Solar split: How a new petition is dividing rooftop and utility-scale installers in SEIA

Rooftop installers want a bigger voice in the trade group, but stress unity is still the priority

An emerging movement in the solar industry is calling for rooftop installers to get a bigger voice in the sector’s largest trade group, and threatening trouble if they are denied.

Small solar installers within the Solar Energy Industries Association (SEIA) are demanding their policy priorities be considered on equal footing with those of larger, utility-scale developers, whose deep pocketbooks give them leverage within the group.

Last month, distributed generation (DG) advocates outlined their grievances in an online petition that now has well over 700 signatures.

The petition highlights how diverging policy priorities could pull factions of the solar industry apart, but leaders on both side of the debate insisted to Utility Dive they recognize the importance of keeping the industry unified and are reaching out to those who feel under-represented.

“What we want is the board of SEIA to have a conversation about how the DG guys and the utility-scale guys need each other so they should stop squabbling and start working together,” said petition co-author Jigar Shah, founder of solar giant SunEdison and co-founder of renewables finance specialist Generate Capital.

“The DG guys need the utility-scale guys to keep driving down the cost of solar with their volume,” Shah said. “But the utility-scale guys desperately need the DG guys to get the political support that will pass the laws that force utilities to sign more contracts with them.”

The petition — “An Urgent Plea to the Solar Industry” — was written and posted by Shah and Spice Solar founder Barry Cinnamon, a 14-year SEIA Board member.

It describes the 200,000 jobs, one million solar roofs, and 16 GW of installed capacity the distributed solar industry now represents. It also reminds readers that the industry faces state-level policy fights across the country in defense of net energy metering (NEM) and other crucial supports while it searches for a new SEIA CEO.

“Even though the majority of solar companies and employees in the U.S. are focused on rooftop solar,” the petition asserts, the SEIA governance system “favors utility-scale solar interests.”

To continue supporting SEIA, local installers must be assured they can “have the same voice and influence as their utility solar brothers and sisters.”

Dan Whitten, SEIA’s vice president of communications, said the trade group needs “to do a better job of communicating with our smaller members, and the petition raises some important issues.”

All trade associations have competing members with different interests and points of view. "This is not unique to solar," he added. “Our job is to bring them together and agree on the things that are critical to the whole industry.”

Origins of the split

Shortly after SEIA helped lead the federal policy fight that won an historic extension of the industry’s 30% investment tax credit (ITC), GTM Research Senior Solar Analyst Cory Honeyman foresaw a coming divergence of interests.

The difference between the two solar segments will become clearer as the tax credits spur a solar boom, forcing policy decisions about distributed solar and net metering, he told Utility Dive in January.

“As debates veer off into complicated questions about net metering, Clean Power Plan compliance approaches, and the value of distributed solar in higher penetrations,” he said, the result will be a "more fractured landscape."

He’s not the only one. Last month, SEIA Board Chair Nat Kreamer warned that the many policy debates facing the industry “can either create or destroy value for our industry” in the emerging “networked policy environment.”

The emerging solar split has been aggravated by a growing awareness of a significant cost difference between utility-scale and DG solar. In Arizona, a Brattle Group study commissioned by utility-scale solar developer First Solar found utility-scale solar generation to cost the utility no more than $0.05-$0.06/kWh in Arizona, while the retail rate NEM credit for rooftop solar can cost the utility two to three times more.

That gave ammunition to utility leaders at Arizona Public Service, who have pushed to end retail rate net metering and install more large-scale solar. “Why would you pay $0.12/kWh for a resource you can get for $0.05/kWh?” APS Vice President Jeff Guldner told Utility Dive when the report came out.

Solar industry attorney Court Rich, a frequent participant in regulatory proceedings on behalf of solar, disagreed. “The choice between customer-sited solar and utility-scale solar is a false choice," he told Utility Dive. Independent and objective cost-benefit analyses show “a customer’s investment in rooftop solar results in a net benefit to all ratepayers,” but whether utility-scale solar is a net benefit to ratepayers is a different question, he said.

Despite these utility-imposed debates about cost, SEIA was held together by its long fight to sustain the ITC, Shah said. Led by local installers who were able to galvanize public support from tens of thousands of solar advocates, the industry won a long-term extension of the federal policy at the end of last year.

“The raw, Greenpeace-style political power comes from DG,” Shah said. “No one is protesting for utility-scale solar and many environmental groups don’t like it because of its impacts on the desert. It is tolerated because it is not possible to get to 50% renewables with only DG.”

With the ITC issue settled, state level policy fights over issues like net metering and interconnection standards have taken center stage. Those issues are of critical importance to rooftop installers, but have less direct impact on utility-scale companies.

The problem is "there is only so much money to go around,” Shah said. “SEIA was asked to help with state level policy and there was a lot of hesitancy from some of the members, especially those on the utility-scale side who said they are not excited about using their dollars to defend DG.”

Just Energy Senior Vice President Jeffrey Wolfe, a SEIA board member since 2005, said solar has “once again succeeded faster than was predicted and has run out of policy roadmap.”

As state and federal policy evolves, the industry goes through cycles and “the ITC extension kicked off another cycle,” Wolfe said. “Solar will again be forced to grow the policy and legislative space it works in.”

Some rooftop solar installers feel utility-scale companies have an outsized influence on SEIA, and want to see the next executive director be sympathetic to their needs. 

Rooftop solar's three demands

While the petition provides only the broad outlines of the tension, Cinnamon and Shah have three very specific asks of the SEIA Board.

The first is that DG advocates “want the Executive Director that replaces Rhone Resch to take more interest in state level policy than SEIA has shown,” Shah said.

The second, more detailed, ask is for SEIA “to take on education,” Shah said. “I have probably done more education with the general public myself than SEIA has.”

State level policy makers must be educated on why the country needs renewable energy, he said. “The answer has to be that renewable energy has been the biggest U.S. job creator since 2008 and created more blue collar jobs than any other industry since The Great Recession.”

SEIA is not adequately representing solar and is not doing enough rapid response to negative misinformation, Shah said. “SEIA is understaffed, but the industry is now big enough to staff and build a positive ad campaign and to be ready to change the narrative when there are attacks.”

The third ask is for a SEIA plan to maximize the industry's impact in state level policy fights. With the proliferation of policy debates, a small group of national experts repeatedly defending solar at regulatory proceedings and legislative hearings across the country is no longer feasible, Shah said.

Instead, SEIA should develop “something like the American Legislative Exchange Council (ALEC) educational plan,” he said. “SEIA would write sample legislation, sample testimony, sample reports, and other materials so that the state SEIAs and other state advocates could use SEIA-written stuff to defend solar policy.”

Shah, Cinnamon and their allies are currently working to secure approval for these proposals at the upcoming board meeting on Oct. 17.

In response to the DG demands, SEIA’s Whitten told Utility Dive the trade group is already working on some aspects of the proposals.

A new leader who understands state policy “is absolutely critical,” Whitten agreed. “We also need to engage more with our state SEIA state affiliates.”

There are plans in place to engage “at a more granular level” with groups like the National Governors Association, the Western Governors Association, and the National Conference of State Legislatures “to make sure people in the states who are actually making policy understand solar views,” Whitten added.

A major strategy session is planned for the day after the October board meeting. It will be attended by both DG and utility-scale companies and guided by national policy experts, he said. State policy issues and NEM will definitely be on the agenda and SEIA will focus on what it wants to achieve over the next five years.

“We were less than 1% of U.S. energy just a few years ago. Now we are over 1%. In the next three years to four years we will get to 3.5% of U.S. energy,” Whitten said. “We are a growing industry and we need to be a maturing industry and we will talk about that.”

Working more effectively with state affiliates and communicating more effectively with local installer-members are things SEIA leaders have been thinking about more carefully since Shah and Cinnamon posted their petition, Whitten said.

“But those who say SEIA is not expending resources on NEM are, with all due respect, just dead wrong,” he added. “Our historical spending and our plans are extremely balanced.”

Increasing the number of state affiliates on the board is worth considering, Whitten said. “But board representation is not the whole answer. In every state battle, we are engaged with state affiliates and state groups like Vote Solar. State Policy VP Sean Gallagher “is on the phone with state affiliates all the time,” Whitten said.

Wolfe offered a bigger idea. SEIA’s guiding principle used to be that “nothing done by one part of the industry can harm another part of the industry,” he recalled. “Rooftop installers or utility-scale developers might initiate an effort that didn’t help the other, but it couldn’t do anything that harmed the other.”

More recently, some board members want to prevent any action unless it helps all segments of solar, he said. With an industry as diverse as solar, that leads to “policy paralysis,” he said, and there is speculation that some on SEIA’s board have gridlock as a goal.  

“Policy paralysis benefits those who have power under the status quo so right now it would benefit utilities and those who work with them,” Wolfe said.

The petition has created a productive, healthy, if highly charged, conversation that will allow SEIA to reconsider its priorities, Wolfe said. It also could help “get us back to the old rule of ‘do no harm to another part of the solar industry’ and away from the ‘nothing can be done unless it helps the whole industry’ rule,” he said.

Fostering unity

At the core of the SEIA dissension is a simple but deep failure by DG installers and utility-scale developers to understand how interdependent they are, Shah said.

Today’s solar growth is led by utility-scale solar, but those large developers on the SEIA board need to “grow up” and “stop biting the hand that feeds you.”

“The political leverage that is allowing solar to thrive is coming from the DG installers,” Shah said. “You need each other, so show each other respect.”

If there is no reconciliation on the SEIA Board, “solar will still build $400 billion worth of renewable energy over the next five years, but things will be more difficult.”

An association made up of only DG installers would likely use their political leverage and effective regulatory affairs capabilities, which central station developers lack, to make sure new policies exclude utility-scale solar, Shah said.

Eventually, utility-scale developers would realize their mistake and the differences would be resolved, he added. The only question is what the cost would be.

Whitten said there is no reason SEIA can’t fight for things that matter to all its members and for policies important to its smaller members.

“We understand the critical role the DG installers play and how much they did to help push the ITC extension through,” he said.

The industry is changing and the divisions between utility-scale solar and DG solar are blurring, Whitten said. Commercial-industrial and community-scale solar are bringing utility-scale developers into the DG space and DG installers are offering grid services to utilities.

Such common interests make agreement on policy more necessary, Whitten said. “The SEIA leadership has been thinking about the questions raised by the petition and we see them as part of our evolution.”

California, by far the nation’s largest solar market, already lost its 2,200 MW San Onofre nuclear plant and it is planning to close the 2,200 MW Diablo Canyon plant, Whitten pointed out. “They are going to need innovation and we are an innovative, disruptive technology. They are going to need all the utility-scale solar they can get. And they are going to need massive amounts of DG to take pressure off the grid. Both solar sectors are going to have to work together.”

The DG sector did the work that built the solar industry’s policy  momentum, Wolfe said. “But without the economies of scale that utility-scale solar drives, my inverter prices and my panel prices would be higher.”

SEIA is a diverse association with diverse interests, “but our biggest challenge is not in finding adequate resources to represent those diverse interests,” he said. “Our biggest challenge is getting SEIA’s members to explicitly recognize that every member of the industry helps every other member.”

How the solar industry resolves its internal divides is sure to have an impact on the entire utility sector. As SEIA's Kraemer wrote, the rate design and net metering policy fights are “symptoms of larger questions,” like “[w]hat is the right utility business model for the future? Will it remain a cost-plus monopoly compensated for commodity sales and infrastructure investments? Or will it transition to a networked model compensated for infrastructure investment and value-added services?”

Those are debates, both large and small installers agree, that deserve a unified solar industry’s involvement.

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