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Can Small Companies Take the Solar Plunge?

A fight over rooftop solar panels could decide America’s energy future.

Last Monday, Google announced that it was cutting ties with the American Legislative Exchange Council, the powerful Koch-backed conservative group that, among other things, opposes government action to combat climate change. “Everyone understands climate change is occurring and the people who oppose it are really hurting our children and our grandchildren,” Google’s Eric Schmidt said on NPR’s Diane Rehm Show, adding for good measure: “And so we should not be aligned with such people—they’re just, they’re just literally lying.”

The conservative group, which has been steadfast in its opposition to the Environmental Protection Agency’s efforts to curb carbon emissions, was quick to shake off Google’s high-profile defection, attributing it to “public pressure from left-leaning individuals and organizations who intentionally confuse free market policy perspectives for climate change denial.” Take a closer look at ALEC’s priorities, though, and there’s evidence that the group’s commitment to “free market policy perspectives” is less resolute than its climate denialism. Consider, for instance, ALEC’s push to squash the nascent rooftop solar industry.

ALEC and its allies are currently lobbying state lawmakers and regulatory commissioners to rewrite industry rules regarding solar panels. The apparent goal: to ensure that customers with rooftop panels pay more each month and to make would-be adopters think twice about paying the upfront cost of installation. ALEC’s anti-solar attacks have drawn friendly fire from self-identified Tea Party groups who see the effort as anything but free-market friendly. Groups like Barry Goldwater Jr.’s TUSK America say that a user fee is just a new tax aimed at limiting consumer choice—exactly the type of argument you’d normally hear from a conservative firm like ALEC. Liberals and other solar proponents, meanwhile, see the push as the latest example of utilities and fossil fuel producers doing whatever it takes to protect their bottom lines. And no matter what side you’re on, it’s clearly counterproductive to make solar energy less attractive given the prevalence of big-dollar federal and state initiatives currently aimed at making the cost of solar competitive with that of fossil fuels.

The solar fight is taking place in at least a dozen states, and its outcome won’t just shape the future of the rooftop solar industry—it will also play a major role in deciding how Americans pay to keep their lights on. If the utilities get their way, they’ll preserve the profit-producing status quo of the natural monopolies that are many Americans’ only option when it comes to buying electricity. If the solar side wins, it could conceivably open the door for a fundamental reshaping of the system, creating small but serious competition for power companies in a market currently devoid of challengers.

To be clear, utility companies, which burn coal and other fossil fuels to generate most of their electricity, aren’t necessarily anti-solar. Their concerns lie with the rooftop panels being installed on homes and businesses around the country. An oft-cited estimate from the solar industry suggests that on average someone in the United States installs a new solar panel system every four minutes, up from one every 80 minutes in 2006. While solar still accounts for only two-tenths of 1 percent of the nation’s electricity, that does little to ease the worries of utilities, who rightly view the rooftop panels as an existential threat given that they allow consumers to become their own energy producers. Such fears will only grow as the technology becomes cheaper and as companies develop cost-effective ways for homeowners to store the excess energy their panels produce.

One of the utilities’ main complaints about residential solar is that homeowners and businesses get to sell their excess energy back to the grid at a set price. Forty-three states have such “net metering” rules in place, ensuring that unused solar energy doesn’t go to waste but also cutting into power companies’ profits. The utilities contend that government-mandated rates don’t take into account the wear and tear on the grid itself and that they’ll be forced to pass on the cost of infrastructure upkeep to consumers via their monthly electricity bills. The pro-solar crowd believes that doesn’t take into consideration that the utilities benefit from wider solar use, which provides the grid with a clean, reliable source of electricity when it needs it most: on hot, sunny days when residents crank up their air conditioners.

What is not in dispute is that the utilities believe their business model hinges on undercutting the rooftop solar industry before it matures. A 2013 report by the Edison Electric Institute, a leading utility group, made it clear that forcing consumers who sell their surplus back to the grid to pay more for the privilege was a “near-term, must-consider action.” The group’s big worry is that as more and more solar power–producing homes pay less and less each month, the cost for traditional consumers will go up, making a jump to solar that much more appealing. If utilities wait until that starts happening, the Edison report warned, “it may be too late to repair the utility business model.”

And so the industry isn’t waiting. In the 20 months since that report was published, utilities have taken aim at rooftop solar (and to a lesser extent, small-scale wind projects) in at least 12 states, lobbying regulatory commissions and statehouses to rewrite rules to de-incentivize customers from buying or leasing rooftop solar panels. While each proposal is different, most share the common goal of forcing people who install solar panels on their rooftops to pay for both the electricity they buy from the grid and for a portion of the electricity they sell back to it.

One such effort is currently underway in Wisconsin. The state’s largest utility, We Energies, has filed a proposal with the Wisconsin Public Service Commission to pay solar users less for the energy they sell back to the grid and to force all customers,solar and nonsolar alike, to pay a larger fixed fee for hooking up to the grid in the first place. Such a change would be good for the utility’s bottom line but could be potentially devastating to the rooftop industry, reducing the incentive for a would-be solar customer to buy or lease rooftop panels. It could also wreak havoc on the budgets of early adopters who have already invested in the technology.

The bigger-picture concern with the Wisconsin proposal and others like it is that it leaves homes and businesses with less of a financial reason to cut energy waste, regardless of whether they have rooftop solar panels. If more of your bill is set at a fixed rate, then it makes less sense to monitor your monthly electricity allotment. You don’t have to be a liberal environmentalist to think that decreasing consumers’ incentives to reduce their energy usage is a bad idea.

The Wisconsin Public Service Commission—a regulatory panel made up of a pair of Republican-appointed commissioners and a single Democrat-appointed one—is expected to decide later this year whether the proposed changes will be implemented. Across the country, the odd coalition of conservative and liberal pro-solar groups has thus far managed to fight the utilities and their deep-pocketed allies to a draw. Most of the industry’s biggest victories have simply kept the door open for user fees in the future, as was the case in Oklahoma and Utah earlier this year. The one exception is in Arizona, where utilities were able to win a small $5 user fee but not the $50 to $100 they were originally asking for.

At this point, two big questions remain. The first is whether the utilities can find a way to snuff out residential rooftop solar and other renewable alternatives before they reach critical mass. The second is whether the industry’s goal of killing rooftop solar will backfire, driving more customers to take the solar plunge and pushing the rooftop industry to maturity that much sooner. Whatever the final outcome, this much is clear: Little-known groups like the Wisconsin Public Service Commission will have a huge effect on America’s energy future.

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