With Jon Wellinghoff, SolarCity looks to resolve net metering disputes in Nevada and elsewhere
SolarCity's new policy chief discusses Nevada's net metering battle and SolarCity's policy strategy.
Jon Wellinghoff has done a lot for the renewables sector.
As a former FERC chairman, he was instrumental in driving greater integration of renewables onto the U.S. power grids. After his tenure, he served as the co-chair of Stoel Rives' energy team, where he focused on working with emerging cleantech firms.
Now, Wellinghoff is taking on a new role at SolarCity—the leading residential solar developer in the country (and now subject of an acquisition bid from sister company Telsa)—as their Chief Policy Officer. Wellinghoff comes into the position at a time when SolarCity is shifting its strategy toward the heated solar policy debates that have captured the attention of the industry in recent years. Leveraging his relationships with regulators and utilities, SolarCity’s tone is evolving from the sometimes-adversarial approach that defined net metering battles in Arizona and California to a more collaborative one.
His first challenge will be on his home turf of Nevada, the state SolarCity recently left after regulators issued a controversial net metering decision and where Wellinghoff served as General Counsel for the Public Utilities Commission of Nevada for two years during the late 1990s.
SolarCity's stake in Nevada's net metering battle
There’s a lot at stake for SolarCity right now in the regulatory arena.
35 debates over net metering policies are currently taking place in 22 states, including several where the company is active. Net metering—a crediting mechanism that compensates rooftop solar users for the excess energy they export to the grid—is essential to SolarCity’s value proposition to customers. Any cuts to the remuneration rate paid to consumers under net metering can have immediate—and sometimes drastic consequences—for the company’s business model.
New applications for rooftop solar arrays have plummeted in states where utilities cut the remuneration rate for net metering. After the Nevada PUC issued a decision to cut net metering rates and increase fixed charges paid by solar owners, SolarCity's stock slid and the company ceased operating in the state.
Nevada became a hotspot in the national debate over compensation for rooftop solar customers last year after rooftop penetration surged and developers like SolarCity worried they would hit the net metering cap before the year was over. The dominant state utility, NV Energy, disagreed with the developers, saying that the net metering cap would most likely be hit in early 2016.
The state legislature struggled to come up with a solution satisfactory to both sides: NV Energy lobbied to have the net metering credits reduced or eliminated altogether, while the solar sector fought to have them stay the same. Lawmakers eventually directed state regulators to come up with a solution by the end of 2015, but before they could do so, the caps were hit in August. Regulators voted to keep the current remuneration rates in place through the end of the year until they could conduct a full review of the state's net metering program.
In December 2015, regulators issued a decision that led SolarCity to ultimately leave the state. Under the decision, rooftop solar customers would pay a reduced rate for their excess energy exported to the grid, be separated into their own rate class and pay increased fixed charges over a period of 12 years.
SolarCity CEO Lyndon Rive, who had testified in hearings in Nevada earlier that year on the net metering issue, told Bloomberg at the time that the decision would "destroy the rooftop solar industry in one of the states with the most sunshine."
Frustrated, solar advocates tried different tactics to reverse the ruling, including lawsuits and ballot petitions. The decision spurred SolarCity to cease its operations in the state, along with fellow solar developers Vivint Solar and Sunrun.
The state's chief regulator, Paul Thomsen, defended the decision to Utility Dive earlier this year, saying that it isn’t an end to rooftop solar in the state. But it does mean that business models like SolarCity’s will have to adapt and change in order to keep pace with regulatory decisions, he said.
“Just relying on large subsidies to keep a sector growing isn’t a success,” he said. “As we see prices change and innovation adopted, we want to get to place where solar can be developed and implemented to the utility model without a large cost shift or subsidy.”
Since the decision, Gov. Brian Sandoval (R) convened a task force to develop a long-term policy plan for clean energy, including a push to rethink some of the more controversial provisions of the net metering decision, including the lack of a grandfather provision for the existing 23,000 solar customers.
Meanwhile, with Wellinghoff as their new policy chief, SolarCity is working to reverse the ruling, starting with a new report drafted with the Natural Resources Defense Council that outlines the net benefits rooftop solar arrays gave to state ratepayers.
Armed with public tool, Wellinghoff seeks 'common ground' in Nevada
For SolarCity, Nevada regulators' decision to reduce net metering rates for solar user failed to evaluate the full costs and benefits of solar. The company is pushing to remedy what they see as a shortfall of information, Wellinghoff said.
With a new report that outlines the benefits of rooftop solar to utility ratepayers, SolarCity aims to set the stage for a possible compromise between regulators, solar companies and utilities in the state.
The paper, which uses a public tool created for the Nevada PUC, gives all parties the same “game pieces,” Wellinghoff told Utility Dive. If it proves successful in Nevada, the study could be a model to start similar conversations in other states.
“I would think that certainly that this tool is potentially a tool that can be used in New York [or other states] to use for cost and benefit analyses,” Wellinghoff said.
The Nevada Net Energy Metering Public Tool was constructed in 2013 at the behest of the PUCN for a 2014 report that aimed to quantify the value of distributed generation and test the impacts of net metered systems on the grid.
“There was an attempt to bring the tool forward again in the NEM proceeding that the PUC did in 2015,” Wellinghoff said. “But they didn’t have updated numbers and the numbers were stale from 2014. As a result, they didn’t use the full benefits list in their final analysis.”
In a footnote to their draft decision, the PUCN wrote that the net metering study was “outdated” and “irrelevant” when discussing how to allocate costs.
The 2014 report found the net benefits of rooftop solar totaled $36 million and demonstrated there was not a substantial cost-shift burden to non-solar-owning ratepayers when all 11 variables were used. When adjusting some of the numbers in the 2014 study, the PUCN found a $222 million cost-shift to non-net metering customers, partly due to the falling cost of solar. But SolarCity said in their recent report that the PUCN only used two of the variables when establishing a cost-shift burden on non rooftop solar users in their most recent decision.
Wellinghoff said SolarCity aims to use the findings of the report in an upcoming rate case for Sierra Pacific Power, a subsidiary of NV Energy.
“My vision is that the study can be submitted in the Sierra Pacific Power rate case and as such, will inform a change in rate design and rationalize rates to ensure that first of all, existing solar customers are grandfathered back into [net energy metering] because there is a determination from a review of the study that there is no cost shift but net benefits,” Wellinghoff said. “[The] rationale and basis for not allowing the grandfathering [will] now [be] erased with the new evidence put on the record.”
While the public tool is specific to Nevada, Wellinghoff believes its characteristics are applicable to other states. Using the public tool will hopefully bring all parties to the table with some common assumptions, he said.
“That’s exactly why we chose to use it,” Wellinghoff told Utility Dive. “It was common ground [for all parties].”
As SolarCity gears up to explain their data in the Sierra Pacific Power case, Wellinghoff is confident their conclusions can be a mechanism for similar debates in other states.
“I think ultimately the basic and overarching conclusion will stand. If you look at all the benefits, eventually you will determine that there is a net benefit to all ratepayers in Nevada to installing rooftop solar," he said. "We’re all at the table already looking at the same tool and the same assumptions. Ultimately, we all have the same game pieces to play with."
The road ahead for SolarCity's policy strategy
While Wellinghoff hopes to address short-term solutions for rooftop solar in Nevada, he sees a bright future for rooftop solar—even without net metering.
“[We’re] looking at moving beyond net metering to a net benefit analysis,” Wellinghoff said. “Looking at not simply a rooftop system but also how we can look at advanced inverters and putting in other systems like storage and controls, like thermostats and water heaters...and how we can integrate those control management systems as one distributed energy resource to manage as one system and help them [customers] control their energy cost to sell out their excess to a larger grid.”
Shifts in SolarCity's strategy have been appearing in recent times. In December last year, SolarCity split from the Alliance For Solar Choice (TASC), an solar advocacy group notorious for its antagonistic stance towards utilities. Following that, SolarCity reached a compromise deal with utilities in New York to address concerns of a cost-shift burden and ultimately plan a transition away from retail net metering.
SolarCity's business is also becoming more reliant on utility partnerships. Just last month, SolarCity also introduced a new set of services for utilities and grid operators, including installation, financing and consulting on utility-scale solar and energy storage, as well as new controls for demand response and aggregated distributed resources.
“I think we’ll likely see quite a lot of partnerships with utilities, and we see our business [with them] growing quite significantly,” Elon Musk said recently of Tesla and SolarCity's opportunities to work with utilities.
But while SolarCity hopes to collaborate with utilities, Wellinghoff warned that if a peaceful approach doesn’t work, the company will be forced to take a more aggressive stance.
“I would also make it clear that if a collaborative approach does not appear to be possible, I would also encourage [SolarCity] and hopefully assist the company to participate in an adversarial process,” Wellinghoff said. “[And] we should do that in a transparent manner ... that would move our agenda forward."
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