The outgoing head of the largest utility-scale solar developer in the United States is offering some parting shots that weren’t what rivals focused on residential installations wanted to hear.
Jim Hughes, who stepped down on June 30 as CEO of First Solar, believes the complicated—and controversial—rate structures that utilities offer to residential solar customers who also connect to their grids are leading to a “train wreck” for the sector.
U.S. solar markets have been roiled in recent months by state-level changes to the tariff structures that utilities are allowed to apply when providing power to PV-equipped homes while the sun is down, and what they must pay to those same homes when their sunlit panels are sending power back to the grid. Nevada and other states have rolled back net metering provisions that obliged utilities to purchase residential solar power at full retail, rather than wholesale, rates. Regulators are also allowing utilities to add “demand charges” to residential power bills, reflecting the incremental cost of supplying the peak energy a customer consumes during a billing cycle.
The moves have sharply reduced business for solar installers in several states, and prompted a drop in share prices for publicly-traded solar companies—prompting fierce opposition from the sector. But Hughes calls the changes unavoidable, and even wise.
“A rate structure that facilitates short-term economics and isn’t long-term sustainable for the grid, the economy, and the system as a whole doesn’t create a sustainable industry—it creates a train wreck,” Hughes told the recent Edison Electric Institute’s annual convention, Greentech Media reports.
“I’ve been saying that retail-rate net metering is not economically realistic. It’s something that’s going to bankrupt the entire system,” Hughes added in a follow-up interview. “The beneficiaries of net metering are well-off suburban companies. The people burdened by net metering are small businesses, multi-family tenants, and those who don’t own their homes or don’t have adequate credit. Early on, I identified that as one of the big problems with net metering, because at some point that was going to become politically untenable. You’ve seen that happen.
“If the residential solar industry thinks they’re going to force the industry to pay them uneconomic retail net metering rates, to whatever level of penetration they want, it’s not going to happen.”
Hughes predicted photovoltaic power will be available in the United States at a generated cost of US$1 per watt by 2018. While he foresees distributed generation (facilities smaller than 5 MW) accounting for 40% of future solar nameplate capacity, it will contribute only 30% of actual generation, due to the higher efficiency of the kind of concentrated, utility-scale array his former company produces.
Residential rooftop solar panels “will be a very small percentage” of the total generation mix, he added: “I really think we’re going to see the dominance of community solar, as opposed to residential. People don’t necessarily have passion to put solar on their roof; it’s a passion for clean power. That’s why I’ve been saying for years [that] community solar will be so powerful.”
But much depends on rate structures that accurately reflect the cost and value of solar generation. “The whole key to me,” he told Greentech, “is to focus on passing through what the true economics are.”
First Solar currently operates 3,177 MW of photovoltaic generation, with 2,397 MW under development, about 10% of all solar projects now under way in the United States, Greentech reports.