Solar industry applauds incentives, waits for details

NEW HAVEN — The four dozen members of Connecticut’s solar industry packed in a steamy corner room at Gateway Community College had come for answers about how the massive energy legislation passed this session would affect their industry.

What they got were two thick wads of printouts and nearly 90 minutes of explanation from a lawyer. But answers?

“No,” said Benjamin Baker, a Southport-based architect and solar developer at Star Power PV, who specializes in small solar electric systems for non-profits. “But I understand why. It’s complicated, and it’s not 100 percent there, and I think I’ve got to go buy some legal time to answer that question to figure out how I’m going to position myself to get into this.”

“This” is an almost entirely new way of doing solar business in Connecticut. After two years of failed legislative attempts, solar industry folks are happy to have anything in place to jumpstart their industry, once the envy of the nation with generous incentives and a booming workforce, but stagnant in recent years after money ran out.

But the new solar rules of the road could leave some parts of the industry at a disadvantage and other parts — like solar thermal, often used to produce hot water — out entirely.

Solar Wilton High School

Solar arrays being installed at Wilton High School.

“No one knows what to expect,” said Brad Mondschein, an attorney from Pullman & Comley in Hartford, who had come to translate pages of legislative-ese. “I don’t think even the regulators know yet.”

The detailed mechanics of how each of the new programs works still need to be developed. But in broad terms, the residential solar program will stay where it is, in the Clean Energy Finance and Investment Authority, the so-called green bank formerly known as the Connecticut Clean Energy Fund.

It remains a basic rebate program to finance at least 30 megawatts of solar projects by the end of 2022, but in a more evenly throttled way to avoid the boom-bust cycles that plagued the previous iteration forcing companies to shed Connecticut employees and shift their work out-of-state.

New Market Competition for Solar

For commercial renewable energy projects, the big money in the renewable constellation, solar will have to compete for money in a new market-based system. All zero-emission renewable energy technologies — mainly solar, wind and hydro — will bid against each other for contracts. While solar is a more developed and generally less controversial industry, right now it tends to be more expensive, which means it could lose out.

“We’re thankful to have a program, and if that means we have to compete with each other and with other technologies, so be it,” said Mike Trahan, executive director of the industry group, Solar CT, which organized the information session. “To ask for guarantees, frankly, in this economy is admittedly too big of an ask.”

Beginning January 1, 2012, commercial solar projects will be funded through renewable energy credits, known as RECS — equivalent to one megawatt hour. To do that, the utilities — Connecticut Light & Power and United Illuminating — will be required to purchase power from zero-emission electricity generation projects in 15-year contracts.

They will purchase that power by buying RECS — Connecticut has coined the term Z-REC for zero-emission credit — from the owner of the system each year of the contract. The owner uses the money to finance the project.

The utilities are required to buy $8 million in Z-RECS the first year. That increases by $8 million each year through year six, reaching $48 million. It levels out for the next nine years and then declines by $8 million a year to reach zero in year 21.

Utilities can in turn sell the Z-RECS they’ve purchased to recoup some of the cost, though the going rate right now is less than $20. The remainder of the cost will be passed onto ratepayers, though CL&P maintains that due to other factors, overall rates are not likely to increase.

There are, however, several catches. While many Connecticut solar contractors have worked with RECS in Massachusetts and New Jersey, Connecticut’s will be different. Instead of setting a floor — a low point for the cost of a REC — Connecticut sets a cap: a top price of $350, which is lower than the prevailing REC price in those two states. Some fear that price will not be high enough to accommodate the cost of projects.

Some also fear that because of the uncertainty inherent in a bidding process in which potential customers will be turned down, solar companies may have a difficult time finding clients and third-party financing. The system could also put smaller companies at a disadvantage for commercial projects because they cannot do the large-scale purchasing that can keep costs down.

“There will be some consolidation, I think, in the solar installer community,” said Trahan who noted he’s already receiving calls from large national solar companies interested in working in Connecticut. “I think what you’ll likely see is some of the small and medium sized players may combine and work together because in the end, whoever’s got better product pricing will have a competitive edge.”

The utilities are just beginning to write their plan. It will still need approval by the new Public Utilities Regulatory Authority, which replaced the Department of Public Utilities Control under the new Department of Energy and Environmental Protection. Rich Soderman, CL&P’s director of legislative policy, said that lower priced renewables will have an advantage.

“While the solar folks may be enthusiastic about it, there are other non-emitting sources of wind and hydro that could step in front of solar technologies,” he said. “They’re going to have a tough row to hoe. This is not opening the floodgates. This is opening a process. We’re going to have to see what happens.”

Not All Solar is Treated the Same

Paul Michaud, executive director of the Renewable Energy and Efficiency Business Association, a business group that promotes the use of renewable energy, said his group would have preferred a commercial program just for solar, but can live with the new configuration even with what REEBA considers a too-slow six-year funding buildup. But what has him and many others most anxious is the absence of any program for solar thermal for hot water.

Federal stimulus funds funneled through the old Clean Energy Fund, while recently used up, had given the solar thermal industry here a boost. Among those concerned that without a new funding source, momentum, if not the entire solar thermal industry, will be lost, is Bryan Garcia, the new president of the green bank, CEFIA (already being called SEE-fee-ah).

Garcia said he intends to find money within CEFIA to keep solar thermal going.

“It’s a high priority,” he said, adding that includes developing a solar thermal manufacturing industry. “It’s the most number of jobs — the highest per million dollars invested comes from solar thermal and geothermal.”

Garcia is also pledging to use CEFIA to leverage into even more funds the $9 million that comes in yearly from ratepayers for residential solar programs. And if needed, he said he would make funds available for commercial solar, as well as the Fund’s expertise, during the transition period to the Z-REC program.

In the meantime, companies will have to wait a little longer. That means Ron French president of Alteris Renewables, the largest Connecticut-based solar company, is not rushing to rehire the 50 percent of the Connecticut workforce he lost over the last few years, even as he made Alteris into a national company.  “Once we know the dates, as soon as we can start a quantifiable proposal to a customer, then we can begin to hire people,” he said.

For Erik Anderson, the solar energy specialist at CT Electrical Services in Beacon Falls, even though last week’s meeting did not produce the timetable and incentive level information he had hoped for, there was still enough to tell him the new programs would make the solar industry more sustainable than it has been.

“The way we view it as electricians is that this bill is going to put electricians back to work,” he said. “This next year is time to lay the ground work and get ready to get off the line.”