckily, I was flat-out wrong about my last prediction for 2018: The White House did not convert to coal power in 2018. Here are my 10 predictions for 2019.
1. Inflation will hit residential solar installations hard
The Federal Reserve is trying to keep a lid on overall inflation, but the lid has blown off the pot when it comes to the solar industry. With the fortunate exception of lower module prices, costs for virtually every other component and service are going up. Tariffs are increasing inverter, electronics and mounting-system costs; general inflationary factors are increasing labor costs. Necessary new code requirements (rapid shutdown, battery safety measures, Rule 21) add to the complexity and costs of most residential and commercial installations. Nevertheless, since electric rates continue to go up with inflation, net customer economics are still improving in most markets.
2. Good software and communications are the price of admission for future solar and battery systems
Marc Andreessen published his “Why Software Is Eating the World” essay in The Wall Street Journal in 2011, just as “smart” inverters were being conceived and battery systems were viable only in the off-grid world. I don’t believe software will “eat” solar and battery storage hardware anytime soon (silicon and lithium are not among the tastiest of elements), but it is clear to me that functional and reliable customer, server and administrator software/firmware are absolutely required for effective grid integration and customer service. Software is a core competency for every inverter and storage system company.
3. Supply chain issues with battery storage systems will persist
These problems will continue to plague customers and EPCs — at least until there are multiple inverter and battery companies whose products are seamlessly interchangeable (as solar modules and inverters currently are). Tesla and Enphase were wise to integrate their batteries and inverter in a single enclosure. LG Chem and LG Electronics are teaming up for a complete packaged offering, and market leader SolarEdge is expected to add batteries to its product portfolio now that it has acquired Korean company Kokam.
4. With a recession looming, financing will become even more important
According to Paul Samuelson, “The stock market has predicted nine of the last five recessions,” so the expectation is high that the next recession is on the horizon. When it hits, financing will be even more critical to the solar industry. During the last recession a dozen years ago, the residential solar industry almost ground to a halt as real estate values collapsed, eliminating the use of home equity loans for system financing. EPCs that offered to finance solar installations — both for residential and commercial systems — thrived compared to cash-only providers.
5. U.S. solar manufacturing will continue its downward slide
U.S. solar manufacturing will continue to decline on a worldwide percentage basis, in spite of illusory tariff benefits. Tariffs were applied to solar cells and modules ostensibly to help U.S. manufacturers. But since virtually all the components in a solar module must be imported (everything from cells down to junction boxes), the tariffs on these components put U.S. manufacturers at an even greater disadvantage. Meanwhile, overseas manufacturers continued to ramp up their volumes and reduce costs. Kudos go to those intrepid U.S. module manufacturers that are striving to succeed in the face of hostile economic policies for their business.
6. PUCs will force utilities’ hands when it comes to grid reliability
Public utility commissions will compel incumbent utilities to leverage distributed solar and storage — in addition to new grid infrastructure — to improve grid reliability. Whether it’s grid edge technology, distributed energy resources, or behind-the-meter solar and storage, deployments of these systems without significant utility investments are good for ratepayers. The dilemma — as always — will be fairly compensating customers for the use of their own assets. Note that these customer assets are not only solar panels and batteries, but also smart inverters that can be remotely controlled to support the grid. Investor-owned utilities will continue to lobby hard to install their own generation and storage assets, and “rate-base” (essentially charge customers for) these new investments.
7. Despite headwinds, batteries will continue their slow march toward 50% penetration
Cost-effective and reliable battery storage systems are still at the bleeding-edge stage, so it will likely be a few more years before they are attached to 50% of systems (including retrofits and upgrades). The two big benefits of combined solar and storage systems — backup power and energy cost savings — are only partially addressed by the first-generation systems currently on the market. Customer backup power needs will be met more effectively when solar-plus-storage systems can effectively integrate with 200-amp residential service panels. Battery systems provide more compelling customer benefits as peak electric rates move into the evening and new per-kWh fees are added to electric bills (such as non-bypassable charges and power charge indifference adjustments). Unfortunately, hostile interconnection and incentive policies for battery storage systems often thwart these potential savings.
8. As pilot results roll in, uptake of VPPs will increase
Virtual power plants will gain traction in the market as pilot programs demonstrate their value in reducing peak utility energy costs. VPPs are basically distributed networks of solar, batteries and controllable loads (EV chargers, HVAC systems) that can be dispatched to support the grid with more power (solar or batteries), or temporarily disengaged to reduce loads (EV chargers, HVAC systems). These VPPs will have the most immediate impact among energy retailers, community-choice aggregation utilities and municipal utilities, since investor-owned utilities maximize their profits by owning generating and distribution assets.
9. Upgrades and maintenance will emerge as a key opportunity
Maintenance of existing systems — including cleaning panels, replacing inverters, updating archaic monitoring systems and replacing broken panels — will be an increasing part of contractors’ business. Although panels generally can last for 25+ years, inverters and their communication systems are usually good for only 10-15 years. Successful contractors will find that providing these services is one of the best ways to generate referral business.
10. Stubborn soft costs will impede further drops in residential solar prices
Residential solar prices will bottom out at an average $2.50/watt until permitting, inspection, interconnection, incentive and selling costs are reduced. Even if solar panels were free, average prices will be over $2.00/watt until these soft costs begin to fall. Of course, there will be lower- and higher-cost systems depending on location and equipment, but most contractors operating long-term businesses will be at the higher end of the range in their locale. To make these soft-cost problems worse, contractors installing grid-tied battery storage systems are experiencing permitting, interconnection and incentive delays in excess of 12 months — a reality that is almost impossible to explain to customers. Please support the efforts by Solar Energy Industries Association and The Solar Foundation to reduce these costs with their Solar Automated Permit Processing (SolarAPP) initiative.
As I wrap up these 2019 comments, I am humbled by Yogi Berra’s advice: “It’s tough to make predictions, especially about the future.” Nevertheless, I am confident in two key elements of our industry: We are doing the right thing for the global environment, and the economics of solar-plus-storage remain superior to any other energy source. I remain optimistic that — regardless of the next plunge in the solar coaster — our industry will continue to thrive over the long term.