CPS Energy, San Antonio’s city-run electrical utility, launched a new program this month to install solar panels on residents’ homes. The plan calls for residents to receive fixed credits on their monthly bills, while the utility maintains ultimate ownership of the panels and the energy they produce.

While the San Antonio program has been described as “brilliant,” there are reasons to be cautious. Far from being a breakthrough, utility ownership of distributed-power generation could undermine what is making rooftop solar so successful.

The price of solar panels has fallen rapidly over the last few years. With the advent of economic electrical storage, the future of solar energy seems bright. But the cost to install rooftop solar still can run into the tens of thousands of dollars, making it unaffordable to most consumers. Private solar companies such as SolarCity have stepped in to this breach, offering leased panels to homeowners while bearing the costs of installation.

The city’s new program follows a broadly similar model, but with an important caveat: while private solar companies must compete with each other on the open market, CPS is a government-run entity that is largely protected from competition. In fact, the closest CPS comes to facing competition is from privately owned distributed-generation firms. Once the utility begins owning its own rooftop solar resources, the temptation to use the advantages of government sponsorship to undercut private solar companies will be all but impossible to resist.

Consider Arizona, where the state’s utility recently started a similar utility-owned rooftop solar program. Like many utilities, Arizona Public Service traditionally has been hostile to solar, claiming that solar users who sold electricity back to the grid were burdening non-users who still had to pay for grid-maintenance costs.

But as solar has continued to grow, APS has reversed course. Sort of. It likes the solar it owns, but continues to try to thwart privately owned solar resources. Along with the utility-owned solar program, APS pursued a large fixed charge for solar consumers that could cancel many of the benefits of adopting the generation source.

There’s nothing unique about APS, of course. Whenever government-sponsored companies compete with private enterprise, they have strong incentives to use their legal privileges to gain an advantage. The U.S. Postal Service uses profits generated from its letter-delivery monopoly to subsidize package delivery, where it competes with FedEx.  Similarly, while CPS’ new program may lead to a short-term burst in solar signups, over the long term, its incentives will be to make private solar less enticing. That could undermine the market’s growth.

San Antonio needs to embrace competition, not stifle it. The experience throughout Texas has shown that choice in electricity has been a boon to consumers. The potential for innovative new ways to provide cheap, clean energy through distributed generation are incalculable. If San Antonio wants to remain a leader in renewable energy, it cannot abandon the entrepreneurial spirit that got us to this point in the first place.

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