The solar battle on Nevada rooftops

On May 20, 2015, an exasperated Nevada Legislature washed its hands of the net metering debate, punting its resolution to the Public Utilities Commission of Nevada.

Exactly one year later, the issue surrounding rates for rooftop solar is poised to come full circle as a state task force mulls sending it back to state lawmakers.

A May 26 meeting by the Governor’s New Energy Industry Task Force to determine whether existing rooftop solar customers should be grandfathered under older, more favorable rates is the latest in an ongoing drama that has garnered Nevada plenty of national attention — mostly of the negative kind.

The situation is a far cry from the heady days of the Nevada solar experiment. State lawmakers passed several policies through the years to support the budding renewables industry, including its first legislation for net metering back in 1997. The net metering program aimed to boost installation of such renewable energy technologies as solar, wind, hydro and geothermal by providing credits for any excess power that was generated.

Additional legislation at the state level in the following years further bolstered Nevada’s solar chops, which also got an assist in Washington, D.C., through Sen. Harry Reid. In 2008, the Nevada Democrat succeeded in ending a federal moratorium on applications for solar facilities while touting the Silver State as “the Saudi Arabia of solar energy.”

Net metering, solar cap debate sizzles in Nevada

By 2014, Nevada saw solar investment in the state jump by 427 percent to $569 million, according to the Solar Energy Industries Association. Nevada also posted the fastest solar job growth and largest number of solar workers per capita in the U.S. based on the Solar Foundation's annual jobs census.

In the last six months, however, Nevada has turned from a solar darling to a case study for the kind of public relations brouhaha that can occur when an established utility company and a strong solar lobby clash openly while the state is caught flat-footed.

The battle being waged on Nevadans' rooftops reached a crucial turning point earlier this year when companies such as SolarCity and Sunrun pulled out of the state after rooftop solar customers were moved to a new rate class that charged higher monthly service charges while reimbursing less for the excess solar power they produced.

The effect on rooftop solar was swift and severe.

In December 2015, NV Energy’s solar program received 1,368 applications. The number dropped to 68 in January, 15 in February and March, and 20 in April.

Along the way, the solar lobby launched an aggressive communications campaign that was highly critical of utility company NV Energy. Meanwhile, a group backed by the utility started its own campaign in April, which included television ads that ran statewide.

Behind the strongly staked public positions, however, is a willingness indicated by both camps for compromise. Even as both sides run ads and public campaigns against each other, NV Energy and the solar lobby have met several times behind the scenes in search for a deal.

Prospects for a grand bargain between the utility and solar lobby, however, remain dim, with each side claiming a lack of flexibility from the other. After one strike from the Legislature last year and a second strike from the PUC this year, hopes for a resolution now appear to lay on the same body that got so frustrated with the debate that it literally gave up on the issue.

“It’s time to take us out,” a noticeably tired State Sen. Kelvin Atkinson said at the time.

Before state legislators get another crack at fixing the net metering fallout, however, there’s still the matter of whether the New Energy Industry Task Force will recommend issues such as grandfathering and distributed generation to be part of Gov. Brian Sandoval’s legislative agenda for 2017.

So far, solar advocates are optimistic.

“Obviously, we wish we can just wave a magic wand and fix this issue but it has really been a breath of fresh air to see how genuinely interested the task force is in tackling this,” said Chandler Sherman, a spokeswoman with the solar advocacy group, Bring Back Solar Alliance. “It’s the ideal stakeholder-driven process.”

The changing energy landscape

Cost is king.

At least that’s NV Energy’s philosophy when it comes to acquiring energy for its customers.

“Our mandate is to always deliver the lowest cost energy to our customers,” said Kevin Geraghty, NV Energy’s senior vice president of energy supply. “We’re agnostic as to what that supply is.”

There was a time, for example, when geothermal received the requisite attention among renewable sources in the state because it was the cheapest. Since then, utility-scale solar has seen its cost drop significantly, making it a viable option despite its intermittent nature.

The importance of cost strikes at the heart of NV Energy’s choices, Geraghty said. It’s what makes it possible for NV Energy to have five straight quarters of rate reductions for customers to date. The company says it is also the reason why Nevada had the second lowest increases in rates from 2002 to 2013 behind only Maine, based on a report by the Texas Coalition for Affordable Power.

“We’ve made the move … to less carbon intense (energy sources) and have done it with rates going down,” Geraghty said. “We don’t pick winners and losers, we pick the lowest cost.”

Cost is also what drives the position NV Energy has staked on the rooftop solar debate. In its statements against the solar lobby, protecting non-solar customers from subsidizing rooftop solar users has been a constant mantra by the utility.

The cost shift theme plays prominently in a television ad by Citizens for Solar and Energy Fairness, which is backed by a coalition that includes NV Energy. The ad attempts to reframe the messaging war, which the solar lobby has been winning so far.

“We tried to stay out of the limelight and not put pressure on the (solar) proceedings,” said Paul Caudill, NV Energy president and CEO.

After being consistently hammered in the court of public opinion, the company started to push back more vigorously. Solar advocacy groups notched a big PR win in January, for example, when actor Mark Ruffalo testified before the PUC in support of solar. The move received a lot of attention from news sites and blogs as well as social media, much to NV Energy’s chagrin.

Nevada passes net metering cap for rooftop solar

It’s the changing energy landscape, however, that presents the bigger challenge for NV Energy. The utility sector as a whole is dealing with the rise of distributed energy, which includes smaller power sources such as rooftop solar combined with storage options such as batteries.

This changing landscape was mentioned in a 2013 report by the Edison Electric Institute, which represents investor-owned utilities.

“The threat to the utility model from disruptive models is now increasingly viable,” the Edison report found. “Once the sustainability of the utility earnings model is questioned, investors will look at the industry through a new lens, and the view from this lens will be adverse to all stakeholders.”

Groups such as the Bring Back Solar Alliance point to the adverse impact that increased adoption of rooftop solar can wreak on the traditional utility model as an incentive for companies such as NV Energy to run interference on residential solar.

“The utility business model is 150 years old,” Sherman said. “It worked great at the time but the grid of the future is not the same and the utility needs to adapt.”

NV Energy, however, says it is not afraid distributed energy. On the contrary, it sees it as an area of opportunity, Caudill said. The company pointed to efforts NV Energy has undertaken with Tesla for using its storage battery technology. The company also proposed a joint project with Tesla and SolarCity involving large-scale battery technology, though the endeavor did not get permitted. Nevertheless, if there is an opportunity to deploy the technology to better serve its customers, it will do so, NV Energy said.

In addition to industry-wide changes, NV Energy is facing challenges on its home turf. MGM Resorts announced recently that it plans to leave NV Energy’s system in October and pay the requisite $87 million exit fee. Other casinos such as Wynn Resorts and the Las Vegas Sands are looking into a similar move as well.

Meanwhile, a group called Nevadans for Affordable, Clean Energy is pushing for a ballot measure called the Energy Choice Initiative, which seeks to break up NV Energy’s monopoly in Nevada by opening up the market to other power providers. Backers of the move include industry heavyweights such as Tesla Motors and homegrown company Switch.

Describing the initiative as a “political hot potato,” Caudill says NV Energy trusts that future Legislative bodies will do the right thing.

“If this is something that customers want us to take a look at, then we will,” Caudill said. “We’re willing to sit at the table and engage in conversation with customers, but that doesn’t mean we’re endorsing it.”

Irreconcilable differences?

If the New Energy Industry Task Force decides on Thursday to adopt recommendations made by its subcommittee to grandfather existing customers under the old rooftop solar rates, it would represent a big boost for the solar lobby.

One reason is that the recommendation extends the grandfathering period for 25 years instead of the 20 years that NV Energy proposed. It will also include more existing customers by extending eligibility from those who signed up for rooftop solar service through Sept. 2015 to those who signed up by Dec. 31, 2015.

“Unless several folks who already signed up drop out, that’s almost 30,000 people total who are now eligible (for grandfathered rates),” Sherman said. “That’s huge.”

If the task force adopts the recommendation, it will be considered by Gov. Brian Sandoval for potential inclusion in his legislative agenda for energy in the upcoming 2017 Nevada Legislature.

Spokeswoman Mari St. Martin said on Friday that the governor’s office will wait for the task force’s decision before issuing a comment on what Sandoval will do about the grandfathering issue. St. Martin, however, reiterated Sandoval’s support for renewable energy, pointing to multiple bills that the governor has signed, including one that doubled the net metering cap in 2013.

In February, Sandoval released a statement that the PUC decision on net metering did not go far enough in protecting the interests of rooftop solar customers.

“I remain committed to providing a path for Nevada to continue to explore the potential of our vast renewable energy portfolio while ensuring Nevada has an equitable system that balances energy policy with just and reasonable utility rates,” Sandoval said.

Even if the task force adopts the recommendation, however, it is only half the battle, according to Sherman. Although it would help older customers, it does not address the higher costs for new customers.

“It would be great if existing customers are able to continue under the older rules that they signed up for, but we also want to make sure that other Nevadans are able to sign up,” Sherman said. “No one else can afford to go solar under these new rules.”

NV rooftop solar grandfathering could be headed to Legislature

Because the higher rates will be implemented in step ladder fashion every three years, solar advocates have time to push for change. It’s something both sides are fully aware of as they take their fight to other avenues.

The No Solar Tax political action committee supported by SolarCity, for example, is working to get a referendum on the November ballot to revert to rooftop solar’s original rates. This was opposed by NV Energy proxy, Citizens for Solar and Energy Fairness, which won a victory when Carson City District Judge James Russell ruled that the proposed referendum did not meet requirements. The case is now under appeal at the Nevada Supreme Court.

Behind all the wrangling, however, is an acknowledgement by both sides that they need to work together. It’s the reason both continue to communicate behind the scenes despite their continuing debate in public.

“We don’t talk every week … but we know we have the same customers,” Sherman said. “Solar customers are always going to be utility customers.”

For its part, NV Energy says its relationship with the solar lobby is not as acrimonious as it might seem to the general public. The company says it has attempted multiple times to reach a compromise with representatives of solar companies. The question is just how much compromise each side is willing to make to reach a satisfactory resolution.

NV Energy says Nevada’s situation is not unique, pointing to the same issues that the solar companies face in other states. Geraghty pointed to ongoing issues in Maine, saying that SolarCity is demonstrating the same lack of willingness to change a business model reliant on subsidies.

The Bring Back Solar Alliance, meanwhile, scoffed at claims of compromise by NV Energy. When one side is down to 15 to 20 customers per month, it can hardly be called a fair fight between equal parties, Sherman said.

“A compromise means meeting halfway, but you can't do that when solar is already shut down,” Sherman said. “The utility says they want to compromise, but their enemy is already dead.”

With NV Energy and solar companies not seeing eye to eye on a potential fix, it will be up to the state once again to mediate a resolution. Despite the failure to reach a solution within the last year, the governor and state lawmakers have more political cover this time around given the public support seen for grandfathering at agency meetings and sessions as well as NV Energy’s decision to back the move.

As far as a potential compromise between the two biggest players in the field, both sides also say they continue to communicate, as implausible as a compromise may be.

“I don’t see a grand bargain yet,” Sherman said. “But how great would that be?”