A weird thing is happening with solar power. For years derided as a sideshow energy source that was only for environmentalists, solar is now being seen as an imminent threat to both the mainline energy industry and at least one national economy. As a result, those harmless people with the shiny panels on their rooftops are suddenly being seen as dangerous freeloaders and, in some potential bellwether cases, are being threatened with punitive taxes to dissuade them from their pursuit of self-generated power from a renewable resource: the Sun.
But the strongest responses to tightening the screws on solar aren’t only coming from the traditional green community: a populist pro-solar resistance may be taking root, seeing independent power generation as a right. As a result, the shape of the future pro-solar, even pro-innovation coalitions, could be anyone’s guess.
¡Viva el Sol, or not?
The story begins in Spain in 2007, when, despite its many other economic woes, it was seen as a shining story of solar energy success. And why not? Parts of southern Spain see nearly 3,000 hours of sunshine per year, even more than US hot-spots like Dallas and Atlanta. The stuff literally falls from the sky. While industries like tourism or agriculture fluctuate with economies, most of the time the Sun just shines. With an infinite resource and plenty of open space, solar seemed like a great bet for Spain.
In the late 2000s, hoping to get a jump on the potential growth industry, the Spanish government saw Chinese production come online and the price of solar panels falling, and began looking for ways to encourage people to install panels on homes and businesses. To create a strong incentive to make the investments, the government increased the price it paid solar power users for selling excess power back to the grid. The price paid for solar was jacked up to €444 ($592) per megawatt hour, compared to around €39 ($52) per megawatt hour paid to utilities for conventional electricity generation via coal or natural gas.
Bottomless subsidies
As massive subsidies are hoping to do, the plan worked exceptionally well, attracting a 500% increase in solar photovoltaic (PV) installations in just the first year of the policy. Now, six years on, Spain has a glut of PV capacity, thought to be 60% more than needed. But far worse than that, it has an enormous hole in its finances created by the uncontrolled subsidies it paid out as costs of PV plummeted and installation and solar generation rocketed upward. Along with subsidies it paid out to other renewables alongside PV, the Spanish government is now left holding around €26 billion ($34.7 billion) in deficits created by its policies, or a little over €5 billion ($6.6 billion) accumulated per year since 2007.
The government’s response has been about as damaging as its initial policies turned out to be. Upon taking office at the beginning of 2012, Prime Minister Mariano Rajoy’s conservative government halted the subsidies and also began cutting assistance to renewables projects overall, jolting not only consumers who had expected a different set of rules around their solar investments, but leaving Spanish utilities—and the banks that backed their foray into renewables—with their balance sheets in disarray. NPDSolarBuzz estimates the fallout from Rajoy’s moves could leave the industry with a €20 billion ($26.7 billion) hole in its pocket as the government has attempted to stop renewables’ runaway growth—at a time when Spain’s economy could not be in a more delicate position.
Tax the Sun
But Rajoy’s most recent round of new proposals to further stem the bleeding takes Spain’s changing solar posture from the irresponsible well into the Kafkaesque. As part of additional taxes and restrictions designed to throttle further deficits from solar, not only must consumers generating solar power from their own installations pay dramatically higher rates—27% higher—to sell excess power to the utility grid than non-renewables cost, the government wants to levy a fine of between €6 million ($8 million) and €30 million ($40 million) against any individual caught generating their own solar power on panels not connected to the grid. In other words, any autoconsumo, or home solar generation, that isn’t hooked up to the power networks and doesn’t pay the higher rates will receive the draconian fine. Unmetered backyard solar generation is now effectively considered bootlegging under the new laws.
In a moment of heightened outrage and brewing anti-government sentiment, the responses have been quintessentially Spanish. Some citizens are ripping panels off their rooftops rather than complying, some are ignoring the law, and some have turned to theatrical protest. At the end of July, a group organized by pro-renewables activists showed up at a prison outside Barcelona to turn themselves in as “criminals,” dressing in prison garb and wearing solar panels on their backs. As Reuters reported recently, some have even moved their panels into the countryside far enough away from main power lines as to be exempt from the tax. A large and strange group of bedfellows, including unions, utilities, political parties and industry groups filed a complaint against the government to the European Parliament in summer as well, citing the retroactive nature of some of the cuts and penalties as a violation of EU rules. In short, Rajoy managed to alienate everyone from rank and file voters to banks to utilities to greens. As such a central part of future economic growth in Spain—an estimated 50,000 jobs in renewables have already been lost—traditional right-left alignments have gone out the window when it comes to these policies.
While the government has made noise about pursuing offenders, opinion is divided as to whether the massive fines proscribed in the most recent law will be enforced, since they were created with industrial-scale producers in mind, not individuals. Spaniards currently have two months to comply with the new regulations. Solar advocates also see the Rajoy government’s crackdown as contrary to European Union Directive 2012/27/EU, passed last October, which compels member states to deploy innovative technologies in order to reduce energy consumption by 20% by 2020. By slamming the solar industry into reverse, not only will panels be taken off grid, but also, critics contend the aforementioned hit to utilities’ and banks’ finances will scare off new renewables investments, both in Spain and across the EU.
Meanwhile, in America
While Spain’s solar rebels are organizing against Rajoy, a solar rebellion of sorts is brewing in parts of the US as well. As Quartz recently reported, some US utilities are starting to feel the pressure on their long-term finances from once-fringe home solar, and are pushing to raise tariffs on home generators tied to their power grids.
A white paper from the Edison Electric Institute (pdf) released in January got attention from US utilities by positing that solar and other renewables’ success among consumers could soon create financial problems for both the utilities themselves and their non-renewables customers. For one, solar and other renewables could become so successful that some customers would be self-sufficient enough to leave the grid. Current cross-subsidization by customers who don’t use solar but pay for solar users’ access to, and ability to sell excess power to, the grid could then become a smaller pool paying for infrastructure built with a larger user base in mind. From EEI’s perspective, solar is the biggest renewables threat as the PV cost curve bends lower, and economics continue to move the consumer’s way.
In EEI’s analysis, if utilities don’t act soon to slow the bleed of solar customers from their services, capital markets will take an increasingly critical view of the old-line utilities’ finances long-term. “Increased uncertainty and risk will not be welcomed by investors, who will seek a higher return on investment and force defensive-minded investors to reduce exposure to the sector,” the report stated. “These competitive and financial risks would likely erode credit quality. The decline in credit quality will lead to a higher cost of capital, putting further pressure on customer rates. Ultimately, capital availability will be reduced, and this will affect future investment plans. The cycle of decline has been previously witnessed in technology disrupted sectors (such as telecommunications) and other deregulated industries (airlines).”
Not in your back yard
Big Power has listened to the EEI analysis and several major Western utilities, in Arizona and California in particular, have gone to regulators to ask for new rate structures. The fight between Arizona’s utilities and solar users has been particularly acrimonious. Arizona Public Service generally proposed what EEI called for—adding a hefty grid use surcharge to solar users’ bills and lowering buyback rates for excess power purchased from solar homes. Astroturf groups have rolled TV ads favoring the utilities’ position—that the economics are unfairly skewed toward solar owners. Pro-solar groups have fired back—the largest fronted by the son of former Arizona Republican firebrand Barry Goldwater—using the state’s solar jobs and impact on senior citizens on fixed incomes as their weapons of choice.
The alliances get stranger in Georgia, where an all-Republican Public Service Commission recently voted to mandate local utility behemoth Georgia Power to raise its solar output 525 megawatts by 2016. One of the Republican commissioners justified the vote thusly: “When the President finishes his war on coal, he’ll come after fracking, and gas prices will surely go up. We have to be ready.”
Cue attacks from utility-friendly groups such as Americans for Prosperity (AFP), who say alternative power will “kill jobs,” raise the cost of food and clothing, and leave customers with less reliable power when the sun goes down. While being careful not to go after solar itself, AFP explicitly aligns Republican commissioners with President Obama, calling the decision a government intrusion into power markets. And, despite longtime alignment between APF and the Tea Party, the latter group split with them on this issue, defending what they see as the right of the individual to determine their own power source of choice and not have it forced by a monopoly utility. One outcome of this feud has been the formation of a “Green Tea Coalition,” uniting Georgia Tea Party members with the Sierra Club and other pro-environmental groups in a strange brew that may signal the shape of similar coalitions to come.
What’s next?
It’s unlikely this is just a summer fling between free marketeers, progressives and other pro-solar groups. In Spain, the odd political alignments weren’t the same as the US, but the populist sparring match could just as easily be in Colorado as it is in Catalonia. These libertarian-progressive alignments have been pro-innovation and anti-corporate, and in some ways echo sentiments that are emerging in Silicon Valley. They also may presage an emerging political dynamic among Millennials, who, while having grown up with their elders’ traditional liberal-conservative constructs, are starting to show signs of a strange brew of progressive libertarianism that reconciles both protection of the environment and resistance to top-down intrusion into business—in this case renewable energy—one of this generation’s most favored issues.
It doesn’t stop there, however. In the EEI paper on the disruption renewables present to utilities, one of the biggest threats identified was a growing percentage of customers simply walking away from big power generators and running their own home generation off the grid. “While we would expect customers to remain on the grid until a fully viable and economic distributed non-variable resource is available, one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent.” While economical home storage isn’t here yet, it’s near enough to hear its hoofbeats. Seeing the connection between their own choices and impacts on the bigger world, and, given the option to generate clean, efficient, and possibly shared community energy close to home, younger consumers will be more, not less likely to opt for self-generation. The dirty fuels industries can already see that coming.
Alignments between anti-government and pro-local production interests are not new. Probably as many moonshine bootleggers were Republican as Democrat during American Prohibition. While the technology innovation community may have been cast as pro-Democrat or leftish progressive in the past 20 years, the new political alliances are getting muddled in a way that we don’t quite recognize yet. New layers are emerging as next-wave technologies such as renewable energy, are thrown together with the pro-corporatist course of the recent past, which has left a bad taste in the mouths of younger voters. What we’re seeing today as traditional energy production gradually declines and new, independent energy creation emerges, may cause some significant political reshaping in the next few decades that might leave the old guard wondering which way the sun shines.
You can follow Scott Smith on Twitter at @changeist. We welcome your comments at ideas@qz.com.
Hippies and libertarians have become unlikely allies in a war against solar power
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