U.S. Solar – Growth with Declining State RPS Programs?

Numerous solar industry analyst forecasts and media articles herald the U.S. as the next big market opportunity for global PV solar energy suppliers. Many offshore PV industry

State RPS Program Driven or ITC Driven?

companies have been setting up distribution and facilities across the country to position themselves for this growth opportunity.

At a recent Wall Street alternative energy conference, progressive utility CEO David Crane , a strong solar energy supporter, gave his view about government support for renewable energy. The federal government is too paralyzed to produce any meaningful support policy via either climate change or energy legislation, says Crane, but the renewables business will move forward strongly on the strength of state level legislation.

While the state-by-state paradigm has been credited with slow but steady solar energy growth in the U.S., the mid-term elections of 2010 resulted in new legislators in various states who have been reversing support mechanisms for clean energy and climate change mitigation.

The most recent example is New Jersey Governor Christie’s recent reduction in the state renewable portfolio standard (RPS) target (30% by 2021 now 22.5%) and language that may remove enforcement teeth for meeting the threshold by making it voluntary for utilities.  (An RPS is a requirement for utilities to produce or buy and sell a certain percentage of renewable energy to their customers.) He also withdrew New Jersey from the highly successful Regional Greenhouse Gas Initiative, an alliance of nine North East and mid-Atlantic states.

Seven other states have quietly reduced their RPS mandate and diminished or eliminated penalties for non-compliance by the utilities in the last few months.

Governor Christie and other detractors of RPS mandates routinely cite escalating costs to ratepayers (utility customers) for their lack of support. Christie believes the RPS is an “unreasonable transference of wealth from ratepayers at large to solar developers.” But an extensive Lawrence Berkeley National Laboratory RPS report in 2010 and more recent studies show that the “cost is a fraction of a percent.” Tiny by anyone’s standard.

The trade off, producing more clean energy which reduces health care costs and environmental damage costs (compared to burning fossil fuel) while creating a high number of quality jobs (17 jobs per $1M spent vs. 5 jobs per $1M spent in oil & gas sector)  in a new economic ecosystem, for that small cost, would seem like excellent bang for the dollar spent. Am I missing something here?

Solar energy in 2035 by State RPS

Source: Lawrence Berkeley National Laboratory

The chart above shows the projected amount of installed capacity (in yellow at top) if current RPS programs are kept in place. Approximately 6 million tons of C02 would be displaced annually if achieved, along with elimination of large amounts of ground level particulate pollution.

With the rapid reduction in the installed cost of PV systems, declining RPS programs may become less important in regions where high utility cost and other factors line up to make winning project proposals that are close to retail cost grid parity (including only the federal ITC incentive) in the very near future.

Recent, high frequency, global extreme weather events are affecting crop yields and increasing negative feedback loops, not to mention causing significant loss of human life. I am deeply concerned about the near term, current generation effects of climate change. With C02 levels now approaching 400 parts per million (350 ppm is the generally agreed tipping point) these decisions and others like it are reckless and irresponsible in my opinion.

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