Hopes of reviving solar industry ride on new energy legislation

Not long ago, Connecticut’s solar energy industry was thriving, the envy of other states. Then the state’s generous incentive program ran out of money, the legislature failed to create a sustainable alternative, and the industry found itself on the ropes.

“It’s not in danger of losing momentum, it’s lost it,” said Ron French president of Alteris Renewables, the largest Connecticut-based solar company. Alteris’s Connecticut employee base is down by 50 percent in the last year, and like most companies here, has refocused business in states with healthier programs, principally Massachusetts and New Jersey. “We’ve grown as a company, but our growth has been in other states.”

Alteris and others are pinning their Connecticut solar revival hopes on provisions in this year’s omnibus energy bill – SB 1. But it’s a work in progress, with the original solar components proving to be some of the more contentious in the enormous, multi-provisioned bill.

A six-hour meeting last weekend among energy committee chairs, ranking members and the administration – one of a series of sessions held out of the spotlight — did not achieve final wording, but has pulled the solar language into sharper focus. The changes are at once pleasing and worrisome to solar advocates.

“As far as I’m concerned there will be a solar commitment in the bill,” said Sen. John Fonfara, D-Hartford, co-chair of the energy committee. “What we’re saying is we want to find the sweet spot.”

Finding that sweet spot will mean changing the way state has run its solar incentive program since it started in 2005 with a pot of money from electric ratepayer fees, administered by the quasi-public Clean Energy Fund.

Residential and commercial solar systems received rebates, considered the most generous in the nation when they started. The rebates were so popular and effective that the money ran out rapidly even as they spawned dozens of solar companies and hundreds of jobs.

At its peak, Connecticut was ranked among the top three states in the nation for the amount of solar it installed, according to the Solar Energy Industries Association, a trade group. With the demise of legislation in 2009 and its veto in 2010, the state fell to 18th last year.

The pending legislation uses renewable energy credits to reconfigure the commercial solar program to be largely self-sustaining and market-based. Solar system owners could finance at least part of their project costs by selling the credits, called recs, to electric utilities that need to meet renewable energy requirements.

But solar power still costs more to generate than electricity from traditional fossil fuels, though industry members and others point out that solar prices have fallen dramatically and could reach parity with fossil in the next several years. Some of the dispute over the bill’s provisions has been how to make up the difference in prices without overly-burdening ratepayers, and how long to do it.

“We talk a pretty good game with supporting a clean energy-based economy, but that takes a financial commitment” Fonfara said. “We didn’t want to do that on the backs of electric ratepayers.”

Sen. Kevin Witkos, R-Canton, ranking member on the energy committee, echoed sentiments common among legislators, saying that the 10 years of incentives in the original bill is too long, the cap on ratepayer increases not strong enough and that a solar-only program is too restrictive.

“The legislature’s job is not to pick the winner, but to make sure there’s monies available for everybody,” he said. “I’m concerned that putting more money in is still not going to realize our goal – and that is to be incentive-free.”

The compromise taking shape would expand the concept to include all alternative energy sources in two broad categories: non-emission, which covers solar, wind and hydro; and low emission, which would include fuel cells and things like bio-digesters. It would shorten the incentive lifespan considerably – though keep intact the 15 year contracts utilities must sign for purchasing renewable power, and offer a specific dollar amount that caps what utilities can pass along to customers.

Chris Phelps of Environment Connecticut, an advocacy group that has worked for solar incentive reform for years, said he supports the idea of incorporating all renewables, though he cautioned that each has quirks that need individual attention. “If it’s designed well, it can work with solar and work with wind,” he said.

In any case, achieving a sustainable clean energy system is more important than how the state gets there, he said.

“We’re at a tipping point,” he said. “If we don’t get off the dime in this state and create stable solar policies, we’re going to see that day in the not-too-distant future where solar is competitive in neighboring states, but here it’s not. We will be behind the curve.”

Solar Connecticut, a statewide trade group, warned as far back as 2009 that inaction by the state would harm solar companies precisely as it has, and while it is again pushing hard for legislation to reboot the incentive programs, any legislation is not necessarily better than no legislation said Executive Director Mike Trahan, He said curtailing the program could undermine business by not providing enough volume to drive down costs.

“Are we going to invest in that or are we going to nickel and dime it?” he asked. “At some point it won’t make sense for commercial installers to have a presence in Connecticut because there won’t be enough projects.

“It’s depressing to see installers who cut their teeth in the solar installation business in Connecticut at ratepayer expense; they’ve taken themselves and their expertise to work for ratepayers in other states.”

George Keithan, president of Consulting Engineering Services of Middletown, for one, now does 95 percent of his work out of state – mainly Massachusetts and New Jersey – setting up new companies in those states and adding about a half-dozen employees to each.

“We love to pay our taxes into the state that we’re actually doing the work in –I hate to say it,” he said. “And that’s why we would love SB1.”

The bill keeps the residential solar program in the Clean Energy Fund using about one-third of the $27 million that comes into the fund each year. The format will stay classic rebates, but they will be in what’s called a declining block structure to keep money flowing evenly and lowering incentives as solar costs go down.

The popular residential solar lease program, which is about to end after a three-year run, will not resume.

The original bill also included a 3-year pilot project for a feed-in tariff, a funding structure that has worked well in Europe and Canada for building renewable plants that feed electricity into the grid, but has been less successful in the U.S. The government sets a per kilowatt-hour price it will pay a developer for renewable electricity, and hopefully it will be enough to finance a project.

It’s unclear if that language will make the bill’s final cut, and while some are nervous about it, most say they appreciate the administration’s willingness to consider creative energy options.

“What I can tell you about solar and funding mechanisms — if you get it right there is a lot of solar financed and built,” said French of Alteris. “But it’s a fragile equation. If you get it wrong, very little of it will get built.”