Solar energy hearing gets testy as Xcel insists that rebates must be cut
Thursday, March 03, 2011 at 6:00 am
During a Senate committee hearing Wednesday, solar advocates called foul on Xcel Energy’s decision to petition the Colorado Public Utilities Commission (CPUC) to cut solar incentive programs that have helped the burgeoning industry grow in the state. With tempers running hot Wednesday, many solar company owners said they would be looking for greener pastures after having to lay off large percentages of their workforce.
“The New Energy Economy is dead,” one of the owners of a solar company testified during the hearing, put together by Sen. Gail Schwartz, D-Snowmass Village. He went on to explain through tears that he had been forced to lay off many in his company as a direct result of Xcel’s decision to cease taking new applications to its Solar Rewards Program until after a CPUC ruling is made. His sentiments were shared by many in the room.
Still, Xcel said the changes were necessary. It said its incentive program had exceeded the statutory 2 percent cap paid for by its customers to reimburse solar panel purchases and that the company has already borrowed into the future of that fund to meet demand.
Karen Hyde, Xcel Energy regulatory vice president, told the commission that due to decreases in the cost of solar equipment and the addition of federal tax credits, the purchasers of solar equipment are only paying 25 percent of the cost of the product. Hyde said, the original split between subsidy and purchaser cost was closer to 50/50.
As a result, Xcel plans to ask the CPUC for a cut to their direct reimbursement rates for upfront costs to solar equipment purchases on Friday. Hyde said they are asking for a change from $2.01 per watt to 25 cents per watt. In return Hyde said they would increase the amount that they pay in Renewable Energy Credits, which are directly tied to the systems’ production of energy into the grid, to $1.00 per watt from 35 cents. The combined change would bring reimbursements down from $2.36 per watt to $1.25. (See chart here: SolarRewardsPlacemat_final)
One key difference the change would make in the regulatory system is to provide Xcel considerably more flexibility to make changes to reimbursements in the future as only changes to the direct rebates require approval of the CPUC. Xcel would be able to essentially dictate future incentives for solar energy usage through the manipulation of REC rates. Hyde said such flexibility was necessary to reduce borrowing from future Renewable Energy Standard Adjustments.
While solar industry owners said there was a need to move away from direct rebates on solar products and toward a production model that would eventually ween the industry off subsidies, some members were afraid that Xcel would gain too much power by essentially eliminating the need to go to the PUC for a rate change. They said this would increase fears of instability in the market. Others said Xcel had the ability to hold the industry hostage now, and that was unlikely to get any better if the company got its way in the CPUC.
“We are looking at laying off 15 to 30 percent of our staff tomorrow,’ Eriks Brolis, co-owner of Namaste Solar told The Colorado Independent (TCI). ”The confidence has been shaken in the solar industry in Colorado so we are likely to start looking in other states for other forms of opportunity. We had agreed to a plan with Xcel Energy – the 2010 Compliance Plan — that the Public Utilities Commission approved with declining subsidies for a fixed number of megawatts for a fixed capacity for fixed dollars. So to come in now and say it is too expensive I think is completely unjustified. That plan was going to reduce incentive levels so that we could slowly ween our industry off of incentives, something that I believe no other energy industry could say.”
Black Hills Energy suspended accepting applications for its solar energy program that provided rebates for solar energy purchases to consumers as well as renewable energy credits in October. The company said the program had become too costly and is currently working with stakeholders to develop a model that is based on energy production.
The Colorado Solar Energy Association website states that Black Hills’ suspension of its solar rebate program has led to a 90 percent drop in solar sales in the affected region.
Schwartz told TCI that legislation increasing renewable energy standards and policies to make renewable energy a driving economic force in the state in part had led to the current issues and said its jobs are too valuable to lose.
“I think the rate of subsidy is probably less important than what is the cost to our utilities moving forward, what is the payoff and how can we have more transparency and more predictability with respect to what those rebates will be so an industry can build a strong business model,” Schwartz said. “How can any business plan for a rebate changing from $2.00 to 25 cents.”