Usually state policies dictate the growth of the solar industry. Not so much this year.
A high-profile trade case and last minute provision in the GOP's tax overhaul have overshadowed any consequences from state policies, analysts told Utility Dive.
"This year there have been many more actions at the federal level that could really impact solar," said Autumn Proudlove, manager of policy at the North Carolina Clean Technology Center, which tracks solar policies nationwide.
Statewide policies are a major driver in the solar sector, analysts say, but market dynamics propelled growth even more, especially in the distributed generation and utility-scale space. For example, solar prices fell so rapidly, they hit a benchmark set by the Department of Energy three years early.
Even so, a slew of state and federal level policies have directed the course of the industry for much of 2017, and will continue to play out in the next year. Here are the ones that defined solar.
Solar trade case
Foremost in nearly every solar industry officials' mind is a high-stakes trade case over potential duties for imported solar equipment. Earlier this year, two United States-based solar manufacturers petitioned for import relief using a rarely-invoked global safeguard measure under Section 201 of the 1974 Trade Act.
According to the duo, Suniva and SolarWorld Americas, cheaper imports from Chinese manufacturing bases around the world drove down prices enough to make it nearly impossible for domestic manufacturers to compete.
The majority of the solar sector says otherwise, describing the proposed trade duties from the petitioners as punitive. The U.S. International Trade Commission, which oversaw the case, unanimously found injury, punting the final decision to President Donald Trump, an avowed critic of solar energy.
The final decision is expected at the end of January. But the solar sector is already feeling the ripple effects, from stalled solar projects to a rise in prices for fixed-tilt utility-scale solar panels.
"There is something to be said right off the bat that the Section 201 case, which even before it's been passed, there have been noticeable effects in distributed generation and utility-scale markets," said Colin Smith, solar analyst for GTM Research.
The consequences from Trump's decision, should he side with the petitioners, will play out in 2018 and beyond, likely overshadowing any implications from other federal and state policies.
GOP tax code overhaul
A last-minute provision in the GOP's ambitious tax code overhaul could have "devastated" the renewable energy sector. The so-called Base Erosion Anti-Abuse Tax (BEAT) provision, designed to combat tax dodging from multinationals, could have also leveled tax equity investment in the renewable energy sector.
Furious lobbying from renewables advocates, including solar, assuaged some of its effects, but it remains to be seen how this provision will impact the solar sector.
"This was something from a thumbs up or thumbs down (perspective) that could have decimated the solar market," Smith said. "We're still in the process of figuring out how it impacts the market. It might be innocuous or it might be negligible."
The final version includes an offset provision for 80% of BEAT payments, but solar and wind interests still say it could harm the industry. The tax bill cleared both houses and awaits Trump's signature.
Aimed at shifting reliance from imported oil, the federal Public Utility Regulatory Policies Act came into being during the tumultuous 1970s. The law evolved into the primary driver behind renewable energy growth in vertically-integrated state markets.
Battles over PURPA requirements — ranging from contract lengths to bidding processes to size limits for qualifying facilities — have plagued most Western states in the past few years. But states are now tackling PURPA reform in a myriad of ways.
"The biggest one was a real move away from PURPA-driven markets," Smith said. "A couple of years ago, we saw 80-plus% of utility-solar in the U.S. driven and coming online from RPS. As we move away from policy-driven solar growth to economic-[driven] growth, PURPA was the mid-point," Smith said, meaning PURPA was a bridge for solar growth between state-mandated Renewable Portfolio Standards and declining prices.
A massive legislative push by Duke Energy in North Carolina resulted in a new competitive bidding process for PURPA projects — and allowed the utility to compete with independent developers.
"The proposal from Duke Energy to remove PURPA solicitations as we know [them] and instead meet FERC obligations through competitive bidding puts an end to the era of PURPA-driven projects," Smith said.
In Montana, a fight is simmering over a decision this summer to cut PURPA rates 40%. Solar advocates have filed a lawsuit against the state Public Service Commission in hopes of restoring the original rates.
And the fight for PURPA reform is reaching congressional and federal hallways. Rep. Tim Walberg (MI-R) introduced legislation at the beginning of December that could weaken some provisions. In the latest development, the National Association of Regulatory Utility Commissioners proposed regulations that would move away from administratively-determined avoided costs and encourage the use of competitive solicitations for PURPA compliance and project selection.
It remains to be seen if the Federal Energy Regulatory Commission will take up the proposal, but it's clear PURPA will continue to be a flashpoint.
Biggest state policy plays of the year
This year has been remarkably tame at the state level compared to previous years.
"[State] policy has not been nearly impactful as a driver in the near time," said Austin Perea, a GTM Research analyst. "Across our state markets ... you have stable policy."
Nevada was a hotspot for virulent battles over net metering in the past two years after regulators gutted the compensation scheme for rooftop solar users sending excess energy to the grid.
The backlash was immediate and rough — national solar installers pulled operations and even Presidential candidates weighed in. This year saw lawmakers pass legislation that restored the net metering credit to nearly its full previous value, and guarantee consumers the right to generate energy.
Arizona, another state with frequent and rancorous solar battles, saw more debates over rate cases after the state ended its net metering program at the end of 2016. In exchange, regulators set a Resource Comparison Proxy calculation close to state utilities' avoided cost rates. An actual compensation number would be decided in individual rate cases.
This year, utilities proposed rate schemes, including demand charges and time-of-use rates, which saw hefty debate among stakeholders. Those debates will likely continue for years to come.
And at the beginning of this year, Indiana lawmakers eliminated the state's net metering program. This trend is likely to continue, as more states re-evaluate their policies, but it's clear the market will drive distributed generation even more, Perea said.
Tesla made waves earlier this year in a filing with Massachusetts regulators asking for clarity over storage's role in net metering compensation. Rhode Island is another state weighing whether or not solar-plus-storage systems will qualify for net metering, also at the behest of Tesla.
Both cases are pending, but will have far-reaching consequences once storage's role is defined in these policies.
Analysts say more states are taking a look at compensation schemes for community solar. While a popular option with utilities, community solar has been slower to take off than other market segments, like rooftop and utility-scale.
"We saw a couple of new states adopt solar policies this year," Proudlove said. "Now we're seeing states look at different approaches to community solar credit rates. We're seeing states like New York and Oregon looking at value-based compensation."
Though the trend has been slow, it will likely gain traction as more states seek to define community solar policy in the coming years.
State policies are driving less solar growth than previous years. But the federal level could have untoward power to set the course of the industry, analysts say.
Beyond the tax bill and trade case, the DOE is examining net metering policies at the behest of Congress, and could even take up PURPA reform.
"I think federal level is more relevant this year and maybe coming into the next few years as well," Proudlove said.
But it is the outcome of the trade case — a one-time policy deal — which could pack the biggest punch to the sector once Trump makes his final decision.