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The State(s) of Distributed Solar

| Written by Nick Stumo-Langer | No Comments | Updated on Feb 29, 2016 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/the-states-of-distributed-solar/

placeholderWith the solar energy tax credit’s future settled by Congress, solar energy has the green light to continue expanding across the U.S. But who benefits from solar depends heavily on state policy. Do states encourage distributed solar deployment and the democratization of energy or simply leave solar growth up to incumbent utilities?

The following map illustrates the size of state’s solar market (in yellow, orange, and red) with a pie chart showing the percentage of distributed solar (1 megawatt and smaller).

Distributed Generation of Solar by State

States seem to fall into three categories:

  1. In the Southwest, abundant sunshine has driven utility-scale solar deployment even as state policy has (until recently) encouraged distributed solar development as well.
  2. In the Southeast, strong sunshine hasn’t meant much solar because incumbent monopoly utilities have stalled it development. Hence, few Southeastern states have large solar markets, and the one exception (North Carolina) is dominated by utility-scale solar owned by Duke Energy.
  3. In the Northeast, high electricity prices and robust distributed solar policies have led to strong solar markets and lots of distributed generation, even with modest sunshine (which has also meant less utility-scale solar development).

The focus on the size of solar is important because solar is inherently the most distributed renewable energy resource. Sunshine falls everywhere, and solar can be economically harnessed at nearly any scale. Distributed solar has particular benefits to the electric grid that large-scale solar does not, from lower energy losses by avoiding long-distance power transmission to reducing variability of solar (passing clouds rarely cover entire states, for example). Many states are starting to examine the true value of distributed solar like Minnesota has done.

But beyond the economic benefits, solar also enables a transition from energy monopoly to energy democracy. When electric customers become producers, they also become decision makers in the grid system. As the grid transforms (as with New York’s Reforming the Energy Vision process), these customers will be able to transact with one another and the grid to make it more innovative and efficient). With the coming of economical distributed energy storage, customers may hold the keys to the future of the grid.

Customers may be able to hold the keys, but only if states require the incumbent monopoly to relinquish them. As we can see in the five states from the above map where installed capacity exceeds 1,000 megawatts, policy matters. In four of them (Arizona, California, Hawaii, and New Jersey), policies protecting local authority and encouraging individual ownership of PV arrays have created an environment amenable to greater distributed generation throughout the United States.

  • Arizona – 35% Distributed Generation
    • While the state of Arizona’s Renewable Portfolio Standard is only 15% by 2025, their solar carve-out (the requirement that electric utilities generate power from the sun with “stiff penalties for non-compliance”) is one of the best in the nation. It sets aside 30% for distributed generation, and half of that for residential installations.
    • Arizona gives a sales tax exemption for solar panel purchases, along with half of the other states.
  • California – 37% Distributed Generation
    • California has been out front on the issue of local, renewable energy for most of the 21st-century including breaking down the barriers to distributed generation.
    • The state’s 10-year California Solar Initiative providing incentives for distributed solar for years, declining as the costs of solar dropped.
    • The state Public Utilities Commission has recently maintained net metering.
    • The state’s Energy Commission’s New Solar Homes Partnership offers incentives encouraging energy efficient solar installations in new residential construction including extending a tax break for property taxes.
    • The legislature and governor’s office have also required all energy distributors in the state to attain at least “33 percent of their load with renewable energy by 2020” or their Renewable Portfolio Standard.
  • Hawaii – 89% Distributed Generation
    • Currently, 20% of electricity sold in Hawaii comes from renewable resources on the islands thanks in part to the federal solar taxes and nearly half of a million in state tax credits.
    • Hawaii’s Renewable Portfolio Standard is among the best in the nation, 100% by 2045, signaling the state government’s commitment to solar and other renewables.
    • There are, currently, 314.6 megawatts of rooftop solar installed in Hawaii, and over 15% of households have solar installed. Even more stunning, that’s 222 distributed watts per resident.
  • New Jersey – 66% Distributed Generation
    • With a Renewable Portfolio Standard of 22.5% by 2021 and a solar carve out of 4.1%, New Jersey has one of the strongest electric utility requirements in the country.
    • New Jersey’s net metering law ensures that their residents will get “full retail credit” on their utility bill thanks to solar energy produced by their residential arrays.
  • North Carolina – 6% Distributed Generation 
    • North Carolina has a 12.5% renewable energy standard, with 0.2% set aside for solar that’s nearly fulfilled
    • The state offered tax incentives that expired at the end of 2015, and utilities have reduced their distributed solar incentives.

A record 7.3 gigawatts of new solar arrays were installed in 2015. Although the majority of new installed capacity came from utility-owned arrays, residential rooftop solar grew 66% last year (with per 2 gigawatts installed) and distributed commercial solar also continued to grow. But many utilities are frightened of a future with more customer choice and control and are fighting back. They’re rolling back net metering laws in Nevada and adding fees to reduce the financial benefit of solar in Arizona.

Is the future energy monopoly or energy democracy? The states may decide.