Will Wisconsin Ever Let the Sunshine In?

by | Jun 19, 2013 | Uncategorized

A commentary
by Michael Vickerman, Director, Policy and Programs, RENEW Wisconsin

Once
dismissed by electric utilities as a boutique energy resource, solar power has
become the go-to renewable resource for a wide variety of electricity
customers. From data centers to department stores, from airports to auto
dealerships, more and more customers around the country are tapping into this
clean and quiet energy source that shines on their rooftops every day.
Nationally,
solar energy’s growth has been nothing short of phenomenal. In the first
quarter of 2013, solar energy accounted for nearly half (49%) of the new
generating capacity built, elbowing out wind and natural gas as the fastest-growing
energy source in the United States. Declining installation costs coupled with
easier access to third-party owned systems account for solar’s rapid
advancement, especially in the residential sector. Even utilities in select
states have begun diversifying their resource mix with large solar arrays.
For-profit
businesses and homeowners in all 50 states can take advantage of the 30%
federal investment tax credit in place through 2016. However, not all 50 states
have flourishing solar markets. This is true even in states where electric
rates are high enough to tempt homeowners and businesses to supply themselves
with energy from the sun. Unfortunately, Wisconsin happens to be one of those
states with a languishing solar market, though it wasn’t always that way.  
Five years
ago, Wisconsin was a regional leader in encouraging customer investments in
rooftop solar. Early adopters then could avail themselves of special solar
buyback rates which most electric providers offered on a limited basis. For customers
of utilities that did not offer these higher rates, a fair and transparent net
metering service was available. The state’s Focus on Energy program contributed
significantly to solar’s early success with grants and incentives that
supported start-up installation contractors. In fact, that program instilled
them with confidence that Wisconsin was a solid place to do business.  
Fast forward
to today, and you see a very different market environment for solar energy
here.  Attractive buyback rates in
Wisconsin have become a distant memory. Some utilities have restructured their
net metering service to make self-generation substantially less appealing to
customers. And while state incentives for solar installations are still
available, the flow of dollars has been reduced to a modest trickle. Solar
contractors, like the rest of Wisconsin’s renewable energy business community,
cope with the hard times by pursuing work opportunities in neighboring states
like Iowa and Minnesota.
The
installed costs of solar today are about half of what they were in 2008, while
the price of utility-supplied electricity continues to move higher. Given the
fact that solar’s return on investment to customers has never been higher, the
attitudinal about-face we’re seeing is as inexplicable as it is
counterproductive.
While
Wisconsin raises the proverbial drawbridge to protect utilities from solar’s
advances, the state of Minnesota, in stark contrast, has rolled out the welcome
mat to this emerging industry. Just one month ago, Minnesota became the first
state in the Upper Midwest to establish a solar electric standard. By 2020, the
state’s largest utilities will need to source 1.5% of the electricity they sell
at retail from solar generation systems. 
Through the
same law, Minnesota strengthened its net metering policy, and required Xcel
Energy, the state’s largest utility, to provide a community solar service to
its customers. This innovative provision will enable Xcel customers who can’t
host a solar system on their premises to invest in a nearby installation and
receive a modest return through their monthly bills.  
What does
Minnesota hope to achieve by adopting such an aggressive solar energy policy?
The list of
objectives is long:
Ø  Promote manufacturing and contracting
opportunities for solar energy and “green” construction firms;
Ø  Expand employment opportunities
for the state’s work force;
Ø  Enhance the ability of business
and residential customers to manage their electricity costs;
Ø  Modernize the state’s electrical
infrastructure and diversify its resource mix;
Ø  Attract private investment
capital into its energy sector from both in-state and out-of-state sources;
Ø  Minimize exposure to fuel price
volatility, especially during on-peak hours;
Ø  Reduce greenhouse gas emissions
associated with electricity generation;
Ø  Reduce imports of fossil fuel;
and
Ø  Promote the state as a
destination location for clean–tech companies. 
Ironically,
the ingredients are now in place for an instructive side-by-side study on the
value of state policy in advancing solar energy, with Minnesota serving as the
test case and Wisconsin serving as the control. In terms of both solar resource
and utility regulatory structure, the two states are very similar to each
other.  And, with each state having about
14 megawatts of installed solar capacity, both share the same baseline from
which to measure progress.
Indeed, the
only significant difference going forward is state energy policy. In Minnesota,
solar is subject to a state mandate that is projected to increase current
capacity, in seven short years, by a factor of 30. In adjoining Wisconsin,
solar operates within a policy vacuum. 
This raises
the question, what do we gain from participating in an experiment in which
Minnesota reaps all the economic and environmental benefits from its solar
investments while we get to send more dollars out of state for fuel
to feed 40-year-old power plants?
The fact is
that Wisconsin cannot afford to stand idly by while Minnesota plugs itself squarely
into a dynamic industry segment and exerts a gravitational pull on private
investment and start-up companies in the region. It’s no secret that Wisconsin
has struggled to find its economic bearings in the wake of the Great Recession.
In contrast, clean energy has provided a great lift in other states that had
the foresight to sow the marketplace with some well-thought and welcoming
policy seeds.
In a popular
two-part Simpsons episode, the diabolical Montgomery Burns builds a
giant disc to block the sun’s rays from reaching Springfield, forcing city
residents to become even more reliant on the power plant he owns. Though
clearly cartoon satire, those of us who are 
watching the ongoing retreat from solar energy know that if Wisconsin
has any chance of capturing at least its proportional share of an industry that
yielded $11.5 billion in new projects in 2012, it has to ditch the Mr. Burns
act and begin designing a policy to let the sunshine in.

Please show your support for Clean Energy Choice

by | Jun 17, 2013 | Uncategorized

RENEW Wisconsin, Clean Wisconsin, and the
Sierra Club are pushing for the State of Wisconsin to adopt “a policy
expressly allowing customers to enter into contracts with third parties
who install, own and operate a renewable energy system at the customer’s
premises.” This initiative is called “Clean Energy Choice” and is one
way to greatly expand solar energy installation in Wisconsin. 


The Eau Claire County Board, under the leadership of
Chairman Gregg Moore, is considering a resolution in support of Clean
Energy Choice in Wisconsin on Tuesday, June 18 at 7:00PM in the County
Boardroom.

 Later this summer, a similar resolution will go in front of the Eau
Claire City Council. La Crosse County and Dane County have already
passed resolutions, and if enough municipalities do so the State of
Wisconsin will hopefully be compelled to act.  Please use the Clean Energy Choice talking points below to guide you when you contact your county supervisor before Tuesday:

RENEW’s “Clean Energy Choice” Initiative  

Talking Points

Wisconsin must adopt a policy
expressly allowing customers to enter into contracts with third parties who install, own and operate a renewable
energy system at the customer’s premises.
  •  Current ambiguities in public
    utility law interfere with customers’ ability to access clean energy produced
    on their premises.     Clean Energy Choice
    affirms
    their right to decide how they wish to purchase or implement a renewable energy
    system for their site.

  •   Because the third party
    owner provides the up-front capital under this arrangement, this policy will
    greatly expand the number of energy users who can afford to host wind, solar or
    biogas systems serving their homes or businesses.

  •  In contrast to standard
    utility electric service, purchasing energy directly from a renewable energy
    system enables households and businesses to lock in predetermined prices for 10
    years or longer.

  •   In contrast to renewable
    energy purchased from utilities through their green power programs, the price
    of energy from a third-party owned renewable energy system does not increase or
    decrease as a result of short-term fluctuations in the cost of conventional
    energy.

  •  Clean Energy Choice will enable nonprofit
    entities to team up with for-profit companies that can take full advantage of
    federal tax incentives, such as the 30% Investment Tax Credit and accelerated
    depreciation.

  •  Earlier this year, the
    U.S. military solicited bids from businesses and developers to supply its bases
    and facilities with renewable energy produced by third parties on-site. The
    total amount of the pending solicitation is $7 billion. Unfortunately, without
    a Clean
    Energy Choice     policy in place, there were no bids from companies to
    install renewables in Wisconsin.

  • Energy from a third
    party-owned system either flows to the customer directly, offsetting
    consumption, or is sold to the utility under an approved tariff. The rate
    impact from these installations would be negligible.

  • Clean Energy Choice would help households
    and businesses overcome the diminishing supply of renewable energy incentive
    dollars available from Wisconsin’s Focus on Energy program and utilities at no extra cost to ratepayers and taxpayers.

  • Clean Energy Choice will greatly expand market
    opportunities for Wisconsin companies and their employees who are part of the
    state’s renewable energy supply chain. For example, there are an estimated 135
    companies in Wisconsin participating in the solar market, including Helios,
    Ingeteam, and Caleffi, three Milwaukee-based manufacturers.


Also, please consider attending the Eau Claire
County Board meeting on Tuesday, June 18 at 7:00PM in the County
Boardroom, 1st Floor Courthouse, Room 1277, 721 Oxford Ave., Eau Claire,
WI. Members of the public may speak at the very beginning of the
meeting for up to 5 minutes each.


GTM Research and the Solar Energy Industries Association Identify Solar Energy as a Significant Component of all New Electric Capacity Installed in the U.S.

by | Jun 12, 2013 | Uncategorized

The GTM Research and Solar Energy Industries Association 2013 quarterly report on U.S. solar markets finds that solar energy installations account for 48 percent of all new electric capacity installed in the U.S. last quarter, the largest contribution for any given year in the industry. Rhone Resch, president and CEO of SEIA attributes this growth to long-term pro renewable energy policies. Read the press release below and the fact sheet released with the report.

WASHINGTON, D.C. AND BOSTON, MA — GTM Research and the Solar Energy Industries Association® (SEIA®) today release U.S. Solar Market Insight: 1st Quarter 2013, the definitive analysis of solar power markets in the U.S., with strategic state-specific data for 28 U.S. states and the District of Columbia.

 This quarter’s report finds that the U.S. installed 723 megawatts (MW) in Q1 2013, which accounted for over 48 percent of all new electric capacity installed in the U.S. last quarter. Overall, these installations represent the best first quarter of any given year for the industry. In addition, the residential and utility market segments registered first-quarter highs with 164 MW and 318 MW respectively.

As explored in greater detail in the report, the residential market remains a highlight for U.S. solar with 53 percent year-over-year growth. Unlike the non-residential and utility markets, residential solar has not exhibited seasonality and market volatility on a national basis; quarterly growth in the U.S. residential market has ranged from 4 percent to 21 percent in 12 of the past 13 quarters. 

[READ MORE]

Master Limited Partnerships for Renewable Energy: A Point/Counterpoint

by | Jun 10, 2013 | Uncategorized

In Midwest Energy News John Ferrell comments on the potential expansion of Master Limited Partnerships (MLPs) to cover wind and solar energy providers. Ferrell asserts that including wind and solar companies in MLPs and thus allowing them to avoid paying corporate income tax would simply provide another tax loophole to big business rather than evening the playing field between renewable and conventional energy sources. In the counterpoint below Attorney Michael Allen of Energy Law Wisconsin identifies three primary reasons why the extension of MLPs to include wind and solar business will encourage more investment dollars to come into the renewables marketplace.
I write in response to
John Farrell’s recent commentary on Master Limited Partnerships (MLPs)
in Midwest Energy News.  Bottom Line: I don’t entirely agree with Mr.
Farrell’s pessimistic point of view. Here are a few areas where I
respectfully disagree.

The
first is while it is technically correct for Farrell to say that MLPs
don’t pay corporate income tax, this statement is somewhat misleading,
as it suggests that  that the income generated by Master Limited
Partnerships avoids taxation.  It does not.  MLPs, just like the LLCs
who comprise many of the members of the Midwest Renewable Energy
Association, do not escape income taxation on the money they earn. 
Rather, their income flows through to their owners who pay the tax on
this income at their own tax rates.  Renewable Energy MLPs would offer
an advantage to persons who wanted to raise large amounts of money for
renewable energy because the entities would get the best of both the
partnership and corporate forms of doing business.  Like corporations
they are publicly-traded, so many people, even small investors, would be
able to invest and with a broader potential owner base they should be
able to raise funds at more favorable rates.   In addition, they get the
same favorable pass through tax treatment as an LLC because, unlike
publicly traded corporations, their profits would not be taxed twice —
first at the corporate level and again when dividends or profits are
distributed to the shareholders. 



Farrell
may have a valid criticism of the FERC regulation of Master Limited
Partnerships in the oil and gas industry in that FERC may be allowing
them overly generous rate recovery –treating them as if they were
subject to “double taxation” of profits and dividends when they are
not.  However, if true, this is a criticism of FERC regulation that
should be corrected at the FERC and avoided if Renewable Energy MLPs
become a reality.  It is not an inherent defect with the MLP form of
doing business.  It is unclear to me to what extent this would be an
issue for renewable energy MLPs.  FERC regulation would apply if they
were selling electricity in interstate commerce.  However one can
imagine an MLP that would not be regulated by FERC because it focused on
developing PV systems or micro grids serving business parks or
subdivisions within states.



Farrell
raises two other concerns with MLPs.  First, he claims they will enable
large regulated utilities to get to the tax-saving “trough”. Second, he
believes MLPs will reinforce centralized control of the energy system,
and counter the trend of distributed local generation on rooftops,
thereby taking ownership of the renewable energy system away from the
“little guy”, who is unlikely to be an investor in a renewable energy
MLP. 



I think Mr. Farrell’s view that these features make MLPs lousy policy for renewables is debatable.



First,
plenty of “little guys” hold shares in regulated utilities, so I don’t
know what would prevent them from being investors in renewable energy
MLPs should they be utilized by utilities (For example — my 84 year old
mother holds units in Cedar Fair, the amusement park MLP).  Locally if
you go to an MGE annual meeting you will see thousands of small
investors.  In addition, if individual investors want to buy stock
cheaply, they can do so in just about any utility and many other
publicly-traded corporations and existing MLPs through low cost services
that allow shareholders to buy as little as one share and reinvest
their dividends or make additional modest investments through Dividend
Reinvestment Plans and Direct Investment Plans.  Renewable Energy MLPs
actually have the potential to open up ownership of renewables to people
who, like the small investors who have flocked to Solar Mosaic, can’t
afford to put a PV system on their own home and don’t have sufficient
taxable income to be a major investor in a renewable energy project to
get the tax credits, but can afford to invest a $1,000 or less in a
renewable energy project.



Second,
if utilities or other big industry players really want to get into
renewables in a big way, they already can – they don’t need the MLP. 
Look at Warren Buffett, or Duke Energy or MEMC, which purchased Sun
Edison and just adopted its name.  They just need to find the right
renewable investments in the right markets.  I think it is unlikely that
it is the lack of the MLP form of doing business that is holding them
back.



Finally,
it is not cheap to set up an MLP and utilities can already raise money
through their existing corporate structure (assuming the local state
regulatory commission lets them do so).  I don’t think it is a certainty
that they will be the ones to jump into the MLP game.  If you want to
anticipate which financial heavyweights might use the MLP renewables
structure, my sense it would be more likely to be the major oil
companies (as Farrell notes) or the investment banks, who underwrote the
fossil fuel and pipeline MLPs.



Ultimately,
I think Mr. Farrell is making an argument that renewables are done best
with local control and not by large centralized owners.  There are
certainly benefits to the local approach, including increased
responsiveness to local community concerns and perhaps, in some
circumstances, even local grid security.  However, there are drawbacks
too, including loss of potential economies of scale making renewables
development more expensive than it needs to be and risk of inadequate
depth of expertise to serve the needs of customers.  In addition, as
noted above, one could even argue that MLPs, by offering an opportunity
for small investors to invest in renewables via MLP unit ownership, may
have a democratizing effect on renewables by opening up greater
opportunity of ownership to small investors, even if ownership of
renewable energy assets are concentrated in larger companies. 



Nothing
is black and white, but I come down on the side of favoring MLPs,
because I believe they will encourage more investment dollars to come
into the renewables marketplace. And the clinching consideration that
sways me in this direction is that if the Earth’s atmosphere obtains
relief from GHG emissions due to increased development of renewables, I
think the atmosphere doesn’t care much whether these renewables are
locally or centrally owned. 



Regards,



Michael
Michael J. Allen



Energy Law Wisconsin
1500 West Main Street, Suite 300
P.O. Box 27
Sun Prairie, WI 53590
(608) 837-0111
mallen@energylawwisconsin.com



www.energylawwisconsin.com

 

Journal Times editorial: Homegrown solar generation makes sense for Wisconsin

by | Mar 27, 2013 | Uncategorized

An editorial from The Journal Times about how Wisconsin could benefit from new solar legislation. Find the original posting of this article here.

Unlike many other states, Wisconsin hasn’t fully taken advantage of the potential for energy savings through the expansion of homegrown solar generation.

That could change under a bipartisan proposal by state Reps. Gary Tauchen, R-Bonduel, and Chris Taylor, D-Madison, who are crafting legislation that would exempt owners of renewable generation at a home or business from being regulated as a public utility.
The heart of the proposal is that it would allow third-party ownership of solar systems — allowing solar companies to come in and install solar generation systems and assume the upfront costs and then have the business or homeowner repay that over time through savings on their energy bills.
It’s a plan that has been adopted in other states to good effect. Carl Siegrist, a solar energy consultant, said nearly three-fourths of the solar market last year came from third-party ownership, according to a recent story in the Milwaukee Journal Sentinel.
While the upfront costs of solar installation have dropped considerably in recent years — some reports put the drop at 50 percent — those initial costs still represent a hurdle for renewable energy, and the Tauchen-Taylor bill could help Wisconsin businesses and homeowners to clear that barrier.
According to a recent Milwaukee Business Journal report, the return on investment for solar installations is between seven and 10 years. But after that, the solar systems could provide low- or no-cost energy for another 30 years.
One of the companies that’s been a fan of third-party ownership is Kohl’s Corp., which has contracted with SunEdison for installation of solar generating panels at many of its stores in other parts of the country. The Milwaukee newspaper report said those Kohl’s department stores generate “three times as much power as all the solar electricity being generated in Wisconsin today.”
“If there was third-party ownership allowed, they would have it on every one of their stores in the state,” the report quoted Steve Johnson, a solar energy developer in Delavan.
That kind of impact not only saves energy and dollars, but it would buoy Wisconsin’s economy by creating a potential groundswell of solar installations and the attendant jobs that work would create across the state.
The fly in the ointment is opposition from the state’s utility industry, which argues that increased use of renewable energy would create “partial customers” and reduce their sales. This would result in a cost shift to regular customers because the fixed costs for poles, wires and business operations would be spread across those users.
That’s a legitimate concern and we would hope it could be addressed in the legislation, but it is not dissimilar from the effects of energy conservation and those efforts have been pushed by the state — and by utilities themselves — for decades.
A low-cost financing system to encourage the use of solar generation makes sense for the long-term energy profile of Wisconsin and we urge the Legislature to give this bill the bipartisan support it deserves.

Find the original posting of this article here.