Speculation that the Trump administration might do away with subsidies for solar installations in the United States may be barking up the wrong tree, Greentech Media argues, as other factors pose more subtle but greater challenges to the sector.
Citing job creation and energy savings, even Republican governors joined last week in signing a letter addressed to the new White House, asking that the federal government extend existing support for renewable power investments.
“But the government can undermine solar in more subtle ways,” Greentech notes. “And some negative policy changes impacting solar may already be under way.”
One is a change to the length of contracts for purchasing power. Previously, many utilities bought solar to fill a renewable portfolio standard, even when it was costlier than other supplies. With solar prices falling, however, the federal Public Utility Regulatory Policies Act (PURPA), which mandates utilities to buy electricity from whatever source is cheaper than the “avoided cost” of competing sources, has “become a huge driver of solar energy development.”
That should be good news for solar power, but U.S. utilities “are starting to see this as a threat. PURPA challenges are coming in Oregon, North Carolina, Utah, Montana, Utah, and elsewhere around the country.”
Meanwhile, power-purchasing utilities are using the time-sensitive concept of “avoided cost” to push for shorter contracts with solar developers. Shorter contracts make it harder for developers to demonstrate to bankers that they have a secure revenue stream when they seek financing for projects.
“If you’re trying to develop a solar project, it’s all capital cost,” solar lobbyist Adam Browning told Greentech. “There’s not a utility in the world that would develop a solar project if they were only on a two-year contract, and yet those are the terms they want—from 20 or 15 years down to two.”
Another headwind for developers in the heavily capital-intensive sector is blowing from the U.S. Federal Reserve. “Late last year, the Fed said it expects three [interest] rate increases in 2017, and the benchmark 10-year rate is up nearly 100 basis points since July of last year,” Greentech warns. “Rising rates aren’t a crazy risk factor for solar; they’re already happening today.”