Can US solar energy survive without incentives?

Solar power, which has been enjoying rapid growth in the United States in recent years, could face a cloudy future, as more states reconsider incentives deemed essential to the industry's growth.

The incentive in question is net metering – a policy that enables consumers who install solar systems on their rooftops properties to receive full retail credit for the surplus energy they provide to the electric grid.

Net metering once enjoyed widespread support, but it now faces threats, with 25 of the 40 US states, including Maine and New Hampshire, considering rolling back on net metering policies. Massachusetts, a traditionally solar-friendly market is waiting on a bill that would lift the cap on solar metering that limits private distributors to 4% and public entities to 5%. Previous attempts to pass similar measures have been defeated in the past.

Nevada scrapped the policy altogether last December, while Mississippi has shifted toward less generous net metering policies. The state approved a plan last year that pays solar users below retail rates for the excess power that they supply to the grid.

Solar Customers in Arizona, net metering policy is still in place and customers pay a small fixed fee, but utility regulators have opened a generic docket to evaluate the cost-benefit of solar.

While the incentive is safe in California, the state's regulators in January increased fees on solar users.

Citing the falling prices that have reached 40 percent in five years, opponents argue that the industry can survive without generous incentives.

Some analyst agree that the industry may be able to survive without cash incentives, but it won’t survive without net metering. Solar power without net metering makes less sense, Brian Lips an Energy Policy Project Coordinator at the North Carolina Clean Energy Technology Center tells The Christian Science Monitor.

Rooftop solar power lowers the amount of power needed from centralized power plants, meaning that “upgrades to the grid such as new power plants or bigger power lines and substations can be delayed or even canceled altogether,” writes Seth Blumsack, an Associate Professor at Pennsylvania State University, in The Conversation.

“A study performed in January by Crossborder Energy found that net metering delivers more than $92 million in annual benefits to non-solar customers in California since it allows utilities to avoid costs from generating and delivering energy. Studies in Arizona, Colorado, and other states also highlight the financial benefits of net metering to non-solar ratepayers,” according to the Alliance for Solar Choice.

Many opponents recognize this value, but argue that solar subsidies benefit more affluent homeowners at the expense of everyone else. Utilities say that users buying less power or sell it through net metering leaves fewer ratepayers to share the cost of traditional power generation.

“The legacy grid and the goal of providing reliable electricity to society are not simply going away. A utility needs to bring in enough revenue to pay for the grid and to support social programs like providing low rates for poor customers,” writes Blumsack.

“Utilities have a responsibility to make sure there is enough electricity to meet consumers' demand at all times. Having more customers generate their own solar power (and selling some back to the grid) makes the job of utilities more complicated, because it is harder to predict how much power the grid will demand at any given time.”

Still advocates of net metering say the system benefits everybody because it reduces the electric bills for consumers.

Besides, “the market has figured how to make energy more accessible for people from lower economic backgrounds as solar prices have dropped in recent years. Certain states even allow people to lease these systems,” Mr. Lips says.

Solar energy makes up less than 1 percent of US electricity generation, in part because of its historically high cost compared to coal and natural gas. But the industry has grown quickly in states where high power prices and generous solar incentives have made it financially attractive to homeowners.

[Editor's note: An earlier version mischaracterized the net metering policies of Arizona and Massachusetts.]