What Solar Should Look for in a National Energy Bill

Prospects for 2010 passage of national climate legislation are dimming. The disappointing outcome in Copenhagen, the prolonged health care debate, and the election of another opposing Senator have led some members of the democratic leadership to all but give up on the issue before the November midterm elections.

But instead of attempting to pass comprehensive climate change legislation, some members of the Senate are considering stripping off the energy provisions of existing climate bills, which are viewed as more bipartisan, and passing them alone. There has even been some speculation that an energy bill will be absorbed into a jobs bill.

While a comprehensive climate bill remains essential to address climate change, a pure energy bill could still have a significant impact on the U.S. solar market. This depends, of course, on what provisions are included and how they are designed. So let's take a look at a few of the elements that will be of most interest to the solar industry.

First, some background: a number of energy/climate bills have appeared on the docket of the U.S. Congress, though none emerged from subcommittee until 2009. The bill that did, the American Clean Energy and Security Act of 2009 (ACES), is also known as Waxman-Markey. Although ACES passed through the House of Representatives, the Senate has placed its own negotiation on its version of the bill on hold while the prolonged health care debate progresses. However, the Senate Energy and Natural Resources Committee did pass a version of the bill, called the American Clean Energy Leadership Act of 2009 (ACELA). The full Senate is yet to vote on ACELA.

Now, on to the provisions that will most directly affect the solar market. Each of these is contained in either ACES, ACELA, or both. 

National Renewable Portfolio Standard (RPS): State Renewable Portfolio Standards have driven much of the existing solar demand in the U.S. They require utilities to generate a percentage of their electricity from renewable energy by a specified date.

Both ACES and ACELA contain a provision to introduce a national-level RPS. ACES sets a target of 20 percent renewable energy by 2020 with up to 5 percent through energy efficiency, reducing the effective target to 15 percent by 2020. The ACELA RPS is weaker, requiring only 15 percent renewable energy by 2021 with up to 26.67 percent to be met through energy efficiency.

State RPSs have been most successful in promoting solar when there is specific target for solar power or distributed generation. While neither bill contains such a requirement, they both provide 3x credit multipliers for distributed generation. This would provide an additional incentive for residential and commercial PV.

However, industry consensus is that the ACES and ACELA Renewable Portfolio Standards would only provide a marginal benefit beyond the aggregate of existing state-level targets. In addition, the lack of a solar-specific requirement suggests that other renewable technologies may take the lion's share of the benefit.

In order for a national RPS to truly incentivize solar, it needs to have a larger overall target and specific requirements for solar or distributed generation.

Clean Energy Deployment Administration (CEDA): Also known as the "Green Bank," this provision could have a large impact on solar project financing. Through CEDA, a government-owned corporation would be arranged with the express intent of providing and catalyzing financing for clean energy.

The Green Bank would be similar to other government-run private banks, such as Germany's KfW Bankengruppe, which also provide project financing.  The Green Bank would have the authority to provide financial assistance in a variety of manners, including loans, loan guarantees, and insurance products.

The key element here is capitalization. According to SEIA, in order to be an influential source of project financing the Green Bank should be allocated significantly more than the $7.5 billion to $10 billion offered in ACES and ACELA. SEIA suggests a minimum of $50 billion, with authority to issue bonds for another $50 billion. With that said, any additional capital made available for explicitly for renewable energy projects will provide a valuable service to the solar industry.

Interconnection and Net Metering Provisions: Perhaps most importantly, a national energy bill could contain provisions that set minimum standards for net metering and interconnection. These standards are present in varying degrees at the state level and provide the backbone of every growing solar market.

ACES and ACELA differ in their approach to these standards. ACES addresses net metering for federal facilities, but not for the general public. ACELA requires national interconnection standards, but doesn't cover net metering. Ideally, a national energy bill will ultimately include both.

Comparison of Provisions in House and Senate Climate Legislation

Source: SEIA

The battle to pass a comprehensive climate/energy bill isn't yet lost. The New York Times editorial board just released a worthy call for President Obama to make the case for a 2010 climate bill during his State of the Union address this week. And the issue is too important to leave unresolved, even if just to ride out the midterm elections.

But regardless of whether a climate bill is passed this year, look for debate over energy legislation to begin in earnest once the health care debate subsides. And keep these provisions in mind, as they could provide a solid foundation for a rapid expansion of the U.S. solar market.