Category: Blog

PURPA 101: How a 45-Year-Old Law Impacts Solar EPCs Today

Posted on by Mike Zimm

When the Public Utility Regulatory Policies Act (PURPA) was signed into law on November 9, 1978, it put the wheels in motion for renewable energy to thrive. 

PURPA was designed to address an oil crisis that had gripped the United States throughout the early 1970s and prevent future issues from happening by fostering more domestic energy independence, and its goals were simple:

  • Address and improve U.S. electric use 
  • Create pathways for better electrical utility energy efficiency 
  • Drive better rates for consumers and increase market competition 
  • Provide avenues for renewable energy development 

At the time of PURPA’s enactment, hydroelectric was a major renewable energy player. Since then, the industry has exploded with the expansion of solar energy systems, wind turbines, geothermal, biomass, and others. 

Several forward-thinking states, including New York, California, North Carolina, and Arizona, are leading the way. These states are investing in renewable energy at scale, enacting renewable portfolio standards, making permitting easier, and opening the door for companies to take advantage of substantial tax incentives. 

Today, more than 21% of our energy comes from renewable sources like solar and wind. We’ve also made massive strides toward diversifying energy sources while curbing fossil fuel use and making long-term commitments to renewable energy use.

What is PURPA? What Does It Do? 

Simply put, PURPA promotes energy diversification and competition in the electric generation industry. Though the word of the law sounds great, how does it translate to the real world? 

Qualifying Facilities and Avoided Costs 

Under PURPA, utilities must buy electricity from qualifying facilities at an “avoided cost.” This might sound like a packed sentence full of industry jargon, but the process allows utilities and renewable energy generators to work together peacefully. 

The first thing to do is explain what qualifying facilities (QFs) are. A qualifying facility is an energy production site generating less than 80MW of renewable power. It can also be a small co-generation plant producing electricity and thermal energy using a singular fuel source. Depending on the situation, the site must fit the descriptions in 16 U.S.C. §796(18)(A) and 18 CFR 292.203. 

Now that qualifying facilities have been explained, it’s time to move on to avoided costs. Avoided costs are the amount a utility company must pay a renewable energy generator for its energy. The cost is equal to the amount the utility would avoid by not producing the same amount of electricity but can be based on other negotiated rates. 

The avoided cost rules were updated with 2005’s Energy Policy Act, removing the mandatory purchasing rule for utilities in competitive wholesale markets for qualifying facilities larger than 20 MW. The rule remained unchanged for smaller electric power generators producing less than 20 MW, even in competitive markets.

Who Benefits from Avoided Costs? 

Avoided costs sound like something designed to handcuff utilities to renewable producers, but both operators benefit. 

Utilities avoid generating electricity when they don’t have to, leaving room for increased capacity when more power is needed. Purchasing electricity from companies using renewable sources like solar panels and wind turbines also helps offset pollution caused by traditional fossil fuels like coal, oil, or natural gas. 

Renewable energy producers benefit from avoided costs because they receive a guaranteed market to sell into. Because the utility must buy electricity from the renewable generating company, solar EPCs (Engineering, Procurement, and Construction) can better manage costs associated with installing panels, interconnections, and everything else tied to coming online. 

Renewable companies also qualify for state and federal exemptions that help reduce operational friction. These include mandatory purchase agreements, interconnection guarantees, and other requirements like public utility regulation and taxation from states. The rules help get renewable projects off the ground more quickly and profitably so they can start supplying electricity to consumers.

Why PURPA Makes Sense for Solar 

Although PURPA supports all types of renewable power, solar energy producers have taken advantage of the law in several ways. 

Fair Competition – Consumers get lower costs for electricity based on available and affordable options. By requiring utilities to buy renewable power, consumers benefit from more energy diversity and can choose what power they want. 

Environmentally Friendly – PURPA has been instrumental in adding more than 100 GW of renewable electricity to the grid. The increase in renewable power has also lowered our dependence on domestic and foreign fossil fuels while bolstering clean energy. 

Better Financing – Several tax credits associated with PURPA make it easier and affordable for solar EPCs to establish energy projects. Investment Tax Credits (ITCs), Production Tax Credits (PTCs), and even property and sales tax exemptions are just a few credits installers enjoy. 

Rules also provide small solar sites with a safety net in the form of guaranteed energy purchasers and markets. 

PURPA Gets an Update 

The 1970s had its share of turbulence, and the U.S. economy was much different than it is today. 

When PURPA was signed into law, the country had just recovered from a severe oil crisis, and there were legitimate concerns about natural gas supplies. Today, we have vast natural gas stores and low-cost energy production methods. 

Unfortunately, the gas crisis of the 1970s has been replaced by climate concerns, and countries are pushing to become carbon neutral by 2050. The situation has forced the U.S. to reexamine what PURPA is trying to accomplish and rework the law to fit today’s changing needs. 

The law has been through several amendments, most recently in 2020. Order 872 has been controversial but modernized several parts of PURPA to fit today’s economic climate. Depending on who you ask, the changes aren’t all for the better, but the goal is to make things as fair as possible for solar installers, utilities, and end consumers.

Avoided Costs Get Adjusted 

In the early days of PURPA, utilities could be locked into long-term fixed energy rates that sometimes meant paying far more for electricity than it cost to produce. 

The new rule allows for more flexibility in pricing using multiple indexes and sources, making for a better, more accurate, and transparent pricing structure. Though the rule impacts costs, it doesn’t touch capacity rates, which control how much electricity is produced. Still, losing the long-term energy pricing contracts could make it harder for solar installers to finance projects. 

Order 872 also changed the criteria for locking in long-term contracts. Previously, projects could lock in using power purchase or other agreements. Now it is moving toward companies showing financial viability before finalizing contracts.

The One Mile Rule 

Under the old rule, capacity was capped at 80 MW for same-site facilities, including energy facilities of the same type found within a mile of a Qualifying Facility. 

The new rule is similar but adds a 10-mile rebuttal. Anything further than 10 miles from the QF is now considered a separate site. This means facilities with the same power source less than 10 miles from a QF can qualify as the same site, including them in the 80 MW capacity.

Competitive Market Access 

Under this rule, utilities can avoid power purchase agreements if the Qualifying Facilities can access competitive markets. 

The old rule established the threshold for QFs to sell to utilities for avoided costs at 20 MW but has been lowered to only 5 MW. One wrinkle in the rule is that the lower threshold applies to power production but not co-generation plants.

Potential Concerns 

Though PURPA’s amendments impact utilities and solar companies, the goal is a steady supply of clean energy from multiple sources at prices the average consumer can afford.  

The changes also have the unintended effect of altering the relationship between the two entities – sometimes not for the betterment of solar installers. Ditching fixed revenue streams may create problems for companies wanting to build but can’t rely on receiving a steady check. Variable revenues mean companies are tied to the market rather than standard avoided cost metrics. 

Lower mandatory purchasing size thresholds also mean less market certainty against more competition. If there’s too much risk, it could have a chilling effect on solar EPCs and other renewable builders.

PURPA Changes Are Mixed 

The new rules have been around for about 3 years, and we’ve seen a few trends developing. 

Solar Isn’t Slowing – It was feared at first that solar development would be shaken. If anything, the pace has increased, especially as the government pushes for renewable energy development. 

Consumers Are in Control – Today’s electricity customers benefit from lower costs and have more electricity options than ever, including emerging renewable sources like solar and wind. 

Utilities Made Some Gains – Utilities have the right to negotiate for variable avoided cost rates that don’t tie them to a potentially costly contract. They also have the power to define rates based on several indexes and economic factors. 

Time will tell how these changes shape the industry landscape, but overall, PURPA has been a boon for the solar industry. Even as conditions change, it’s only fair the rules guiding us adapt and grow alongside it, too.

Who Manages the U.S. Electrical Grid?

Posted on by Mike Zimm

Each day, more than 160 million customers across the United States rely on electricity flowing through hundreds of thousands of miles of transmission and distribution power lines to power their homes, cook food, and heat water. 

Americans use a lot of power – millions of MWh of electricity daily. So many people depend on consistent and reliable electricity to live, and ensuring power is available when it’s needed most is a monumental task. But who is responsible for the grid itself? 

The answer is complicated. 

How is the Electrical Grid Divided? 

The continental United States is huge, so it makes sense to break it up into regions. 

Three major interconnections comprise the U.S. electrical grid – the Eastern Interconnection, which encompasses everything east of the Rockies; the Western Interconnection, covering west of the Rockies; and the Texas Interconnection, which includes most, but not all, of Texas. 

The Eastern and Western Interconnections stretch north into Canada, except for Quebec, which operates its own AC power grid that connects to the Eastern Interconnection. 

From Interconnections to Councils… 

Within the three U.S. interconnection systems are six regional councils called Electric Reliability Organizations. These non-profit companies work on behalf of their regions to provide stable electricity to consumers and uphold NERC standards. They include: 

  • Northeast Power Coordinating Council (NPCC)  
  • Reliability First (RF) 
  • Midwest Reliability Organization (MRO) 
  • SERC Reliability Corporation (SERC)  
  • Texas Reliability Entity (TRE)  
  • Western Electricity Coordinating Council (WECC)  

The councils are managed and approved by the Federal Energy Regulatory Commission (FERC), with responsibilities delegated by the North American Electric Reliability Corporation (NERC). Together, the regional councils and NERC maintain and improve the grid across their respective zones. 

Often, it means sharing information and resources across all the councils and NERC, known as the ERO Enterprise. They develop messaging and guidance for utilities and other entities and innovate the grid’s performance without duplicating efforts. 

Subregions and Other Markets 

Some customers may be living in one of several subregions or coverage areas. 

For example, people in New York live in a Wholesale Electric Power Market, in this case, NYISO. NYISO stands for the New York Independent System Operator and maintains a steady and reliable power supply for the state’s electrical customers. It also regulates New York’s competitive generation program. 

Other coverage areas may include traditionally regulated or competitive retail markets. Depending on the state, it could impact how and what energy options are available. In traditionally regulated states, customers must buy electricity from local utilities serving their area. As a result, selection is limited. 

For states with competitive markets, customers have several suppliers, opening the door for more competition and options, including retail choice. Retail choice allows customers to choose who provides their electricity and even how it is produced. Solar installers may find these states easier to build and work in, especially since many solar and other renewable projects in traditionally regulated states tend to be utility-owned. 

FERC, NERC, and the Chain of Command 

It might seem confusing with so many federal agencies, commissions, organizations, and oversight committees floating around, but the chain of command is clear. 

FERC is tasked with managing electricity transmission of all types, including gas pipelines and hydropower sources. Every energy production source, transmission line, and distribution substation falls under its purview. But it can’t monitor thousands of generation plants without help. 

Through the Federal Power Act, FERC assigned NERC the responsibility of implementing and monitoring standards and regulations across every region. In turn, NERC delegates power to the six regional transmission organizations (RTOs). The RTOs work to identify areas of opportunity, improve efficiency, ensure compliance, and maintain the overall system alongside utilities. 

Independent System Operators (ISOs) also handle grid operations, though they are smaller than their regional counterparts. Unlike RTOs, which can cover a multi-state region, ISOs have smaller footprints, generally contained in one state. Both maintain fair competition in their areas and make sure power suppliers have access to the electrical grid, including solar energy generators. According to the Environmental Protection Agency (EPA), about two-thirds of electricity customers live in areas managed by an RTO or ISO. 

States Get Their Say, Too 

Just when there might be enough electricity generation oversight, the states jump in to take on some of the load. 

Public utility commissions regulate pricing in real-time and have the authority to determine where new power generators and transmission systems go. These organizations also have the power to raise and lower electricity, gas, and water rates. PUCs manage costs and quality and maintain the system for all customers, but doesn’t extend to municipal and cooperative utilities.  

States also have a fair amount of say in their electricity systems. California, New York, and Texas have been on the frontlines, developing clean energy plans to grow renewable energy sources in their states. They’ve also been instrumental in establishing and promoting reliability and efficiency campaigns to reduce reliance on fossil fuels like coal and oil. 

Utilities Are the Backbone of the Whole System 

Regulators are great for the public and the electrical grid but don’t produce the energy needed to power our daily lives. That distinction falls on the thousands of electric utilities and public power companies dotting the United States. 

Utilities like Duke, Exelon, and Pacific Gas and Electric can be private or public companies, and their goal is to generate electricity and deliver it as profitably as possible to end users. They’re often the boots on the ground, repairing, maintaining, and expanding the infrastructure while finding innovative ways to produce electricity and increase generating capacity. 

Who Enforces Rules and Regulations? 

It might seem like a twisted web of alphabet-soup agencies and committees, but everything flows from the top down. 

FERC is the federal agency in charge of developing and enforcing its rules and investigating internal and external complaints to determine what actions to take. When complaints come in, FERC is tasked with collecting facts tied to the event, issuing preliminary conclusions, and settling the matter with the offending organization or going to a civil trial if a settlement doesn’t happen. 

Typically, the agency aims to settle rule violations through the settlement process to quickly issue refunds, address concerns, and reallocate its employees to other pressing tasks. When the violations are especially severe, FERC can issue civil penalty fines, subject the utility to compliance monitoring and disgorgements, or other penalties. 

According to the agency, more than $861 million in civil penalties were issued from 2007 to 2022, along with another $586 million in disgorgements. 

Additional Monitoring Support 

Beyond FERC, there are plenty of support agencies to monitor and enforce its regulations, including NERC, the RTOs and ISOs in each region or state, and state-level public utility commissions. 

Like FERC, NERC has a team to monitor complaints, perform investigations, and issue fines or other penalties. It can also elevate concerns to FERC if it has to. The RTOs and ISOs are another set of eyes and ears, using their reach to monitor the markets for violations. When concerns are found, they can refer them to FERC to investigate. 

Further down the chain of command, state public utility commissions can investigate and enforce FERC powers when utilities and entities violate siting, construction, or pricing regulations. 

Finally, the Department of Justice can step in when violations stretch beyond civil penalties and are considered criminal. Cases where the DOJ might get involved include fraud, among other high-level crimes. 

Many Hands Make Light Work 

Millions of people rely on consistent electricity to live their daily lives, so the system has to work well for everyone. From the highest federal levels down to the local power company, every organization is on the same page and follows the same rules. 

FERC’s oversight and supporting agencies and committees ensure the lights stay on and prices remain manageable. The entire chain of command has overlapping structures meant to keep a watchful eye on utilities and other entities without stressing out organizations with a mountain of investigations. 

The result is a powerful series of checks and balances helping us power our future today, tomorrow, and for years to come.

Can Solar Energy Improve Microgrid Performance?

Posted on by Mike Zimm

In 2003, a summer blackout caused by a severe storm cut power for more than 50 million people across eight U.S. states and parts of Canada. 

Since then, the country has invested millions of dollars into resilience projects, ranging from hardening the electrical grid to moving transmission cables underground. It’s also given rise to the concept of the microgrid. 

As companies, communities, and utilities inch closer toward renewable forms of energy, microgrids are becoming more popular. But what is a microgrid, and how does the rise of solar and other renewable sources impact their expansion? More importantly, can independent energy grids improve electrical delivery for the millions of people relying on it? 

Microgrids Explained 

If you’re unfamiliar with the term, a microgrid is a localized energy producer and provider connected to the larger power grid. It generates electricity to power communities, companies, and critical infrastructure and immediately disconnects from the larger grid to operate as a standalone power source during an emergency. 

There are hundreds of these systems across the United States. According to the Department of Energy (DOE), there are 461 operational microgrids established across the country, powering everything from hospitals and universities to emergency shelters, research facilities, and military installations. 

Other organizations are even more optimistic about the standalone grid’s adoption. The Center for Climate and Energy Solutions suggests nearly 700 operational microgrids are in the U.S., totaling 4.4 GW of electrical power. Meanwhile, Wood Mackenzie has said solar and storage capacity grew 47% from 2017 to 2022. 

Why They Work 

Microgrids work because they generate and distribute electricity to the surrounding community. Their size also makes them less vulnerable to widespread blackouts. 

When large-scale outages occur, microgrids disconnect and enter standalone mode. Disconnecting from the grid lets the system deliver power while crews work on the larger grid. 

Microgrids may have a home in combined heat and power (CHP) situations, too. CHP systems use one fuel source to produce electricity and heat for a building or group of buildings. Although they tend to be small systems powering a small area, larger ones can become microgrids once connected to the larger delivery system. 

Are Microgrids Solely Solar? 

Although they’re generally powered by renewable electricity generation systems like solar panels and wind turbines, fossil fuel generators can also power microgrids. 

Beyond being inexpensive to maintain, solar microgrids tend to be set-it-and-forget-it options. When the system has an autonomous operation system, it can produce consistent and clean energy for years with minimal manual control. 

Is Solar Power Generation Changing the Game? 

Photovoltaic (PV) microgrids are coming online across the United States, but are they making a difference? 

The short answer to the question is yes for several reasons. 

Clean, Low-Cost Power 

One of the major selling points of a solar-powered microgrid is that the electricity produced generates no harmful byproducts. Sunlight and wind are wholly renewable energy sources, reducing carbon footprints while maintaining energy production. 

It’s Scalable 

When communities or businesses want to increase the amount of energy, all they have to do is install additional panels and connect them to the system. 

Beyond that, it’s possible to increase solar efficiency (and power generated) by installing solar concentrators, sun tracking systems, and anti-reflection coatings. 

Low Operating Costs 

Solar costs have dropped dramatically over the years, making installing solar panels as affordable as ever. Unfortunately, the soft costs of solar haven’t seen the same decline but are improving. 

Though solar installations are still expensive for community and utility-scale projects, maintenance costs are low. 

Combines with Other Energy Sources 

Microgrids complement CHP systems, allowing them to make the most out of alternative fuel sources to produce additional electricity for storage or adding to the grid. 

Typically, CHPs use a singular fuel source like natural gas to efficiently generate power and heat without wasting heat energy. Adding rooftop or on-site solar panels creates more energy, reducing strain and fuel use for the CHP system. 

Another Step Toward a Revitalized Grid 

Microgrids can reduce strain on the overall electrical grid. 

As smaller operations come online, improvements must be made to the grid to improve its resiliency and accommodate the additional load. They also take some pressure off other power plants by reducing the amount of power they need to generate. In the case of demand spikes, those generation plants can quickly increase electrical output. 

Another occasionally overlooked benefit of microgrids is their ability to deliver electricity more efficiently than other power plants. Typically, power generation plants are found in remote areas away from cities and towns, resulting in line losses as electricity flows from the plant to substations. Microgrids avoid most line losses because they are much closer to distribution areas. Less distance means less power loss during delivery. 

Problems to Solve 

Although there’s a lot to love about smaller, independent grids, there are still some kinks in the system. 

Microgrids naturally make the electrical grid more complex because we’re adding new systems to an aging infrastructure. Upgrades are necessary to keep everything operating smoothly, but new interconnections come at a massive cost for installers and utilities. 

There is also the risk of utilities seeing microgrids as competition, seeing as how the smaller systems could reduce demand. To minimize difficulties with utilities, installers can build mutually beneficial partnerships to find common ground and solutions. 

Small Footprint, Huge Difference 

The evidence is clear; as the grid becomes more complex, microgrids will step up to offer reliable, consistent power to homes and businesses nationwide. 

Organizations like the NREL have invested in new grid technology and development for more than two decades, and the U.S. military is utilizing microgrids for both sustainability and self-defense. Additionally, smaller communities find community-scale solar installations a low-cost solution to rising energy costs through subscription and ownership stake plans. 

We have so much to be excited about, but everything is still a work in progress. Regulations are hard to navigate, and there isn’t a standard set of rules guiding microgrid installers or the utilities they work with. Installers also have to contend with high interconnection costs as utilities decide how to compensate communities and customers for adding electricity to the grid. 

Threats to the grid aren’t slowing down, making it vital for the U.S. to have a robust grid to supply power to everyone. Microgrids could be the answer to increasing reliability and safeguarding against future power outages, threats and attacks.

What is Community-Scale Solar?

Posted on by Mike Zimm

When most people think about solar installations, two types generally come to mind: rooftop and utility-scale. 

Rooftop or backyard residential PV solar panels provide enough electricity to power a home or small business. Meanwhile, utility-scale operations are designed to power towns, cities, and even regions. 

But there’s a third option emerging in the U.S.: community-scale solar. Larger than residential but smaller than utility-scale, community-scale installations range from a few megawatts to tens and power communities. 

Small Footprint, Large Impact 

True to its name, community solar projects are small, usually less than 5MW, but can generate enough electricity to power thousands of homes. 

Unlike utility-scale solar locations, which utilities develop on owned land, community solar farms live on leased land and get installed by EPC (Engineering, Procurement, and Construction) solar companies like Schuler-Haas, Nexamp, and TerraForm. Once complete, residents and businesses can subscribe to the site and receive credits. 

Smaller solar arrays are picking up steam in several states, including New York, California, Minnesota, and Massachusetts, but can be found in more than 40 states, Washington D.C., and Puerto Rico. Although solar installations were down 16% in Q2 2023 compared to 2022, about 226 MWdc of solar was added to the grid.  

The good news is the Solar Energy Industries Association (SEIA) expects growth from 2024 through 2028, thanks to better policies and more interest. 

How Does Community Solar Work? 

Community-scale solar is unique in size and operation, making it viable for people who can’t fully invest in solar but want to participate. 

Unlike installations owned by a single person, business, or utility company, community solar projects benefit groups of businesses and individuals throughout the service area. They can either pay to own a portion or subscribe to a community solar installation, allowing them to collect solar credits on their electricity bills. 

But what are solar credits, and how do they work? As the solar array generates electrical power, subscribers and owners collect credits based on the electricity produced. Those credits are then applied to their utility bills. 

According to the NREL, about 49% of households and businesses can’t have rooftop solar. For those who can’t afford a residential PV system or don’t have the right conditions to support one, community solar is an option. 

Even better, the energy produced by community solar goes straight from the array to the grid and is delivered directly to those living nearby. 

Is Community Solar Worth It? 

With all the talk of subscriptions and credits, community solar sounds complicated, but it’s a popular choice for consumers and builders for several reasons. 

  • Accessibility: Community solar allows people to invest and benefit from solar installations with a low-risk investment. They still reap the rewards of solar power without the massive upfront purchase to install panels. 
  • Cost savings: Community solar is a low-cost electricity producer compared to traditional fossil fuels. 
  • Supports the local community: Solar installations create jobs and can support sustained regional economic growth. 
  • Varies energy sources: Renewables can support traditional fossil fuels during periods of high demand. They can also help supply power in the case of an emergency when fossil fuel sources are offline. Solar arrays also help develop microgrids, which limit the spread of blackouts if a problem arises. 
  • Cleaner energy: Solar panels produce no by-products, and the sun is an infinite fuel source. Energy storage and consistent production are still troublesome, but the technology needed to address and mitigate those problems is quickly evolving. 

Of course, not everything is perfect. Every investment, including community solar, has inherent risks. 

Drawbacks and Concerns 

Despite renewable energy projects earning the praise of agencies, organizations, and the public, every emerging technology has its fair share of challenges. It’s especially true when attempting to integrate them into older installations. 

  • Interconnection Issues: According to a 2022 White House statement, about 70% of U.S. transmission lines are 25 years old or older, with many pieces coming online in the 1960s and 1970s. Unfortunately, that makes it harder for solar installations to integrate. In those situations, the difficulty of integrating leads to expensive delays, long waiting lists, and high connection fees to cover costs. 
  • Overpowering the system: Substations are designed to handle occasional overcharges or power surges, but not constantly. When a massive influx of electricity is added to the grid too quickly, it can lead to outages and damage. 
  • Location issues: In rural communities, solar installations may be miles from load centers. Getting power to the load center for distribution means more money, time, and labor is needed. These costs ultimately lead to a higher project cost and delayed ROI. 
  • Storage Issues: Solar energy is infinitely renewable but hard to store. Effective battery solutions are available but are expensive, and the technology hasn’t reached its full potential yet. Storage also becomes an issue in places where the sun isn’t shining every day and locations where snow is an issue. 

As technology improves and more utilities invest in renewable technology, it will become easier to interconnect with the larger grid. In the meantime, smaller installations can create microgrids that connect to the larger grid but reduce the effects of an outage in their communities. 

What is the Growth Potential? 

Thanks to several pieces of federal legislation, solar and other renewable energy sources are having a coming out party. 

Solar has accounted for about 45% of all new electricity-generating capacity added to the electrical grid this year, including 226 MWdc of community solar in Q2 2023. The good news doesn’t end there, as experts claim more advancements are coming. 

Global research organization Wood Mackenzie recently touted the strength of community solar, suggesting the industry could grow nearly 120% through 2027. The report also notes that the country could add another 6 GW of electricity to the grid by then. Currently, about 5.27 GW has been installed. 

Several states are leading community solar solutions, including New York, which hosts about half of the U.S.’s installed total. However, new laws, including the Inflation Reduction Act (IRA), have put solar in a much stronger position in the coming years. 

The IRA coincides with a 24-month moratorium issued by the White House on solar panels from four Asian countries: Thailand, Vietnam, Malaysia, and Cambodia. The moratorium expires in June 2024 and is designed to help get domestic solar production off the ground while giving companies and utilities access to lower-cost solar panels to complete ongoing projects. 

Domestic production is expected to improve for balance of system products like PV wire, panels, and racking materials, and organizations like Wood Mackenzie and the SEIA are confident the industry will flourish. 

High Potential, Low Cost of Entry

There are plenty of tax credits and incentives to get people involved with residential solar, but barriers to entry are still high. Options like community solar reduce investment costs while helping people do something good for the community, the environment, and their wallets. 

It also comes in handy for people living in low-income and rural areas, where credits can impact how much they pay for the electricity they consume. Rural locations also tend to have more space for solar installations, shortening the distance from the array to a load center. 

The benefits of community solar are undeniable, but there are still hurdles. Our electrical grid is rapidly aging, making it difficult to efficiently interconnect with existing substations and other infrastructure. If the substations and grid technology are too old, it will be harder to integrate efficiently. 

We’re getting closer to a world run by renewables. More advancements mean more opportunities for good-paying jobs, low-cost electricity, and better resilience in the face of storms and other emergencies. It will take time, but a renewable-powered future is possible.

How Do Solar Investment Tax Credit Adders Work?

Posted on by Mike Zimm

When it comes to the government, there’s no such thing as a simple, straightforward solution. 

Unfortunately, for developers, financiers, and engineering, procurement, and construction companies, known as EPCs, that means knowing when, how, and where projects qualify for federal solar tax credits. Without them, it’s harder to complete jobs quickly and effectively. 

When the Inflation Reduction Act of 2022 was signed into law, it opened the door for a massive uptick in tax credits for solar. However, not everyone qualifies for all the tax credits, and plenty of intricate rules must be followed to receive them. 

Projects can qualify for ITC solar credits up to 60%, with adders tied to domestic materials and products, location, and low-income communities. 

But what projects qualify for federal funding? 

What is the Base ITC Credit? 

When the Inflation Reduction Act was signed into law, it extended the shelf life of the Investment Tax Credit (ITC) for solar installations and increased its value. 

From now until 2032, solar credits for projects are 30% and apply to businesses and homeowners. After 2032, the credit decreases until it’s finally sunset. For utility-scale solar projects larger than 1MW, the tax credit is 6% but rises to 30% if several criteria are met.  

But what are the criteria, you ask? 

For starters, a project qualifies for the 30% credit if workers are paid prevailing wages. The project also requires a certain number of apprentices to perform the work. There are also rules for apprentice-to-journeyman worker ratios, as outlined by the Department of Labor. 

Accessing the 10% ITC Adder 

Qualifying for the 10% domestic production adder requires projects to satisfy three criteria: 

  • Must be in the United States or an associated territory  
  • Must use new or like new equipment (cannot exceed a certain threshold of used parts)  
  • Cannot be leased to a tax-except entity  

The first 10% Investment Tax Credit available is the domestic content adder. As the name implies, projects must use a certain percentage of U.S.-produced materials to qualify. In the case of steel and iron, 100% of those materials must be U.S.-made as outlined by American Iron and Steel (AIS) rules, meaning everything from sourcing to final finishing has to take place in the United States. 

With that said, the domestic content adder does not apply to subcomponents used for the project, including nuts, bolts, washers, etc. 

Meeting the Project Threshold 

As with any federal funding project, businesses must meet certain criteria before accessing the federal tax credit. 

For the 10% ITC adder, manufactured products must comprise at least 40% of the total project cost. Over time, the threshold will rise, meaning more domestic products are needed to receive funding. 

Offshore wind projects will follow a similar rising threshold schedule, but only 20% of the total cost-adjusted percentage needs to be tied to U.S. manufactured products for now. 

The percentages increase over time, as seen in the table below. 

Year Domestic Product Threshold – Solar Domestic Product Threshold – Offshore Wind 
Before 2025 40% 20% 
2025 45% 27.5% 
2026 50% 35% 
2027 55% 45% 

The threshold for offshore wind will eventually reach 55% after 2027 to match solar projects.

Of course, the rules aren’t as black-and-white as one would hope, and there are breakdowns for how products are classified as domestic or foreign-made. 

For example, only components mined or made in the U.S. count toward the total adjusted content rule. Let’s say you’re using a widget made with three components – two are domestically made, but the third was manufactured overseas. Although the widget was U.S.-made, you only get credit for the two domestically produced components. 

The cost of the foreign-made component would be subtracted from the total cost of the widget, leaving you with the cost of the U.S.-made parts. Whatever that percentage is counts toward the total cost. 

It’s a lot to manage, but the rule is simple: If a component, product, or material is made in the U.S., it counts! But besides the domestic manufacturing component associated with the adder, projects also need to meet one of several conditions, including: 

  • The project has an installed capacity of less than 1MW AC  
  • Construction began before Jan. 29, 2023  
  • It meets prevailing wage and apprenticeship requirements  

Projects meeting one of these conditions are eligible for the 10% credit. 

Concerns About the Threshold 

One common concern from solar EPCs is the difficulty of hitting the domestic product threshold due to a lack of U.S.-based manufacturers for solar products. 

Solar companies have had trouble getting ahold of critical solar power system parts, including solar panels, inverters, BOS components, and racking materials. As the threshold rises, some installers fear the 10% ITC will be too difficult to reach. 

In 2022, the government issued a moratorium on solar tariffs, opening the door for cheaper panels and parts from Asian countries. Though it brings an influx of cheap parts to help installers catch up on delayed projects, they also jeopardize the chances of their solar energy system receiving the renewable energy tax credit. 

Ramping Up Domestic Production 

The moratorium was offered, in part, to keep solar projects moving while domestic manufacturers got up to speed.  

While increased federal support is a boon for companies trying to take market share from foreign competitors, the investment is a long-term strategy that leaves current problems unsolved. 

First Solar is the major solar panel producer in the U.S., but the company does not have the size to meet current demand. Other solar manufacturers include, but are not limited to, Heliene, Mission Solar, JinkoSolar, SunPower, Silfab Solar, and Hanwha Qcells, which all produce different parts of the BOS, but have also struggled to meet U.S. demand in recent years. 

However, several brands, including Qcells, have announced expansion plans in the coming years to support increased demand. For example, Qcells’ expansion in Georgia will add 2,500 jobs and double production at the facility by 2024. 

Other Available Solar Project Credits 

It might seem too good to be true, but the 30% ITC credit can rise as high as 60% in certain situations. 

Energy Community Bonus 

Solar projects can earn an additional 10% credit for building in a former energy community. What’s an energy community? It’s a location that is either a former brownfield site or a facility where coal, oil, or natural gas are mined or converted into energy. 

If the site isn’t a brownfield, the project could still qualify if it satisfies one of several other criteria, including: 

  • Either .17% direct employment OR at least 25% of local tax revenue from coal, oil, or natural gas production or storage AND an unemployment rate higher than the national average 
  • Housed a coal mine that closed after 1999 OR a coal electric plant retired after 2009 

Although many parts of the country qualify under at least one of these conditions, some sections don’t, including much of the Midwest. 

Keep in mind that energy communities should NOT be confused with low-income areas. 

Low-Income Bonus 

This 10% credit is awarded to solar projects that sell electricity to lower-income areas and is for solar installations smaller than 5MW. 

What’s interesting about this clean energy adder is that it has two tiers. Projects receive a 10% ITC if they’re located in a low-income community or on Native American land. If the installation is a qualified low-income residential building project, which, according to the Office of Energy Efficiency and Renewable Energy, requires “financial benefits of the solar facility must be allocated equitably between the residents,” it receives a 20% ITC. 

The Credits Are Complicated, But They Have to Be 

When the government gets involved, it typically comes with heaps of regulatory red tape, but the complexity of this program is vital for a few reasons. 

Tying an ITC or PTC to the program encourages solar companies to buy American-made products, bolstering the economy and decreasing reliance on foreign-made goods like solar panels, racking, and PV wire. 

Programs like this also help with nearshoring and reshoring manufacturing efforts. When domestic goods are prioritized, installers benefit from lower shipping costs, including tariffs and duties, since the material has a shorter shipping distance. 

With higher demand, companies can hire and support additional jobs in emerging industries. These careers often pay well and offer room for advancement, making it possible to make a living in a burgeoning market. It’s also important to consider where the jobs are going. Establishing companies and projects in economically depressed areas and locations where fossil fuel plants once stood keeps jobs in those communities and even adds new ones. 

Credits Keep Solar Moving 

The U.S. is moving toward a sustainable future, but can solar tax credits work? 

Solar is surging in the United States, not just because it produces low-cost energy for communities alongside hundreds of thousands of jobs. Installations can stabilize the electrical grid using new technology, keeping the lights on in homes. As the technology improves, solar could be a low-cost alternative to fossil fuels, reliably producing clean, renewable energy. 

Renewable energy still has a long way to go to become the primary power source for the U.S., but a monumental shift is possible with a clear focus on solutions.

Factory vs. Field-Made: Comparing Solar Connectors

Posted on by Mike Zimm

Utility-scale solar installations have a lot of fragile parts and pieces. Small issues can result in thousands of dollars’ worth of lost energy, system damage, or even a fire. 

According to HelioVolta’s SolarGrade PV Health Report, nearly 60% of solar installation issues were attributed to field-made connectors or wire management. Field-made connector issues alone attributed to one-third of all problems at solar sites. Within that segment, the percentage of critical and major issues attributed to field-made connectors was higher than any other damage type. 

It’s fair to say connectors are a concern, but it helps to know when and how the connectors were made. Field-made connectors are installed on-site by workers, compared to factory-made ones attached to PV wire during production.  

With that in mind, the blame then falls on either the connector or the worker who assembled it. 

With so much money and energy on the line, companies must reduce liability and increase their installations’ reliability. Could factory-made connectors improve overall production and dependability? 

The Difference Between Field and Factory-Made Solar Connectors 

Companies have two options for connectors for a utility-scale solar power array: factory-made connectors or field-made solar connectors. 

Factory-made connectors are installed onto the wire in a controlled environment. Performing the work in a manufacturing facility makes it easier to spot quality assurance (QA) and quality control (QC) issues so bad connectors aren’t sent out to the field. 

When PV wire connectors are made in the field, they’re assembled by solar installers. Typically, field-made connectors are used to ensure connectors aren’t cross-mated with other “compatible” parts. During this process, workers use certified pieces and tools supplied by a manufacturer and then do the work themselves. The important thing to remember here is that both the parts and the tools are certified, meaning installers should only use what was supplied to them by the manufacturer. 

Although several connector types exist on the market, some are more common than others. MC4 connectors, using a plug-and-socket method, are the current standard, and Swiss manufacturer Staubli is the original developer and manufacturer. Since the MC4’s inception, many other companies have started making their own compatible connectors, leading to a growing number of connector manufacturers and parts to choose from. 
 
The problem is although there is a certification process for the connectors, cross-mated parts aren’t usually tested together as a single unit. 

One Size Doesn’t Fit All 

There are several types of connectors used in solar operations, including the MC4, MC3 (phased out by MC4), and Amphenol Helios models, but you can’t always use one with another. 

While it might not seem like a big deal mixing and matching connectors across a solar site, HelioVolta noted in its SolarGrade report that pieces were either improperly installed or cross-mated in nearly 80% of field-made connector issues. 

As installers rush to catch up with delayed projects and set up new sites, the resulting time crunch opens the door for mistakes. The industry is also growing, leading to an influx of junior installers who may not have enough experience to perform the job well. 

What Does This Mean for Solar Sites? 

Connector issues set the stage for several problems. From water and moisture exposure, bad PV connector points, and damaged wires from bad crimps or other mistakes, every issue could open the door to a costly disaster. 

So, what happens when a PV system has connector issues? Quite a lot, actually: 

  • Lost power and outages – When connectors fail, the solar panel is no longer reliably connected to the Balance of System (BOS). When that happens, the system produces less energy. 
  • Ground faults or arcing – Ground faults and arcs occur when there isn’t good contact in the connector. Heat expands the parts over time, opening gaps and eventually creating an arc that can damage surrounding wires and materials. 
  • Fires – When fires break out, they can quickly cause millions of dollars in damage. Once the fire is out, crews need to replace damaged and charred parts, adding sunk time and labor costs to the total bill. 

Not every field-made connector is an inherent fire risk, but they may carry more risk than factory-made parts, according to HelioVolta’s data. 

Avoiding Connector Issues 

Limiting the number of fail points is critical when dealing with large utility-scale installations. 

Buying factory-made connectors addresses a crucial failure point, setting your solar energy project up for better long-term success. 

According to the SolarGrade PV Health Report, only 6% of issues at solar arrays were tied to factory-made connectors, much less than the 33% associated with their field-made counterparts. Manufacturer-made parts also reduce on-site critical and major problems, thanks to each manufacturer’s rigorous QC and QA programs. 

The Best Connector for the Wire 

Another benefit of factory-made connectors is that manufacturers can use compatible products with their wire and cable. The result is a more reliable connection, thanks to a standardized process retaining integrity across the board. 
 
Installers may rush or get stretched thin, limiting their attention, resulting in potentially loose or poor connections. Furthermore, unlike field-made connectors that may lack QA assurance from another worker in the field, most manufacturers have staff on hand to spot potential concerns before the wire leaves the factory. 

What Do Bad Connectors Look Like? 

No matter what type of connector is used, you should know what damage looks like. 

We recommend having crews inspect solar sites once every 6 months or so and check every connection point for common problems, including: 

  • Gaps 
  • Cross-threading 
  • Sun Damage 
  • Overheating 
  • Other connector or wire damage 

One of the easiest mistakes to make is using incompatible connectors. When connectors are cross-mated without checking for compatibility, it can put the solar installation at risk. Mismatched connections can generate a lot of heat, making them easy to spot with a temperature gauge. 

It’s also important to ensure every installer is trained to properly work on solar panels, cabling and other balance of system (BOS) pieces. 

Know What You’re Getting 

Simply put – buying factory-made connectors reduces risk. 

Manufacturers have strict quality control standards to prevent damaged or improperly assembled connectors from being shipped out to the field in the first place. If bad parts do get shipped, they can also work alongside customers to quickly correct mistakes before dangerous situations develop. 

Not all field-made connectors will have issues, and many will be fine. But when the goal is to limit risk and liability on your renewable energy project, factory-made connectors are the way to go.

Avoiding Connector Issues on Utility-Scale Solar Sites

Posted on by Mike Zimm

Installation costs, labor, and product reliability often go together when bringing utility-scale solar projects online. 

Despite declining hard and soft costs, there is still pressure to deliver projects on time and under budget. This means installers look for every way to save time and money. 

Material and labor costs usually provide some savings, but the solutions aren’t always elegant. One issue creeping into the solar conversation is the reliability of PV wire connectors and harnesses that cut down on labor but increase the number of fail points in the balance of system (BOS). 

When crews use harnesses, it means more connectors to bring wires together. More connections generally mean more opportunities for issues. Whether it’s installation related, tied to the weather, or just a random event, solar panels can’t do their job if connectors break. 

By limiting the number of PV cable connectors, installers reduce the number of fail points and increase reliability. 

Why Companies Use Connectors 

Every solar project will require MC4 connectors, but the number needed depends on how the installer approaches the problem. 

When companies use Sun-Pull bundled PV wire, it’s a 1:1 connection. This means one wire, one string, and one connector from the solar panel to the combiner box. Although the bundle has individual #10 AWG conductors, they can be terminated at different points along the run. As a result, workers only have to move down the line once. 

If a company decides to increase the number of connectors used, it would need about half the amount of wire compared to a bundled cable solution. They could also use a larger gauge wire (in this case, #8 AWG) than the #10 AWG used in the bundled wire, reducing electricity lost from the solar panel to the combiner box. 

Using connectors across the solar array sounds like a slam dunk, but several drawbacks complicate matters. 

No Real Cost Savings 

Although the installer needs about half the wire, the larger gauge wire eats into the cost savings. Not to mention, the project now requires harnesses and additional connectors to complete the job. All told, the savings are nearly negligible. 

The company might find labor cost savings, which are reduced since workers are installing less wire. Using more connectors saves labor hours, but crews still need to take multiple trips down the line. 

“It’s a less elegant method,” Sun-Pull Wire President Nick Eberly explained. “It will cut your labor in half, you only have to go down that row half the number of times because you’re installing a harness, but you’re installing double the number of connectors. You’re also still going down the row multiple times, compared to a bundled wire which requires going down the line once.” 

More Connections, More Failure Points 

It might not seem like a big deal, but too many connectors can cripple solar installations. 

If you’ve ever left something plastic outside, you’ve likely seen firsthand what the elements do to it over time. The same can be said about the plastic housing connectors have that protect the pins and sockets inside. 

When joining PV panels to the combiner box, the plastic connector pieces are exposed to the elements, eventually degrading them. Although they’re sunlight resistant, they’re still vulnerable to excess moisture, snow, and other environmental factors. If water sneaks into the connector, it can create a short. 

“If you have a piece of wire that’s insulated, that can stay outside for a really long time in the elements,” Eberly explained. “Wherever you put that connector, that’s generally going to fail quicker than the wire itself. And every time one of those connectors blows, a fuse blows too. That lowers the output, and then you have to fix that.” 

Eberly suggests a single conductor approach that eliminates as many connectors as possible. In this scenario, a wire runs from the solar panel to the combiner box, keeping sensitive pieces safe while limiting exposure. 

It’s Not Always the Connector’s Fault 

Sometimes connectors fail through no fault of their own – they get a little help from some unlikely sources. 

The products widely used today are called MC4 connectors and were developed by Staubli, a Swiss manufacturer. Although the company owns about one-third of the product’s global market share, hundreds of global connector manufacturers exist, mostly in Asia. Unfortunately, there isn’t a universal standard, meaning manufacturers can produce similar products with subtle differences that could impact performance. 

Beyond manufacturing, installers may cause connector failures. From putting connectors on backward and not crimping them hard enough to crimping the surrounding wire insulation, cross-threading, or under/over-torquing them, problems can occur. 

As a result, issues could range from a loss of electrical output and performance to full-blown fires. 

According to a 2019 Fraunhofer Institute for Solar Energy Systems report, many connector failures found on utility-scale solar arrays happen within the first five years. Additionally, a joint study by PVEL and HelioVolta found connector issues in more than 70% of commercial and industrial projects analyzed by HelioVolta. 

With so many variations on the market, it’s difficult to ensure quality, leading to potential delays and setbacks. And when harnesses are used, connector failures often mean the whole harness needs to be replaced. 

Small Parts, Huge Impact 

Connectors may not seem like a big deal, but there’s a cascading effect whenever one fails. 

Let’s say a connector fails at a large solar project. The system loses output because of the damaged connector, and the piece could create a situation where arcs, sparks, or fire occur. 

When that happens, the utility or company has to pay labor costs for workers to go out and fix the damage and material costs for a new connector, PV wire, and other BOS parts. The company also loses money because the system isn’t generating as much power, leading to lower profits and potentially unhappy customers. 

This isn’t to say every connector failure will cost hundreds of thousands of dollars to repair. But when multiple connectors fail on a large site, several tiny problems can become a giant headache. 

One (String) and Done 

There isn’t one way to wire a utility-scale solar power site, but it’s possible to save time, labor, and money by finding a system that works well for you. 

Bundled PV wire is a simple solution that reduces fail points from the solar panels to the combiner box and lets workers travel each row once. There’s also no need for harnesses or multiple connection points to connect wires. It’s a safer, more reliable system with less risk of failures, such as electrical arcing or dangerous contact with DC electricity. 

Like other types of renewable energy, solar is on the rise. Of course, work must be done to fully standardize the process, but the necessary steps are taking place. According to PVEL, the NEC was revised in 2020 to require connector pairs to be tested and certified for intermateability. It’s one small step toward a universal process in the United States. 

Connectors are only one piece of a solar BOS, but they’re a potential weak point. Finding solutions that need fewer parts and are more reliable makes it easier to save money on future projects and speeds up the nation’s move away from fossil fuels.

What Happens If the U.S. Reinstates Solar Panel Tariffs?

Posted on by Mike Zimm

For the most part, this has been a good year for the solar industry. 

The Inflation Reduction Act of 2022 (IRA) supercharged the industry, creating billions of dollars in investments. It also led to announcements of more than two dozen solar manufacturing facilities and 10 utility-scale battery storage manufacturing plants across the United States. 

The IRA isn’t the only thing adding fuel to the solar industry’s fire. Growth can also be attributed to the Biden administration’s 24-month moratorium on solar panels coming from four Asian counties. The move allows Cambodia, Malaysia, Thailand, and Vietnam to sell low-cost solar panels to U.S. companies and gives stateside producers time to ramp up production. 

A Bumpy Road 

While everything seems fine on the surface, solar installers face rising uncertainty from Congress. A bipartisan effort to reinstate the tariffs has moved through the House and Senate but was vetoed by Biden in mid-May. 

According to lawmakers, overturning the moratorium would be a rebuke of the Chinese government, spurring domestic production and investment. The problem is that reinstating the tariffs would potentially derail solar installations and investments without guaranteeing U.S. manufacturers can fill the void. 

What does reinstating tariffs mean for the rapidly expanding solar industry? Based on earlier experience, there are several things we can expect. 

Market Uncertainty 

When something changes in the market, everyone has to adjust. 

From a supply chain standpoint, reducing the flow of low-cost solar panels from Asia can delay projects. It also forces manufacturers to source materials elsewhere or jumpstart domestic production to keep shipping panels. 

Meanwhile, distributors must scramble to get the products they need for installers, who, in turn, struggle with having the right amount of labor available. The labor aspect is especially important. According to Abigail Ross Hopper with the Solar Energy Industries Association (SEIA), Congress’ move to overturn the moratorium could affect up to 30,000 jobs. 

Since the tariff decision was made last year, there has been a drastic increase in solar projects across the country. During COVID, supply chain issues created delays for many projects. With a wave of new panels, those installations have picked up again. It’s also encouraged other companies to make announcements for upcoming solar projects. 

The problem is reinstating the tariff. In a burgeoning industry like solar, market uncertainty can halt new investments. When companies can’t plan or forecast, they struggle to find the budget to complete projects. Then, they get delayed or shelved until market conditions improve. 

Strained Geopolitical Relationships 

One of the main reasons the solar panel tariff was introduced was due to an ongoing trade war with China. 

On several occasions, the U.S. has accused China of “dumping” materials into the American market, creating conditions that make it hard for domestic producers to compete. Dumping, as the name implies, occurs when a country sells raw materials, products, or other goods in another market at a low price, sometimes less than the cost to produce it. 

When dumping occurs, domestic producers are forced to sell their products at a higher price and potentially lose market share or lower prices to compete. In either case, it can hurt competition in the buying country’s market and disrupt the economy. 

U.S. officials believe China is going through Malaysia, Thailand, Cambodia, and Vietnam to skirt anti-dumping regulations and get solar panels into the U.S. market. Reinstating the solar panel tariff may not directly impact China, but could cause a rippling effect, further hurting the relationship between the two superpowers. 

There is one positive aspect to this situation, though. With tariffs on solar panel imports, domestic producers will have room to ramp up production to meet clean energy demand. 

Higher Short-Term Pricing 

When there’s less product to go around, prices naturally rise. 

Shortly after President Biden suspended solar panel tariffs, companies jumped at the opportunity to buy low-cost panels from overseas. Prices dropped because there was enough supply to meet growing demand in the U.S. Unfortunately, that would change if tariffs were reinstated. 

Think of it this way: eggs are typically cheap and don’t often fluctuate in price because demand is generally constant, as is supply. But earlier this year, prices skyrocketed after avian flu reduced the number of eggs produced while demand was unchanged. As egg producers fought to catch up, the cost of eggs exploded by double digits, with people sometimes paying $5 or more per dozen. Today, prices are slightly higher than last year, but we’re nearly back to equilibrium. 

So, let’s use the same supply and demand lens on the solar panel situation. What would happen if the steady supply of low-cost panels became severely restricted? In the short term, prices would spike as supplies dwindled and demand stayed high. Prices will jump if domestic producers and manufacturers in other countries don’t fill the immediate void. 

Once manufacturers in the U.S. increase their output, costs will come down until reaching an equilibrium price. 

More Domestic Investment 

Although having an influx of solar panels is great for the burgeoning solar industry, Congress has a good reason for reinstating the tariffs; legislators want to see domestic producers in control. 

For all intents and purposes, the White House has promoted green energy economic development across the board, not just solar. The Inflation Reduction Act (IRA) has been a boon for solar and other renewables, resulting in $150 billion in capital investments across many clean energy projects. 

It’s about more than simply making more panels and parts, though. Every investment in renewable development in the U.S. is an opportunity to create thousands of high-paying jobs in an expanding industry. Without a steady stream of utility-scale solar products, companies can’t predict labor needs. 

More production also gives the U.S. a chance to meet its high-level sustainability goals. According to the White House, the U.S. wants to reach 80% renewable energy generation by 2030 and 100% carbon-free electricity by 2035. They’re lofty goals, especially when nearly 80% of our energy was generated by fossil fuels in 2021. 

With more investment in renewable energy, there is a chance to turn the tide. According to the EIA (Energy Information Administration), total solar generation share could double from 3% in 2022 to 6% by 2024, thanks to lower production and installation costs combined with tax credits and other incentives. 

Where Do We Go from Here? 

No matter what happens with the tariffs, it’s important to remember the moratorium was only temporary. 

The stay was meant to give solar installers, companies, and utilities time to complete projects, increase production, and build a thriving U.S. solar market. Two years may not cover a manufacturer’s ramp-up timeline, but it gives installers time to work on projects while they get up to speed. 

It’s also worth noting that although tariff relief supports low-cost solar panels, the IRA has been doing the heavy lifting to create investment and manufacturing opportunities for companies. 

Repealing tariff relief on solar panels now may be a minor setback, but it shouldn’t cloud our view of what has been done so far. American manufacturing is growing, with companies like Sun-Pull producing critical infrastructure like bundled PV wire. Other companies are coming online soon, joining manufacturers who have found footing in the space, making panels and Balance of System (BOS) items. 

Renewable energy, including solar, is the future, but how we approach the coming years depends on our commitment to green energy and divesting from fossil fuels.  

Anything is possible, but we need to move quickly.

Is Corporate America Leading Solar Adoption?

Posted on by Mike Zimm

Utility-scale solar adoption is rising in the United States, but do we have some of our favorite brands to thank? 

The U.S. Energy Information Administration (EIA) says more than 29 gigawatts (GW) of solar energy could be installed this year, comprising more than half of new energy coming online. According to the organization, the projected 29.1 GW would be more than double the next highest installation year in 2021. 

Solar has been part of the ongoing renewable energy industry renaissance for over a decade. It’s not showing signs of slowing down, either – even with supply chain hiccups in 2022. 

So, what’s causing so much change in the solar market, and why are people bullish on the future of solar power? It comes down to a few stars aligning at the right time, including policy changes, new funding and support, and better, more consistent supply. 

It also helps that America’s largest and most influential brands are stepping up to add solar to their portfolios. 

Utility-Scale Solar Moves Beyond Energy Producers 

When you think about utility-scale solar, utilities are the first thing that comes to mind. 

Although utilities are still the largest solar energy producers, corporations across the U.S. are testing the waters. Increasingly, these companies have aggressive renewable energy and carbon neutrality goals, making their investments a no-brainer. 

Meta (which owns Facebook, Instagram, and WhatsApp) is leading the way with nearly 3,600 MW (3.6 GW) of solar power installed as of June 2022. Other corporate giants like Amazon, Microsoft, Target, Cargill, and Kaiser Permanente are following suit, investing in solar projects across the United States. In fact, 18 of the top 25 companies on the SEIA’s 2022 Solar Means Business report have 100% renewable energy or carbon-neutral goals. 

Though the attention often goes to huge companies, the truth is hundreds of organizations are investing in utility-scale solar. Through June 2022, about 19 GW of solar can be attributed to corporate solar investments, and 27 GW more is expected to come online by 2025. 

Why Are Companies Choosing to Go Solar? 

Billion-dollar organizations aren’t usually known for their kindness, but investing in solar installations carries several benefits. 

Not only do they generate electricity that can be used by the company to offset electricity costs, but the projects also open the door for more clean energy initiatives to offset greenhouse gas emissions. 

Sustainability 

According to the SEIA, nearly one-fourth of large-scale solar projects had at least one commercial buyer. 

We know solar energy is one way of reducing our carbon footprint while distancing ourselves from fossil fuels. Reducing carbon dioxide emissions impacts greenhouse gases, which radiate heat in our atmosphere. Greenhouse gases are partially to blame for rising temperatures causing environmental concerns, including ocean acidification. 

The good news is corporate solar installations are making a difference. According to the SEIA’s reporting, the amount of CO2 reduced is equal to removing 4.4 million cars from the road. 

It’s Tax-Friendly 

When the Inflation Reduction Act was signed into law in August 2022, it opened the door for homeowners, companies, and others to invest in solar energy. 

Not every company is Meta, Walmart, or Amazon, but they can still take advantage of IRA tax incentive programs. These include the Investment Tax Credit (ITC) and the Production Tax Credit (PTC), which cover installation costs and electricity generation, respectively. 

The Investment Tax Credit is upfront and reduces federal income tax liability for installation costs, depending on the system’s cost. The Production Tax Credit is determined by the amount of electricity generated. It reduces federal income tax liability based on how many kWh are produced during the system’s first 10 years. 

Depending on the size of the installation and how much power is generated, sometimes the ITC is the better tax credit to choose. However, if the system produces a lot of electricity, the PTC is more beneficial. 

There are several eligibility requirements tied to the incentives, but navigating them successfully usually produces long-term savings. 

Low-Cost Electricity 

No one can resist a bargain, including your friendly neighborhood conglomerate. 

Renewable energy is one of the cheapest forms of energy out there, undercutting fossil fuels across the board. One reason for the low cost is the massive drop in solar project costs over the last decade. According to the World Economic Forum, solar prices have fallen roughly 85% in the last decade, positioning more companies than ever to take advantage of emerging technologies. 

Solar isn’t the only renewable energy worth considering. Most renewables coming online today, including wind energy, produce electricity more cheaply than traditional fossil fuels like natural gas or coal. 

Positive Long-Term ROIs 

Establishing a solar farm is still expensive, but government tax incentives and generating low-cost electricity for decades lessen the sting. 

Solar energy electrical costs are between .03 and .06 per kilowatt hour (kWh). Fossil fuels come in slightly higher, at .05 to .17 per kWh. Kilowatt-hours measure electricity usage based on a 1,000-watt appliance. 

When stretched out across the typical lifespan of 25-30 years with little maintenance, it’s understandable why more companies are investing in panels. Panel warranties also usually last 25 years, making them a low-risk investment for companies with aspirational emission reduction and energy goals. 

Renewables Become Commonplace 

Establishing massive solar farms was once too expensive for everyone but the largest companies. 

Today… not so much. 

Building a solar array is still expensive, but the cost of entry is falling, allowing more companies to participate. Meanwhile, installations are more reliable and last longer, improving ROI across their lifespan. 

This isn’t to say solar energy, wind power, geothermal energy, and other renewables will take over tomorrow. All renewables, including solar, must keep improving to increase efficiency and live up to the world’s ambitious climate change goals. 

Corporate America, including some of the world’s most influential brands, is helping lead the charge. Of the top 25 companies featured on SEIA’s Solar Means Business report, 16 are on the Fortune 500. 

It’s an exciting time to work in the renewable space. Solar technology is rapidly improving, and new innovations are on the horizon. Companies jumping on the trend today could potentially position themselves for massive future returns.