A memo filed in Arizona last week questions the viability of feed-in tariffs and value of solar tariffs in the United States. And the party filing the memo is the real surprise.
Solar advocates from TASC – The Alliance for Solar Choice – are fighting against FITs, which require utilities to buy the solar power residential and commercial customers produced at a premium and have been largely hailed as the tool that built the solar industry in Europe.
“It’s true that Western Europe got a lot of solar built using FITs,” said Bryan Miller, TASC president and vice president of public policy for Sunrun, a company that leases solar to homeowners. “But they were working with a different set of rules. It doesn’t work here.”
The reason FITs and VOST don’t work in the United States is a tax issue.
Law firm Skadden, Arps, Slate, Meagher & Flom filed a memo with the Arizona Corporation Commission asking that it deny utility company Arizona Public Service’s request to replace net metering with a feed-in tariff because FITs will create significant tax liabilities for solar customers.
“We didn’t want to file this brief,” Miller said, “because it brings up some very difficult questions, not just in Arizona, but in a lot of places that have used FITs.”
But he said APS’ proposal to replace net metering with FITs was viewed as another attack on the industry from a utility that has been embroiled in controversy since it announced earlier this summer that it intended to end net metering for solar customers.
Net metering allows utility customers to get credit on their bills at the retail rate for any excess power their rooftop solar installations send back to the grid.
TASC and Skadden argue in their memo that FITs operate differently. With a feed-in-tariff, the utility buys all of the power from the distributed generation system owner and then sells power back to the consumer in a separate transaction.
That arrangement creates what Miller calls a “ticking time bomb” of taxing issues.
Skadden attorneys found that homeowners who participate in FIT programs would be ineligible for the federal 30 percent tax credit for installing solar because it’s no longer for personal use and instead becomes an income-generating piece of equipment. Skadden further argues in the memo that homeowners who participate in FITs could be subject to income tax on all of the revenue their solar installations generate.
“No enforcement agency has addressed this issue yet that we know of, but it’s an enormous risk,” Miller said.
The way the laws and tax codes are written, solar customers participating in FITs should have none of the tax advantages they currently enjoy, Miller said. That’s dangerous and makes FITs a bad fit for the U.S.
“Net metering is the solution,” Miller said. “It’s been around for 20 years. We have it in 43 states and it works. People keep trying to fix what isn’t broken in this exotic Western European fashion. In Europe, they don’t have the same tax issues.”