Setting Sun
Welcome to the Solar Taper

Any environmentalist worth his or her salt will proudly point to the rapid rise in U.S. solar installations as evidence that the renewable energy source’s time has come, but the outlook is looking decidedly dimmer next year. Bloomberg reports:

Residential installations are expected to increase by 21 percent this year, but in 2017 the figure will inch upward by about 0.3 percent. The change comes as utilities push back against mandates to buy the electricity and shifting tax policies curb demand. Throw in sliding electricity rates and it’s clear the economic benefits of rooftop panels are no longer so obvious to consumers. […]

“After growing as much as it has, sustaining high double-digit growth rate forever is not realistic,” said Pavel Molchanov, an analyst at Raymond James Financial Inc. in Houston.

At SolarCity, which pioneered the no-money-down solar leasing model, losses have accrued in 12 out of 15 quarters as a publicly traded company even as it tapped into swelling consumer demand. It agreed in August to be acquired by Musk’s Tesla Motors Inc. after racking up $3.35 billion in debt to fund growth.

This isn’t exactly surprising. Solar producers have been engaged in a reckless race to the bottom of an admittedly growing market, but in so doing they’ve taken on massive amounts of debt and put themselves on shaky financial footing. Much of the costs of these installations have been subsidized by governmental clean energy initiatives, or through the use of a mechanism called net metering that requires utilities to purchase excess power from solar producers at relatively high costs.

But subsidies are a harder sell these days with fossil fuels available for such low prices, and utilities are understandably fighting back against net metering costs. Some of that intransigence can be laid down to utilities jealously guarding their long-held fiefdom against an upstart, decentralized way of producing power, but while that facile reading may satisfy greens, it doesn’t get to the heart of the matter.

Utilities have to match supply with demand, and they’re well practiced doing so with relatively centralized power plants and predictable supplies. Solar panels challenge both of these: they’re more widely distributed and they also provide power intermittently, subject to the vagaries of local weather. In both cases, that puts strain on power grids, strain that utilities are tasked with relieving while paying solar producers for the privilege. That’s not a sustainable way of operating.

Solar installations spiked, but the costs of this phenomenon were not paid up front. The bill is coming due, and it’s no surprise then that next year isn’t looking nearly as bright.

Features Icon
Features
show comments
© The American Interest LLC 2005-2017 About Us Masthead Submissions Advertise Customer Service