How big government and cronyism are slowing the growth of solar in the south

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An Aug. 9 article in the Los Angeles Times explored why states in the U.S. South that get plenty of sunlight — such as Virginia, South Carolina and, of course, the Sunshine State itself, Florida — are not embracing solar.

The answer the article found was not the lack of demand. In fact, there is a lot of demand for the energy source. Rather, governments in these states have made it extremely difficult for solar companies to do business through regulations and taxes. Which industry is supporting these taxes and regulations? The utility industry, which largely generates power by conventional and dirtier fuels such as coal and natural gas, and largely enjoys a state-protected monopoly on service.

The first thing that needs to be understood is how a utility’s business model works. While some states allow nominal competition among utilities, the way it works in most of the country is that a utility goes to the state government and essentially gets a monopoly to build and sell electric services within a particular area of the state. In exchange for letting state utility regulators set utility rates, utilities are guaranteed a profit on every kilowatt hour of electricity they sell.

The very recent rise and proliferation of solar companies, new ways of financing solar installation, continued generous federal subsidies for renewables and the falling price of solar panels combine to make rooftop solar a viable option for more and more homeowners across the country. The growth of rooftop solar and increased energy efficiency are threatening the old utility business model. Not only are rooftop solar customers using less energy from the grid, but they’re able to sell excess power back to the grid at favorable rates through net metering laws which have been in place on the federal level since 2005. These factors have traditional utilities up in arms and they have been trying to kill new solar projects, especially in the Southeast, which has lots of sunshine. This has set up a political battle royale between heavily monopolized crony utilities and federally subsidized crony solar companies.

One of the weapons traditional utilities have used against solar companies is to threaten lawsuits against companies who offer to lease solar panels and systems to homeowners. South Carolina until this month was one of the states that outlawed companies who lease solar panels and systems as energy providers who compete with the official monopolies. Florida, Georgia and North Carolina still outlaw solar leasing and/or power purchase agreements (PPAs), which essentially keeps solar a privilege of the more well to do. In the rest of the Southeast, the regulatory status is still unclear, because most states have not explicitly legalized the practice. (Texas is the only state in the South where solar leasing/PPAs are explicitly legal.)

Some southern states also make it difficult to install solar systems by assessing taxes and fees on solar that don’t exist in other places. States in the region also make the solar installation process difficult with burdensome laws and a heavily complicated permitting process. These obstacles have combined to place the Southeast far behind regions of the country like New England, which isn’t exactly known for its sunny skies, in solar-electricity production.

What southern states need to do is simply open up a free market in energy in order to take advantage of the solar boom. State legislatures should repeal bans on solar leasing and PPAs. This will make solar affordable for middle-class homeowners instead of merely a privilege for the wealthy. States also need to repeal any and all special taxes and fees on solar panels and equipment and make solar panels and systems on residential properties property tax exempt. Across the South, lawmakers should streamline the permitting process to install solar panels and systems in ways similar to what California has recently done.

The South could and should take the lead in energy deregulation. Currently, no southern states except for Texas has deregulated electricity. Not only has Texas experienced lower rates since it deregulated in 2002, but a variety of renewable have come to take appeal to Texans who are now able to choose their energy provider. Considering the near obsolescence of the old utility business model, states should consider deregulating their electric grid as well.

The ideal free-market energy program would be to end all energy subsidies, whether for so-called “green” energy or conventional fossil fuels. But until the federal government moves forward on that front, southern states can and should open up their own energy markets to allow consumers to switch to solar energy. The South can and should be an example of promoting both free markets and a cleaner environment. With free-market energy, it can have both.

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  • inductancereluctance

    The South should consider itself lucky if government is slowing the proliferation of solar leases and PPAs.

    1. Add up your lease payments and when compared to an outright purchase you’ll find that you’re easily paying up to 3 times more on a $0 down solar lease versus a purchase.

    2. You’ll probably pay so much more for a lease than a purchase that’s it’s actually you who will be over-paying for your own maintenance, monitoring and insurance not the leasing company.

    3. You’ll probably have trouble selling your home because what home buyer in his right mind will want to assume your lease payments on a used, outdated system when they can buy a brand new system with the latest technology and keep the 30% federal tax credit for thousands less.

    4. After making 20 years worth of leasing payments, you won’t even own the system. It will still belong to the leasing company.

    5. Check that quote from the solar leasing company and you’ll find that most of the time they won’t even tell you what brand of equipment they’re installing on your home. I wonder why?

    6. Most if not all $0 down solar leases include an annual payment escalator that will increase your monthly payment by up to 2.9% per year for 20 years.

    7. You’ll be stuck with the same aging solar system without the ability to upgrade for the full 20 year term of the contract. If you bought your system instead, you can sell it at any time and take the proceeds from the sale and upgrade to the latest and greatest equipment. You can’t do that with a lease because it’s not your system to sell.

    8. You’ll have to forfeit the 30% federal tax credit and any applicable cash rebate to the leasing company and you won’t get tax deductible interest on your lease payments. Only a $0 down solar loan or $0 down PACE financing will give you tax deductible interest and let you keep all of your incentives for a much better return on your investment.

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