Does Rooftop Solar Benefit All? That’s the Debate

Fortune, Katie Fehrenbacher

Nevada has emerged as ground zero for a fierce debate over roof top solar panels in the U.S. Even though the state’s energy regulators have already officially changed the rules to make solar roofs less attractive for home owners in Nevada, the solar industry is determined to fight back against the ruling.

This week solar company SolarCity (SCTY), working with the environmental non-profit the Natural Resources Defense Council, released a detailed report that says that rooftop solar panels provide a net benefit of between $7 million to $14 million per year to Nevadans (both solar customers and non-solar residents).

Those figures include reduced costs from the utility having to buy less energy when there are rooftop solar panels operating, as well as reduced costs from fewer power lines that need to be built to transport large new energy sources from remote areas to the cities that use the power. In addition, those extra millions also include the added environmental and health benefits of having more clean energy sources and fewer fossil fuel energy sources in Nevada, and a reduction of regulatory costs for utilities meeting the federal Clean Power Plan, which calls for power companies to lower their carbon emissions.

Lyndon Rive, Solar City
SolarCity CEO Lyndon Rive’s job? Stay ahead. Photograph by Gregg Segal
Photograph by Gregg Segal

This sunny outlook for the rooftop solar industry in Nevada is a contrast to the more dour data that the Nevada Public Utilities Commission worked with to make their decision to lower the rates and boost the fees that solar customers need to pay. The data they used found that non-solar customers in Nevada were unfairly paying additional costs to float solar customers who are being paid for generating energy. These added costs were due to high rates (compared to large solar plants and fossil fuels) that solar customers were paid in bill credits for the energy they generated in Nevada.

Last year, Nevada legislators decided that it wanted to move away from those high net metering rates, and it asked the commission to figure out how to do that. And here is where the complexities of the maturing solar market come in: the Nevada Public Utilities Commission and the state legislators aren’t anti-solar. Nevada has had some of the best incentives and subsidies for solar in the U.S.

But the commission and the lawmakers are more interested in having utility NV Energy buy energy from large, centralized solar panel farms built in the deserts of Nevada, which can provide electricity for less cost than a solar panel installed on a rooftop can. Even though the same solar panels could be used in both situations, installing a solar panel on a home is more expensive (per energy generated) than building a large solar panel farm, due to the added costs of necessities for rooftop solar like expensive customer sales, permits, marketing, rooftop gear, and installation labor costs.

For more on states embracing clean energy watch our video.

Naturally, having Nevada decision-makers give preference to lower cost “centralized solar” (as energy geeks call it) isn’t in the best interests of the companies like SolarCity and SunRun (RUN), which have built businesses off “distributed solar,” or installing solar panels on customers’ roofs. That’s why these solar companies stopped operating in the state after the new ruling, and have fought the change tooth and nail.

That’s also why SolarCity is so interested in investigating how rooftop solar should be used in the economics of setting electricity rates and net metering incentives.

On the flip side, the commission’s decision was in the best interests of NV Energy and its owner, Warren Buffett’s Berkshire Hathaway. Nevada’s Public Utilities Commission has rejected criticism that it is in the pocket of NV Energy.

“After I left the Governor’s Office of Energy, I have not had a single conversation with NV Energy outside of public hearings in this building,” Paul Thomsen, the chairman of the commission told Fortune. “It’s easy to pick an enemy and paint the utility as this nefarious character who is trying to squash the rooftop solar industry,” he added.

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The rub of this entire situation is that the Nevada Public Utilities Commission might not even disagree with the new data that SolarCity presented this week. But the commission’s position is that the solar companies didn’t present it with this type of information last year when it was having hearings on changing the net metering rates. Instead, solar companies focused on media outreach outside of the regulatory framework, the commission has alleged.

The Nevada Public Utilities Commission responded to SolarCity’s new report this week by saying that it “encourages the rooftop solar industry to present any new analysis or studies in upcoming rate cases, where the value of rooftop solar will be re-examined for the purpose of updating net-metering rates.”

The commission also stated:

The record in the PUCN’s recent net-metering proceedings did not support SolarCity’s assertion that retail rate net-metering provides a net benefit to customers who do not participate in net-metering. The PUCN hopes that SolarCity’s efforts to quantify benefits signals a new commitment to embracing peer review and recognizing the legitimacy of the decision-making process of neutral experts representing the interests of the State of Nevada.

SolarCity says in its report that the Public Utilities Commission only took into account two data points (energy and energy losses) for determining the benefits or losses caused by the state’s rooftop solar customers. The company points to the fact that the commission had previously identified 11 possible data points that it could use to evaluate the situation, but failed to consider nine of them due to lack of time and data.

Time will tell if SolarCity’s new data makes it into the commission’s official process for changing the net metering solar rates. If it does, the new data could be an important tool that could be used by solar companies fighting similar battles in other states. Nevada’s ruling and regulatory process will likely offer many lessons learned for discussions that are happening in many other regions.

And releasing reports like this one isn’t the only way SolarCity and other companies are fighting against Nevada’s ruling. Earlier this year, SolarCity organized an event at Tesla’s massive battery factory outside of Reno where SolarCity and Tesla execs quietly lobbied Nevada’s legislators about the future of solar in the state. Tesla CEO Musk and SolarCity CEO Lyndon Rive are cousins. However, ceasing operations in Nevada has actually had a considerably large effect on SolarCity’s finances this year.

The rules for rooftop solar in Nevada might have been decided for now, but the solar industry is trying to get the Nevada Commission’s decision reversed through a November ballot measure, a legislative special session, and a judicial review. What happens next will have wide ranging repercussions on other states as well.

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