A solar energy fight in Arizona

The rising political power of residential solar power

There’s a fight over renewable energy occurring in Arizona right now.  The state’s largest public utility asked state regulators for permission to greatly increase the fees paid by homeowners who have solar power on their houses.  The utility’s argument is that the increase in solar power produced by these houses is putting a burden on the electricity grid – but that solar producing homeowners are not paying their fair share, both because they don’t use a lot of the utility’s electricity (which has distribution costs built into the cost for electricity service) and because of the credits that the utility has to give for solar power produced by those homeowners (net metering).

I don’t want to get into the merits of the utility’s arguments here – there is undoubtedly some truth to them, as this recent post by our colleague Severin Borenstein over at Berkeley’s Energy Institute makes clear.  What I do want to talk about is the politics of the debate in Arizona.  Because the politics of this fight I think demonstrate yet again the importance of how changes in response to previously enacted environmental laws make future changes more or less likely.

My basic argument – developed in an analysis of a failed ballot initiative here in California to effectively repeal the state’s greenhouse gas law – is that environmental laws that nurture and grow the right interest groups will allow for future progress in environmental law and policy in the future.  By building up those interest groups, one can create a favorable political landscape for future legal and policy changes – for instance, by creating powerful industries that can lobby the legislature for future changes.

Arizona is a relatively conservative state, voting reliably Republican at the presidential level for many years.  Given the national Republican Party’s attacks on Solyndra and renewable energy in general, the utility’s request would seem to be a shoe-in for success.  But in the end the public utility had to settle for a modest fee for the costs of providing distribution services for residential solar power producers.

Why didn’t the utility win hands-down?  Opposition to the proposal came in part from solar power installation companies, which have a clear stake in making residential solar power as cheap as possible.  But interestingly, Tea Party activists also united with environmental groups to fight the proposal.  The environmental groups have an obvious interest here.  The Tea Party activists framed this as a matter of individual choice – the utility’s changes would make it more difficult for individual homeowners to produce their own energy, and therefore constrain the option of being able to make one’s own choices about what kind of electricity to use.

This is an interesting (and creative) frame for thinking about distributed renewable energy production.  One reason I think it has gained traction – and not just in Arizona – is the nature of distributed solar as an economic and political matter.  Residential solar production has taken off nationally, as this article from the New Republic notes.  Residential solar production means that thousands of individual homeowners suddenly have a personal, significant financial stake in utility rates for renewable energy – and ensuring that those rates make solar energy production as lucrative as possible.  Instead of being passive bystanders to fights over rates between (for example) industrial scale solar production facilities, fossil fuel industries, and public utilities, these homeowners have become active players.  And that apparently has made a major change in the politics of the normally low-profile world of electricity regulation in general and net metering in particular.

Moreover, as time goes on, the public interest and support for distributed solar production should only increase as more and more homeowners join in.  Laws and policies that encourage this trend will create more political support and power for solar energy which in turn can be harnessed to fight against efforts to undercut solar power (in Arizona) or even to expand support for solar power.

Of course, the fossil fuel industry knows this.  Which is why conservative interest groups allied with the fossil fuel industry were fighting on the side of the utilities in Arizona, and have been supporting similar efforts in other states.  But what Arizona shows is that this is (for now) a rearguard action.  If legislators and policymakers continue to support these kinds of policies, the political environment will continue to shift to make renewable energy policy easier and easier to enact and expand in the future.

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Reader Comments

5 Replies to “A solar energy fight in Arizona”

  1. I’m glad that distributed generation has powerful political supporters, but I think that when one finds oneself on the same side of a debate as the Tea Party, it’s typically a good time to reexamine one’s position.

    The problem is simple: as the penetration of rooftop solar decreases customer’s demand for electricity, the utility’s fixed costs must be spread across a lower number of total kWh sold, meaning that the price per kWh has to increase to allow the utility to recover its revenue requirement. This inspires even more homeowners to “go solar,” leading to further increases in the price per kWh, and so on — the so-called “death spiral.” This phenomenon has regressive distributional consequences that are going to make the politics around this issue even weirder — renters and other utility customers that aren’t able to go solar end up bearing the full brunt of the price increases and therefore paying for a greater share of the utility’s fixed cost than wealthier customers.

    So in my view, the Tea Party argument is that homeowners should be free to shirk their fair share of payment for public infrastructure and impose unreasonable costs on others. This is of a piece with the Tea Party’s general philosophy, which holds that individuals should be free to benefit from our civilized, secure society without paying taxes to support it and should be free to impose environmental externalities on others without being regulated. I hope that other Net Energy Metering proponents are taking a longer view and expressing support for reasonable rate reform if and when such reform becomes necessary.

  2. Eric,

    Great to see mention of the APS proceeding here.

    I totally agree that rooftop solar is changing the political economy of electricity regulation. An example of this that recently occurred closer to home was the demands from distributed generation owners for protection of sunk costs in the run-up to the adoption of AB 327. Used to be, the only interests demanding compensation for sunk costs in response to regulatory reform were the utilities. I think this new interest group has real potential to shake up utility regulation in states where it gains traction – and the potential this creates for innovative services and technologies may turn out to be more significant than the GHG reduction achieved by DG.

    Another interesting example illustrating your hypothesis is the wind and solar industries in Germany. Their power is a big part of the reason that Germany opted to retire its nuclear plants after the accident at Fukushima, despite opposition from the major utilities and energy intensive industry.

    Best,
    MW

    1. Here in Texas we have plenty of clean burning natural gas to generate electricity so there is no need for anyone to waste their time and money on expensive, inefficient and unsightly solar panels. Given that there is no scientific proof that solar energy has any effect whatsoever on mitigating climate change, why bother? We live quite well without solar and have a better life. Solar energy is largely a dream, a joke, and a dubious fad. Who needs solar panels when natural gas is abundant, cheaper, and far more efficient. The California environmental bar should search its collective heart and find a purpose that is more meaningful and enduring.

      1. BQRQ – good points, and yes, I agree, natural gas, and its relative price, are one of the best values in America. But that is not the point and certainly not in other states where natural gas is not as abundant as in TX. Why be against solar? It’s free from the sun (OK, you have to pay for the solar installation, but even if there were no rebates or tax credits, you can still have a relatively reasonable payback period), and it lessens the burden on states where the utilities are using fossil fuels.And, it works. Homeowners and businesses generate their own solar electricity and lessen the burden on the utilities, who are primarily interested in their investors, rather than the customers.

  3. Of course the national Republican Party is against anything solar, and are using Solyndra (yes, it was a flawed technology) as a scapegoat. BUT, only because you can link Solyndra to Obama, who was NOT responsible for its failure, and YES, he WAS black before he “endorsed” Solyndra. The self-serving Tea Party is another animal, to be sure. Who really knows what their agenda is. The bottom line is: if homeowners and businesses can use solar to generate electricity, and lessen the burden on the investor-owned utilities, and along the way save money, which they can put to better use by paying for kids’ college educations, investing for retirement, giving to charities, etc., then why not solar? Even if the rebates and tax credits disappear, solar, even after the cost of installation, still provides a good payback period. No fossil fuels, no emissions, lowers your utility bill, is not unsightly (who thinks that?), you can brag about your lower utility bill at cocktail parties. Plus, utilities complaining that customers avoid paying “other” utility fees is ridiculous. That is like cellphone customers saying they need to charge more for providing cellphone call service. In reality, cellphone call costs are equal to, or approaching $0. In reality, once the companies have put up the towers, the “actual” cost of a cellphone call is nothing. Is that not the same with utilities? Once they build the power plant and install the lines, the costs are minimal. The biggest cost is: MARKETING, Customer Service, and salaries (I suspect!).

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Eric Biber

Eric Biber is a specialist in conservation biology, land-use planning and public lands law. Biber brings technical and legal scholarship to the field of environmental law…

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