r: The U.S. lags behind other countries, like Germany, in solar implementation. What is Germany doing differently?
Sklar: Germany has a very mature feed-in tariff program, not just for solar but for wind and other renewables. They’ve been able to build out market scale. The feed-in tariff concept is problematic because you have to pay extremely high electricity rates for many years. What makes the U.S. different than almost the rest of the world is our electric rates are not, and cannot be, set by the national government. Rates are set by state utility commissions, which have different legislative rules and regulatory guidelines, so there’s no way the U.S. can snap its fingers and switch to feed-in tariffs.
However, the majority of the states have very detailed and robust setups to drive clean-energy technologies.
- Twenty-nine states have mandatory and four have voluntary renewable-energy portfolio standards, which are requirements for a utility to buy new electric generation from renewable energy for its entire portfolio.
- Forty-two states have net-metering and interconnection rules, which in many cases say, up to a certain level, residential and commercial have the right to interconnect (connect to the grid) and get the retail rate for their power, not the wholesale rate.
- Seventeen states have system benefit trust funds where they embed a 25 cent per month charge in your utility bill to fundamentally help pay for the installation of high-value energy efficiency and renewables for commercial, institutional and non-profits.
- Lastly, 36 states have tax credits or waivers.
The other 15 states that don’t have at least one of these guidelines represent a very small part of U.S. ratepayers. Ideally, these other states should get on board with this new era in electric technologies, and they will when they see it work in other states.
r: What will be the U.S. impact of the tariffs placed on Chinese PV components?
Sklar: First of all, most PV that’s going into U.S. applications is not Chinese. All the government is doing is bringing up tariff rates closer to what the U.S. real costs of manufacturing are, so it’s really not having a major market impact. Remember, PVs are only 40 percent of the system; the tariffs mean you’re paying 4 percent more on maybe 40 percent of the system.
r: What are some of the financing trends for renewable-energy installation?
Sklar: That is really exciting. It’s not how much renewable energy costs; it’s how we make it affordable. When the auto industry started selling expensive SUVs, all it did was extend the loan to provide consumers with a smaller monthly payment. That’s all people care about.
We’re seeing four very different financial approaches:
- One approach is power purchase agreements, primarily for commercial, utility and institutional projects, like colleges. A solar company will build a system on a building or property and sell the power if the building owner agrees to buy it for 20 years at 1 cent less than the utility sells it. Of course, electric rates won’t escalate like on a utility bill, so the building owner is paying less now and in the future, and he or she doesn’t have to pay for a system out-of-pocket. PPAs have made large-scale solar affordable.
- For medium- and small-scale solar, fuel cells, wind and storage batteries, leasing is available. Companies own systems and actually lease a building owner the equipment. By the way, more than 50 percent of furniture and phone systems in commercial and institutional buildings are leased, so this is just one more thing you can lease. A company puts a system on the building’s roof, and the owner agrees to buy the power or pay the lease. After 10 or 15 years, the owner owns the system or the company will take it off the roof if the owner doesn’t want to own it. There are about five companies nationwide that are leasing equipment.
- There are a series of banks willing to offer second or third mortgages for systems or include them in a home-renovation mortgage. That’s what I did with my home. I was putting a second story on and financed my solar water heating and photovoltaic systems through a second mortgage. I paid it off, and now I’m getting free energy.
- Lastly, there are finance instruments tied to the ratepayer, not the building, such as PACE [Property Assessed Clean Energy] and on-bill financing. PACE uses lower property taxes to make such investments cash positive. On-bill financing allows the utility to make some money to finance high-value energy efficiency and onsite renewables in or on buildings. The financing stays on the building’s utility bill until it’s paid off, which is a positive cash flow for consumers. [Read more about PACE financing.]
r: How long will financial or tax incentives remain to subsidize renewable energy?
Sklar: We’ve had 100 years of oil, natural gas and coal incentives, and they’re not going away. Renewable-energy incentives aren’t going away either.
r: Do you anticipate the outcome of the recent national election will have any effect on the clean-energy industry?
Sklar: It has had a psychological effect on the market. I actually did work as a consultant for Romney when he was governor for his energy agency, and he was very pro green technology. But to differentiate himself from Obama, he started being very negative about green technology. There would’ve been sort of a more conservative feeling about clean energy in the marketplace. Obama’s policies on clean energy are robust, and, the U.S. government, being the largest owner of buildings in the U.S., will continue moving toward using high-value energy efficiency and renewables in buildings. That’s going to have a very good impact on the market.