Renewable forms of energy, especially solar, have shown strong growth in recent years in the U.S., and that is certainly a positive development. As policymakers across the country continue to encourage this growth, it is important that they take a close look at the policies in place that provide favorable incentives to the solar industry. Currently, Maine has an opportunity to be among a select group of leaders on this front, as the state’s regulators work toward refining policies around solar energy.
Specifically, the proposal put forth by the Maine Public Utility Commission to reform net energy billing and ultimately transition to a more market-based approach for pricing solar energy production is a great example of how we should be thinking about these policies. Here’s what our key consideration should be: What is the most effective and efficient way to grow renewable energy production?
One of the main answers here is that while distributed solar energy can benefit homeowners and communities, it is not nearly the most technically or economically efficient way to achieve the goal of reducing greenhouse gas emissions. Ultimately, large scale solar is much more effective, and it will do more to help keep Maine’s electricity rates among the lowest in the region.
Despite its recent growth, solar power remains an expensive energy alternative and accounts for only a small percentage of electricity generation in Massachusetts. If the state is going to make sharp reductions in carbon emissions as well as enjoy healthy economic growth, solar generation will have to be greatly expanded. But given the already high cost of electricity in Massachusetts, it is critical to obtain solar power as cost-effectively as possible to ensure that all consumers benefit.
In a recent study, an MIT team that I led presented a set of policy changes to make solar more affordable. The study shows that because of current policies, we are paying a good deal more for solar electricity than we need to. Residential solar systems are significantly more expensive per unit of capacity than utility-scale systems — about 70 percent more expensive on a levelized-cost basis. In addition, high levels of residential solar penetration often require substantial investments in distribution systems.
Residential solar continues to grow robustly, nonetheless, in large part because it is more heavily subsidized than utility-scale solar. The main federal subsidy, the investment tax credit, has just been extended for an additional five years. Since the amount of the tax credit is directly proportional to system cost, residential systems, which are more expensive on a per-unit of capacity basis, receive larger tax credits per unit of capacity than megawatt-scale, utility systems. This translates into a higher subsidy per kilowatt-hour of residential solar electricity, paid by taxpayers.
Cleantech has seen its share of high profile failures over the past year. The bankruptcy of solar cell company Solyndra has been the most public, but there are many others. This has led many to say that the sector is immature, others to say it is doomed or plagued by fickle or unstable state subsidies. It is also true that quite often, Cleantech firms bank on (somebody) introducing changes in infrastructure that need significant momentum (and time) to take hold. But surely Cleantech CEOs are smart people, so the reason they fail must be slightly more complex, perhaps? And is it even so certain that the problem lies with the industry itself and not with other factors? Is failure, in fact, quite evenly distributed across sectors? You may have noticed that strategies sometimes fail. Some would say strategies mostly fail. I know from my own life that intent does not always translate to result. The question is why.Jim Collins, in his book Why The Mighty Fail (2009), believes failures have a 5 stage lifecycle: hubris of success, pursuit of more, denial of risk, grasping at straws, and capitulation. Does his framework apply equally well across all industries? Is it fully relevant to cleantech?