One of Warren Buffett’s senior vice presidents at Berkshire Hathaway Energy — NV Energy’s parent company — warned of the dangers of rooftop solar at an energy conference in July. His message was clear: Rooftop solar programs cut into utility profits.
Nine months later, Nevada’s burgeoning rooftop solar industry, 6,000 jobs and carbon-free energy production are facing a roadblock.
The impasse is part of a nationwide battle between solar and power companies that’s been fought in public utility commissions, legislatures and courtrooms. In Nevada, there is a debate about utility rates for residential solar producers, pushes for new legislation and questions about the expansion of an industry into territory traditionally dominated by what the solar industry calls NV Energy’s regulated monopoly.
At stake is the small share of the utility marketplace that the rooftop solar industry has won thanks to a policy known as net metering.
Net metering allows homeowners to generate their own power with rooftop solar installations, supply power to the grid and generate credits for supplying power to the grid.
Currently, there is a 3 percent cap on how many Nevadans can participate. That number represents 3 percent of all utility customers consuming energy during the highest level of demand on the electric grid in a given year, which is around 7,500 megawatts.
The solar industry says consumers will hit the limit by the end of the year — halting rooftop installations and blocking renewable energy from entering the grid.
The move to limit net metering in Nevada came from Berkshire Hathaway Energy’s headquarters in Iowa and trickled down to NV Energy, said Bryan Miller, vice president of public policy at Sunrun, a rooftop solar company with more than 1,000 customers in Nevada and a warehouse in Las Vegas.
“Ultimately, it’s going to take strong leadership from the governor to change what’s currently happening,” he said.
As lobbyists scramble to save the industry during the 2015 legislative session, there are few signals that lawmakers, Gov. Brian Sandoval or NV Energy will budge to give the solar industry what it’s wanted for the past two years: an increased cap.
There are no bills in play and little movement to get one.
Sandoval is staying neutral on the matter and leaving any bill introductions for lawmakers, Mari St. Martin, Sandoval’s spokeswoman, said in an email.
A failure to increase the cap would hit one of Nevada’s newest industries. Companies like SolarCity and Sunrun have popped up in the state in the last three years, leasing solar units to residential customers. The cost of buying a solar unit averages around $20,000. By leasing them, consumers put no money down, pay electricity at a lower rate and compensate the solar companies via the power the panels produce. Those leases also break away from the traditional pay structure for ratepayers.
Around 2,000 NV Energy customers currently participate in NV Energy’s net metering program and receive what the utility calls a 7 cent “subsidy” per kilowatt hour.
NV Energy’s full retail rate is roughly 12 cents per kilowatt hour. The value of the energy rooftop solar produces has an average value of about 5 cents per kilowatt hour, according to NV Energy. The 7 cent difference reflects the fixed costs NV Energy incurs to provide service and its investments in local distribution facilities, substations, transmission lines and generating units.
NV Energy defines as a subsidy the difference in rate.
“Some customers benefit and others don’t,” Stacey Kusters, NV Energy vice president of renewable energy and origination, said.
What is a subsidy
Utilities and the rooftop solar industry quarrel about that definition.
Those who participate in net metering receive the rate via credits for providing the grid with energy from their rooftop solar installations. Utilities say eliminating those credits will protect ratepayers from higher bills and nix an unfair benefit only available to some ratepayers. The solar industry contends that utilities like Berkshire Hathaway Energy are facing competition never before seen in the marketplace and trying to keep their grip on their regulated monopolies.
NV Energy says it’s opposed to playing favorites with ratepayers — not solar generation.
“Are we a proponent of solar? Yes, in every form,” Kusters said. “But in the end, we have to make sure there is not a cross subsidization between customer bases.”
The solar industry disagrees with NV Energy.
The power company is not taking into consideration the reduced cost in transmission and the reduced load on its generating infrastructure, said Dan Chia, policy director for SolarCity, a rooftop solar company with 1,000 Nevada employees and facilities in Las Vegas, Henderson and Reno.
At the end of the day, it’s about competition, he said.
“Monopolies need to be made whole as where other private businesses try to reduce their costs in the face of competition,” Chia said. “Net metering reduces revenues that utilities have enjoyed for almost a century. Just because someone decides to generate their own power, which leads to a cut in revenues, doesn’t mean the utility is entitled to be made whole from other customers.”
The showdown in Nevada resembles debates in other states. Berkshire Hathaway Energy has worked to change policies in a handful of states without success.
In Iowa, a Berkshire subsidy tried to ban solar leasing, but the Iowa Supreme Court rejected the case. In Washington, a Berkshire subsidiary pushed legislation to ban solar competition with legislation but failed. It also attempted to add fixed costs for rooftop solar customers without success. A Berkshire subsidiary in Utah tried to enforce fees on solar customers through the PUC and legislation but failed on both.
In the U.S., 44 states have net metering. Colorado, Ohio and New Jersey have no caps. California is looking to do the same. New York recently doubled its cap to 6 percent. Massachusetts is in a similar situation to Nevada. Lawmakers failed to increase its cap, and the Boston Globe reported March 30 the state’s solar industry was on the verge of meeting the same roadblocks as Nevada might soon face.
While net metering remains in flux nationally, Buffett and NV Energy have shown support for solar. Buffett promised to double his current $15 billion renewable investment in the coming years. His company’s subsidiaries operate solar farms in Nevada, Arizona and California. NV Energy currently buys energy from eight solar facilities in the state and facilitates a program that offers rebates for purchasing home solar units.
But the solar infrastructure that utilities provide may be the detriment to the residential rooftop industry.
Utilities want to build more infrastructure — solar farms, power plants, transmission lines — because the costs go to ratepayers and investors usually receive a 9 to 10 percent return, said Jason B. Keyes, a lawyer who represents the Interstate Renewable Energy Council, a nonprofit think tank that receives no industry or utility funding.
If rooftop solar producers supply the grid with energy and keep demand for energy down, there’s no need for new infrastructure, Keyes said.
“It is an attractive return and it is pretty darn safe,” he said. “Utilities would like to build more. If the load is flat, they don’t need to build more.”