With the coronavirus pandemic wreaking economic havoc, former Lt. Gov. Bill Halter fears a long-awaited state ruling on solar power policy could threaten $125 million in projects by his firm alone.
Halter, CEO of Scenic Hill Solar of North Little Rock, is fretting as the Arkansas Public Service Commission prepares an order on what compensation utilities should give homeowners and businesses with solar generation systems.
Net metering, the complex accounting system used for solar credits, has been on the commission’s agenda for four years.
“The PSC ruling could jeopardize all these projects by Scenic Hill,” Halter told Arkansas Business last week. “Beyond the rate issue, there are also potential changes in process, and resistance by electric utilities. All this slows down and jeopardizes projects. At a time when unemployment is large and could reach 32%, it would be a terrible public policy to jeopardize the stimulus from these and other projects now.”
Halter and competitors like Seal Solar of North Little Rock, Entegrity of Little Rock and Shine Solar of Rogers hope the ruling will keep solar projects as economically attractive as possible; utility witnesses have favored cutting the credit solar customers get for the power they put onto the grid.
The rate now, about 10 cents per kilowatt-hour, matches the relatively low retail price paid by Arkansas electric customers. The utilities and their high-energy-use business allies argue that today’s rate lets solar customers shirk paying for the infrastructure that delivers and accepts their electricity. This cost shifts to non-solar customers, they say, arguing for a rate cut of about half.
That rate correlates to customers’ rate of return on their solar investments, and can be crucial in financing.
PSC Chairman Ted Thomas says the PSC ruling is coming soon. “We are working on the net-metering order and I hope it will be issued within the next week or so,” he said in a Thursday email.
If the decision goes against the solar industry, an expectation not necessarily shared by all solar companies, the ripples could add up to billions in lost wages, indirect economic stimulus and state and local taxes, industry executives warned.
“No corner of our society or economy has been or will be untouched by our health crisis,” said Katie Laning Niebaum, executive director of the Arkansas Advanced Energy Association. She said any state rule changes must “align with solar energy’s economic benefits for the state.”
An early survey of the market landscape suggests solar projects are still progressing. “Firms are still installing systems. Prospective clients, both residential and commercial, are still interested and inquiring with firms,” she said, emerging from home isolation for a brief interview, at a distance, outside the state Capitol.
“The state’s solar sector is awaiting potential rule changes to customer-financed solar systems,” she said. “Despite exciting project announcements over the last few months, the solar sector remains an emerging market with the vast majority of opportunities ahead of us.”
The association has long argued that solar power generated by customers is a net benefit to utilities, rather than a cost to other customers, and it cites a rate decrease last year by Ouachita Electric Cooperative Corp. that CEO Mark Cayce credited directly to large solar projects in the co-op’s footprint.
Halter, whose company installed major solar projects for L’Oreal and Clarksville Connected Utilities and is now working on a $6 million project for Bank OZK, said these are crucial times.
“Scenic Hill realizes that the pandemic will mean challenges for financing and the industry. However, we are positioning ourselves to work through all that and deliver a large number of projects shortly after the PSC ruling,” Halter said in a telephone interview. “The aggregate of these projects exceeds $125 million, so we would be in a position to rapidly provide employment opportunities and economic stimulus to an economy that really needs it.”
He said construction on the solar plants would employ hundreds. “We’re talking about electricians and heavy equipment operators and mechanical installers working in towns that will see projects stimulating restaurants, businesses, and contributing taxes to municipalities and counties. You have to multiply that $125 million by all the feedback going into local economies.”
The PSC decision looms exactly a year after the Arkansas General Assembly approved Senate Bill 145, which became law as Act 464 last summer. It allows third-party ownership of solar arrays, whereas previous rules required residences or businesses to own their own arrays under net metering, with leasing prohibited. The law also tripled a 1-kilowatt limit on solar projects by individuals or entities without subjecting them to utility-style regulation.
“Since Senate Bill 145 was passed April 2, 2019, and became law last summer, zero projects have been approved through the Public Service Commission under the new law for projects over 1 megawatt,” Seal Solar President Heather Nelson said in a phone interview. “The citizens of Arkansas fought for change, they won, and yet the fight continues to see the law implemented.”
She said the first project to land on the PSC agenda, with a hearing date set for July, is Seal Solar’s two-site project for Lexicon Inc. of Little Rock. Seal plans to install 11,000 solar panels — 6,588 on Lexicon property in Carlisle to power the steel fabricator’s central Arkansas operations and 4,280 at its plant in Blytheville.
The Wall Street Journal reported last week that solar farms and wind operations are beckoning investors seeking stable yields in today’s volatile markets. Even though oil prices have plunged, making fossil fuels inexpensive and a solar surge seem counterintuitive, wind and solar farms fared well after the 2008 financial crisis, the last time hordes of investors sought a safe harbor. “Wind and solar farms have contracts to sell their electrical output to utilities and companies with good credit ratings for a decade or longer, making their returns stable and relatively low risk,” the Journal’s Russell Gold wrote.
The $2 trillion coronavirus stimulus bill passed by Congress and signed by President Donald Trump late last month included no direct help for the solar industry, but renewable energy companies are seeking cash grants and specialized tax-equity financing. Federal investment tax credits supporting renewable energy projects for homes and businesses are phasing out year by year. The credit fell from 30% of project cost last year to 26% this year, and will fall to 22% before ending altogether for residences and dipping to 10% for commercial and utility-scale arrays.
Meanwhile, business groups devoted to low-cost power and utility allies, like former Deltic Timber CEO Ray Dillon, argue that net-metering customers must, in fairness, pay more. Dillon made his case in a recent Arkansas Business commentary.
“Customers with private solar generation continue to take service from the electric utility, but they avoid paying certain fixed costs that are unfairly shifted to the remaining electric utility customers,” Dillon wrote. “As a result, the rates for electric service become higher for those customers that do not have their own private solar generation. This increase in electric rates is bad for business, bad for employers and bad for employees in Arkansas who will face higher electric rates.”
Niebaum argues that net metering customers pay their fair share through monthly grid usage fees; commercial and industrial net metering customers pay demand charges on their bills.
“AAEA has long argued that customer-financed solar systems are a net benefit for utility systems and all ratepayers through long-term avoided costs,” she said, noting that distributed generation of power eases utilities’ needs for expensive new transmission lines and power plants. Niebaum also noted the environmental and social benefits of renewable energy, saying they should be in the equation.
Halter, of Scenic Hill, put the focus back on economic revitalization in a time of contagion.
“I would put it this way: We have $125 million in projects announced and ready to go, with others in the pipeline,” he said.
“Solar was the largest job-growth category in the United States last year, so it would be the height of foolishness to jeopardize that here in Arkansas. We’re ready to push forward and push forward hard.”