One obstacle to rooftop solar in Florida is its unique approach to power purchase agreements. These long-term contracts, where the solar company sells power to the householder, are often used to finance the installation elsewhere in the country. It is effectively banned in Florida, due to a state supreme court ruling in a case more than 30 years ago that treated any electricity provider, no matter how small, as a public utility, which prevents independent developers.(3)
In 2018, the Florida Public Service Commission, which regulates utilities, clarified that a rooftop solar company can rent panels to customers, as long as it’s a specific fee for the equipment rather than of electricity. It was a workaround that ultimately enabled the market to continue but with drawbacks for customers. “I can’t guarantee the electricity production of the lease,” said John Berger, chief executive of Sunnova Energy International Inc., one of the largest U.S. rooftop solar companies. “I don’t have to provide a minimum like I do in other states.”
Florida offers no state incentives for solar power other than net metering, where solar-panel owners effectively sell their excess output back to the grid, reducing their bills. Residents can also take advantage of the 30% federal tax credit. State regulators ended a limited rebate program for solar installations in 2015, saying it was unnecessary, which is surprising when you look at how sluggish the market has been. This makes it harder for solar to compete with grid power that averages about 14 cents per kilowatt-hour in Florida. Even leaving out the cost of a battery to store excess power, it only takes less than 10 years for a 10-kilowatt-hour solar system to pay for itself, assuming you buy it. directly. (4)
However, this April a piece of legislation drafted by the utility looking to phase out net metering fell through shortly after Governor Ron DeSantis tossed it around, surprising many. But if grid power is so competitive, why did utility advocates feel the need to push that bill in the first place? (Disclosure: My wife runs a company that develops software for distributed energy assets). Ari Peskoe, a specialist in electricity regulation at Harvard Law School, points to the inherent conservatism of utilities and the political support they enjoy in Florida. He cited another state supreme court decision from 2000, Tampa Electric Co. v. Garcia, making Florida an “outlier.” This decision makes it difficult for any developer other than a public utility, or one with a long-term contract to sell to a public utility, to build solar projects above a certain size.
The ruling pertains to major projects rather than the roof, but it speaks to a broader culture of strengthening the interests of incumbent utilities in the state. A sign of the solar boom elsewhere is the leading role played by new entrants. Regulated utilities were formed a century ago in part to raise the huge sums required to build the grid. But the renewables business doesn’t need that; Solar power is still a capital magnet. In a delicious irony, NextEra Energy Inc. simultaneously owns the largest regulated utility in its home state, Florida Power & Light Co., but is also the largest developer of renewable power projects in competitive markets across the US.
DeSantis framed his veto as an anti-inflation measure, and it remains to be seen whether he will block subsequent legislative attempts after the gubernatorial election. Yet barriers to competition in Florida’s power market should sit uncomfortably with its Republican leaders.
Another possible motivation for the change concerns Ian’s outcome. The community of Babcock Ranch, just north of Fort Myers, is now famous for keeping its lights on during and after the storm, thanks to reasonable flood defenses and two dedicated, large-scale solar projects. Solar systems, especially when paired with batteries, provide some resilience against such disasters.
Florida utilities, perhaps as a result of practice, have a good record of reconnecting most homes and businesses within days. Yet the days seem like years when the lights (and everything else) go out. An analysis published last month by Berkeley Lab concluded that a rooftop residential system paired with a 10 kilowatt-hour battery could meet 71% of the critical power needs of a single-family home, in the median, during the outages following Hurricane Irma, which hit Florida five years ago. The cost of such insurance varies from home to home, but should be considered when comparing the cost of electricity vis-a-vis the grid.
It should also figure into the debates about electricity market reform in Tallahassee, although that might be hoping for too much. Regulated monopolies tend to monopolize regulators. Florida seems to be no exception. However, the lack of support for rooftop solar in a state exposed to sea-level rise and the more intense storms that come with climate change looks even more surprising. as the hurricane season rolls on.
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(1) Data as of June 2021. Source: Bloomberg NEF.
(2) Florida is estimated to have enough potential rooftop solar-power capacity to meet 46.5% of its retail sales, eighth highest in the continental US, in an analysis published by the National Renewable Energy Laboratory: “Rooftop Solar Photovoltaic Technical Potential in the United States: A Detailed Assessment” (January 2016).
(3) In the case that PW Ventures Inc. v. Nichols (1988), the Florida supreme court upheld the Public Service Commission’s position that any entity that sells electricity “to the public”, even just a member of the public, makes that provider a public utility. subject to state regulation.
(4) This assumes average annual electricity consumption of 13.15 megawatt-hours per household at 13.95 cents per kilowatt-hour, and a 10 kilowatt rooftop system at $2.55 per watt (sources: Energy Information Administration, Bloomberg NEF).
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he is the editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’s Lex column.
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