Solar leaders talk future of financing and policy at COSEIA

During the introductory keynote of the Solar Power Colorado conference last week, a group of solar thought leaders discussed what would happen in 2012 and what was needed for the solar industry to move forward.

The panel included Rhone Resch, CEO of the Solar Energy Industries Association, COSIEA’s parent; Neal Lurie, executive director of COSEIA; Paula Mints, principal solar analyst with Navigant; Travis Bradford, president of the Prometheus Institute; and Adam Browning, executive director of the Vote Solar Initiative.

One of the places that requires more innovation is financing, according to Bradford.

“Thus far the financing is probably the least developed aspect,” he said.

Third-party ownership mechanisms offer some great project financing options like power-purchase agreements, but they rely on the Investment Tax Credit (ITC). The ITC was created to allow access to tax-equity markets and when that market failed in the recession it got more help through the 1603 Treasury Grant.

But solar is a 25- to 30-year asset, and ITC requires a shorter payback period of 10 years and has a higher interest rate, according to Bradford.

“We're looking at a point in the future where we don't have an efficient financing structure in place,” he said.

Financing for solar should mirror financing for similar assets like homes and commercial buildings, according to Bradford—an average interest rate of 6 percent paid out over the lifetime of the product instead of the more complicated financing structure that’s currently in place.

“If you were to change the capital structure to look like mortgage money, you would drop the levelized cost of electricity from systems at today's system prices in half,” he said.

Financing is one target for innovation moving forward in the U.S.

Another is policy.

“The biggest, most important factor for continued growth is bringing down installed costs. Our challenge is to translate the new prices that we're seeing into a much greater demand,” said Browning.

To do that policy and policy changes are needed.

Colorado is doing many things right and other states are looking at how it has developed policy, including community solar gardens, PACE financing (property assessed clean energy financing) and solar renewable energy credits, according to Browning.

California, the largest market in the U.S., is going through some more painful times, but things happening there could happen elsewhere.

“It's like teenagers. There's a lot of growth potential, but then it's also painful,” Browning said.

For instance, the state’s net-metering requirements are capped at 5 percent of utilities’ electric portfolio.

“Utilities are on an absolute warpath to make sure that that doesn't get expanded,” Browning said. “This will be the defining fight in California, whether or not we continue to have a self-generation program for renewables.”

Already San Diego Gas and Electric tried to enact a new $40 monthly fee for net-metered customers with solar. Browning likened it to the first shot across the bow.

“We're putting a lot of effort into rethinking, how can you reframe this so we're not continually having these battles ad infinitum,” he said.

However, the California’s wholesale distributed generation programs are creating solar power that’s coming in at 8 or 9 cents per kilowatt hour.

“Other policymakers, utilities and states look at that and say: ‘Alright, I can see how this can really scale,’” Browning said.

California’s solar market is going through growing pains.

“This is what everywhere is going to look like,” Browning said. Looking forward it’s going to be important to have more tools and more places to look at to help guide policy, like Colorado.