Solar’s Hitting a Cap in South Carolina, and Jobs Are at Stake by the Thousands

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September 5, 2018
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Solar energy’s popularity jumped with net metering. Now, utilities plan to cap the program 3 years earlier than expected, and it’s an issue in the governor’s race.

South Carolina shot from almost no solar energy to having enough to power nearly 100,000 homes in less than four years, but it’s about to slam on the brakes.

When the state legislature passed its landmark energy bill in 2014, it ushered in a net-metering system that allows residential and smaller-scale commercial power customers with solar panels to get credit at retail rates for the power they produce and send back to the grid.

But the legislation had a catch: Once solar output reached 2 percent of utilities’ peak power production, the utilities could cap the program.

On July 31, Duke Energy plans to do just that for a large swath of the state. Two other utilities are also expected to hit 2 percent in the coming months, solar installers say. Customers who already have net metering won’t see any change until the whole program is due to expire in 2025, but Duke Energy customers who add solar after this month will get much less favorable rates.

This is all coming three years earlier than expected, and it could put as many as 3,000 solar jobs at risk.

State lawmakers have been trying to raise the cap, but their effort failed in the legislature last month. A state agency has now started up a new round of policy discussions among business and environment interests to try to find compromise, and the matter has crept into the governor’s race.

“We have seen really great solar adoption in South Carolina at a pace that is great for the state and that has exceeded expectations,” said Lauren Bowen, a staff attorney with the Southern Environmental Law Center. “Now, it’s important to figure out what’s next and make sure we are not killing renewable energy and an industry everyone worked hard to build just a couple of years ago.”

Solar installers are worried.

“When July 31 hits, very few companies are going to continue to sell solar in the Upstate because, mathematically, nobody is going to want to buy solar,” said Tyson Grinstead, a public policy director for Sunrun, which leases and sells solar systems in 23 states including South Carolina.

“The sales jobs will be affected first,” he said. “Then the installation jobs will go elsewhere.”

Right now, he said, “we are in a situation where there’s a lot of uncertainty.”

South Carolina Seen as a Model for Solar Growth

The 2014 law, the Distributed Energy Resource Program Act, ushered in net metering, which allows customers with solar panels to offset their bills—some of the highest in the nation—with electricity they produce and get credit at retail rates for any surplus power they send to the grid.

It also made it easier for customers to lease solar panels from businesses that provide solar services. (More than 60 percent of installations in the state are through leases, according to the South Carolina Energy Office.)

Combined with other federal, state and utility incentives, solar installations quickly surged, from enough to power about 500 homes to the capacity to power nearly 100,000, according to the Solar Energy Industries Association. The trade association ranks the state 16th in the country for solar capacity.

With that kind of growth, the South Carolina-based Savannah River National Laboratory concluded that the law could serve as a model to neighboring states that still have little solar power, including Alabama and Mississippi.

The program has had some hiccups—local governments were swamped by zoning and permitting requests, for example, and building inspectors and tax assessors knew little about solar technology. But the national lab said it demonstrated how effective policy can “transform and grow a near nonexistent state industry into one that flourishes.”

Whether that growth continues will depend on how the state navigates the coming months, as two other utilities—SCE&G and Duke Energy Progress, another Duke utility—are expected to exercise their prerogative to cap net metering.

A Duke Energy spokesman said net metering in South Carolina was never meant to be permanent.

“Net metering was agreed to … as a temporary incentive to help a nascent solar industry grow and help customers overcome the high cost of going solar,” said Ryan Mosier, spokesman for Duke Energy South Carolina. “Solar companies have benefited greatly from the incentive (and) the costs of installation are shrinking rapidly. We need to get to a long-term, sustainable system that is fair for everyone.” He declined to elaborate on any specific path forward.

“We made our market a little too hot in South Carolina,” said Bruce Wood, a veteran installer and owner of Sunstore Solar, who acknowledged Duke’s position. “We will get a good solution worked out.”

Net Metering Has Been Targeted in Other States

This is just the latest example of U.S. utilities fighting over net metering. Kentucky’s solar industry, for example, successfully fought utility efforts to get rid of the practice earlier this year. Indiana and Michigan recently moved to phase out net metering.

The solar industry saw what could happen in 2015 when Nevada ended its net-metering program. Major solar installers, including Sunrun and SolarCity, announced they were stopping local operationsclosing offices and cutting hundreds of jobs. That state reversed course in 2017, when Gov. Brian Sandoval signed a bill restoring net metering after the political backlash.

Utilities have argued that customers without solar panels are subsidizing those who have them. Solar advocates contend that residential rooftop solar provides benefits to utilities and the electrical grid and that utilities just want to preserve their monopolies.

One practical effect in South Carolina will be substantially less favorable economic terms for future solar customers. Duke has said that customers who add solar systems will still be able to sell the electricity they produce and Duke will credit them at essentially a wholesale rate—or about 60 percent less than existing customers with solar are getting. But customers with new solar won’t be able to directly offset their bills at the higher retail rate anymore, Mosier confirmed.

Like in neighboring Georgia, the solar debate is driven in part by the failure of another kind of energy—nuclear power. The typical Georgia Power customer has been paying an extra $100 a year since 2011 for reactors that won’t start generated electricity until at least 2021, helping to drive a rapid growth in large-scale solar there.

In South Carolina, SCE&G’s parent company SCANA and Santee Cooper abandoned construction of two new reactors, leaving ratepayers stuck with what University of South Carolina political science professor Neil Woods described as a “$9 billion hole in the ground.” The utility is fighting in court over state lawmakers’ efforts to reduce the burden on SCE&G ratepayers from 18 percent of a typical bill to 3.2 percent.

Solar Becomes an Issue in the Governor’s Race

The nuclear costs have created a strong anti-utility sentiment, Woods said, making people pay attention to solar power as an alternative and drawing an embrace from politicians among Democrats and Republicans alike.

Republican incumbent Gov. Henry McMaster does not seem hostile to sun-powered electricity, Woods said. McMaster’s challenger, state Rep. James Smith, a Democrat, led the legislative effort to get the 2 percent cap lifted. The bill won majority support in both houses, but was defeated at the last minute by an amendment that required a two-thirds vote for it to pass.

“I expect the Smith campaign will try to make it an issue,” Woods said, though he added that voters in South Carolina are still likely to be more interested in larger economic issues, roads, school safety and social issues.

McMaster’s press office did not respond to requests for comment.

Smith said electric utilities threw their weight around to scuttle his bill and he’s not giving up.

“What it has meant for our state is thousands of jobs, billions in new investments and more competitive utility rates,” he told InsideClimate News. “This is about our future and ratepayers’ ability to access the power of the sun for themselves, their businesses and their families.”

Despite the uncertainties, solar advocates are optimistic they can work something out.

Republican and Democrat candidates have both said they want to lift the cap, said Thad Culley, a regional director of Vote Solar, a national solar advocacy group.

“To the extent it becomes a political issue, it will be jockeying over who is doing more or who is not doing enough,” he said.