I don’t often agree with articles on energy by writers from right-wing think tanks. Too often I find that such writers are just shills for the fossil fuel companies that provide the financial support for their employers, with the worst offenders being the Heartland Institute and the Competitive Enterprise Institute. As a result, many of the articles coming out of such places seem to dismiss climate science and oppose clean energy.
But this commentary in the Richmond Times Dispatch by Katie Tubb with the Heritage Foundation actually makes a lot of sense in diagnosing the problem with states that are falling behind when it comes to putting solar power on rooftops.
Tubb is writing about my home state of Virginia, which has plenty of solar owned by utilities but very little solar distributed on rooftops. But her analysis could apply to most of the other states, about half of the total, that still fully regulate their electricity markets:
Virginia has created a system where a utility profits less by understanding and meeting customer needs and more by influencing politics in the State Corporation Commission and legislature. It’s the outlines of an approach to electricity services that is all too common across the U.S.
The Problem with Monopolies
That’s the problem in a nutshell. In the Old Dominion, as in other regulated states, utilities are granted a monopoly to provide electricity to all customers in a certain geographic area, with a few exceptions. One of those exceptions is to allow companies that sell clean energy to operate within a utility’s monopoly territory — but only under strict limits. For example, solar companies may be allowed to sell solar panels but not to sell solar power (that is, they can’t legally offer solar through a power purchase agreement or PPA).
These rules limit the ways that solar companies can compete with utilities. But even when faced by the minimal competition that solar companies can mount to monopoly utilities in regulated electricity markets, those utilities’ first priority is not to give their customers the clean energy they want, but instead, to protect their own utility monopoly.
Tubb suggests that Virginia and other states with regulated electricity markets should consider de-throning those monopolies and joining the other half of of U.S. states that have already deregulated their electricity markets. She focuses on Texas in particular as a good model:
The solution is to create an environment where incentives are properly aligned to counteract such behaviors as rent-seeking and regulatory capture, which in the end hurt consumers.
True competition, customer choice, and disciplined government could put a number of Virginia’s problems to rest. In Texas, this has reduced prices, encouraged innovation in grid infrastructure and customer service, and driven environmental benefits.
After seeing that the states that rank at the top for distributed solar (especially Massachusetts, New York, New Jersey and Maryland) are also states that have deregulated their electricity markets, I’m starting to see real promise in the solution that Tubb proposes.
Is Texas Deregulation Friendly to Rooftop Solar?
However, while I like electricity deregulation, as a fan of rooftop solar, I’m cautious about doing deregulation the Texas way.
The Institute for Local Self Reliance ranks Texas in the bottom five states for supporting distributed energy, giving the state’s energy policy a grade of F (no met metering, no community solar, no incentives for efficiency, etc). Of course, Texans generally scorn government incentives and put great faith in the free market, so it’s not surprising that the Lone Star State doesn’t offer much help for solar.
On the other hand, Texas does rank in the top ten for total installed solar (#7 in 2017). According to the Solar Energy Industries Association, “With appropriate state policy that removes, or at least does not create, market barriers and recognizes solar’s benefits, the Texas solar market should see significant growth in the coming years.”
However, as in Virginia, the vast majority of the solar installed in the state over the last few years was done by utilities and not by homeowners or small businesses. That’s too bad. From family self-reliance to grid resilience to cutting the need for investments in power lines and other transmission infrastructure, rooftop solar offers many benefits that utility solar does not.
Solar Needs Electricity Deregulation
It might sound too ambitious, but perhaps solar patriots in regulated electricity states like Virginia should consider fighting to deregulate their states.
But they need to do deregulation right. That means creating a level playing field for distributed solar. To do that, we should learn some things from Texas. But it would be a mistake to try to do everything the Texas way.
I get it that Texans don’t like big government. So, they don’t have to subsidize solar in order to encourage, or at least not discourage, rooftop solar.
But to make things fair for all solar, and especially for rooftop solar put up by homeowners and small businesses, what Texans should do is to stop letting fossil fuels pollute for free. Charging oil, gas and coal producers a carbon fee would help to level the playing field with solar and other clean energy. But giving dirty energy a free permit to emit greenhouse gases is really just another form of public subsidy.
Texans who like small government should be against a state subsidy for dirty energy just as much as they oppose public incentives for clean energy, right?
Of course, Texas is also the world capital of the oil industry, and most Texans seem to like it that way. So I don’t expect the Lone Star State to make oil and gas producers pay to emit carbon anytime soon. I hope this will be done on the national level, by Congress passing carbon-fee-and-dividend.
In the meantime, to get more solar, other states should consider following the example of Texas and the other two dozen states that have deregulated their electricity markets. Otherwise, if big centralized coal and gas plants are simply replaced by big centralized solar plants, still owned by utilities, then we’ll miss out on the many benefits of distributed solar and a more democratized energy system.
With America’s urgent need for climate and energy solutions, any solar is good solar at this point. It’s good that more utilities are putting in solar. But to bring America’s energy system into the 21st century, big centralized solar plants are not enough. We also need little solar installations on thousands of home and business rooftops across each state.
— Erik Curren, The Solar Patriot