Winning the Midwest: We look at how a new solar market is forming in the Midwest

Solar in the Midwest Map

You’ve probably heard, but more solar is being installed than ever before. As the cost of solar dropped the last decade, the economic case in areas of the country with high electricity prices was simple. This isn’t the case in the Midwest, where energy costs are lower, which keeps everyone mellower about the fossil fuels being mined and fracked in their backyards (we say this lovingly as Ohioans).

So, sure, most of the action is on the coasts, but even the Midwest is now starting to emerge from its cave, rub the soot from its eyes and see (and harness) the light.

Here’s what solar industry onlookers are buzzing about in the Heartland.

This article appears in the May/June issue of Solar Builder magazine. Subscribe here for FREE.

Midwest Means MW-scale

Cheaper electricity and a less demanding public means the case for solar in the Midwest mostly starts with policy incentives, and with little public demand for action, the balance of political influence over the shape of those incentives is tipped a bit more to utilities and any other interested stake holders (legacy fossil fuel companies?).

Utility-scale projects represent a little over half of the installations to date in those Midwestern states and about three quarters of the 2016 installations, according to data sent our way by GTM Research. The distributed generation markets in each state are all quite small still — sub 10 MW per state in each of the residential and non-residential markets for all of 2016.

The latest legislative triumphs in the region all seem to support this trend too with renewable energy portfolio standards (RPS) being raised in Illinois and Michigan and unfrozen in Ohio (for now). The Illinois bill in particular was two years in the making and has solar developers excited.

“It creates an adjustable block schedule similar to the successful California Solar Initiative model,” says Owen Goldstrom from Alta Energy, an analytics and procurement company that identifies and executes opportunities for renewable energy. “It’s an opportunity that we are closely tracking, and communicating to our customers with property in Illinois.”

Emerging Opportunities

chicago illinois solar

RPS standards don’t necessarily directly translate to DG solar projects unless there is a way for a smaller scale distributed system to benefit from the renewable energy credits (RECs), Goldstrom says. So, it is worth noting that these RPS bills did come with DG benefits too. The legislation in Michigan helped preserve net metering rules going forward, and GTM Research’s Allison Mond says they are classifying Illinois as an “emerging residential market.”

“The Future Energy Jobs Bill passed in the state mandates that a quarter of the 675 MW of DG required for the new RPS standard consists of sub-10-kW systems,” she says. “Though the market is still quite small, we expect residential installations in the state to double in 2017 over 2016 capacity and then continue to grow by between 100 and 200 percent each year through 2021.”

Illinois also allows for third-party ownership (leases or PPAs) of systems.

Implementation of Illinois’ RPS bill is the top issue of SEIA’s Midwest Committee, which has been working with the Illinois Power Authority to “get the regulatory language that allows the intent of the bill to move forward,” says Sean Gallagher, VP of state affairs for SEIA.

Perhaps the biggest exception to all of our Midwest generalizing so far is in Minnesota, where community solar has grown to become the third largest community solar market in the country after California and Massachusetts.

“It went from a cute idea to big business in two years, and now community solar is really picking up,” says Jake Rozmaryn, CEO of Eco Branding, the agency that represents the Midwest Solar Expo, now in its fifth year. “Large-scale development in Minnesota was over 300 MW in 2016 and is expected to be over a 1 GW in five years. Traction is there.”

midwest-solar-installations-chart

Lingering Problems

We start in Indiana, which is ground zero for problematic energy legislation right now. The much-discussed SB 309 would phase out net metering in tiers: Early adopters would be able to keep net metering for 30 years; those who install between July 1 and 2022 can keep it for 15 years. Anyone installing after that date would be under the new rules.

What are the proposed new rules? Essentially it would be a “buy all, sell all” arrangement where solar customers sell their power back to grid for the wholesale rate (~3 cents per kWh), and then buy it back at the retail rate (11 cents per kWh).

The carrot in the bill for the solar industry is that power purchase agreements (PPAs) would be made legal.

UPDATE: That bill is no longer proposed — the Governor signed it into law.

Gallagher also pointed to Iowa, which doesn’t have a huge rooftop market yet, but has an important DG proceeding happening that will set rate terms and compensation structure going forward “and perhaps set some precedent in the Midwest.”

“We’re also paying attention to a bill in Missouri that would be harmful to rooftop solar,” he says. “We’re just trying to keep those markets open. It’s not a giant market, but we don’t want to see bills that just squash it.”

Arguably worse than the specific inhibitory policies is the general uncertainty lingering over much of the region. For example, we chatted with a developer based in New York who has been eyeing Ohio as a next great opportunity. Well, with the state passing a bill to freeze its RPS, which the governor vetoed, only to have a new, even more limiting bill be passed — how can anyone get a feel for how to proceed over the long term?

Political Will of the Midwest

Getting to this point was definitely not easy, and maturing the market from here will require even more work. Relaxed Trump-era carbon regulations might defibrillate the fossil fuel industries. Longer-term environmental and social arguments in general seem to carry far less weight than short-term costs, politically. Plus, Midwestern utilities have had the benefit of seeing net metered residential systems deployed on a large scale on the coasts, and some are trying to nip it on the bud. For example, ComEd tried to get a demand charge put into that aforementioned bill in Illinois, even though the net meter market in the state at the time was around 800 total customers. The Public Utilities Commission in Ohio is also considering proposals by several utilities in the state to double fixed rates for all customers.

But despite it all, the momentum is real. SEIA and the Environmental Law and Policy Center (ELPC) formed a Midwest coalition about two years ago thinking there were opportunities on the horizon for new markets to develop. It was a baby step. SEIA took a larger step this year and formed a Midwest Solar Committee.

“We recognized that there’s been some activity toward the end of last year that’s starting to bring those potential new markets forward, which provides justification for SEIA and its members to devote more attention to those states,” Gallagher says.

“Utilities in the Midwest have a lot of political clout,” Goldstrom says. “However, solar companies and industry organization have demonstrated a significant capacity to drive change and work with legislators on policy relating to both utility scale and distributed scale generation. I have been pleasantly surprised by the success of a lot of these lobbying efforts.”

By the way, ComEd’s demand charge request didn’t make it into the final version of the bill.

“I think the biggest success solar has had in the Midwest is becoming a competitive form of generation, and as solar prices continue to come down, the cost for electricity in general continues to go up, even in the Midwest,” says TJ Kanczuzewski, president of Inovateus Solar, based in South Bend, Ind. “Even in places that have some cheaper electricity from coal or hydro or even nuclear, electricity prices continue to rise by an average of 5 percent annually while solar continues to become more cost competitive.”

Residential Solar IllustrationROOM FOR Residential

As we wrote about the lagging prospects of residential rooftop solar in the Midwest, Sunrun became the first large national residential rooftop solar company to expand into the Midwest, setting up shop in Wisconsin.

Customers in Wisconsin can either own their system outright with Sunrun BrightBuy or own and finance it with Sunrun BrightAdvantage, using a loan arranged by Sunrun.

“We see a demand for solar that has been underserved in the state and look forward to giving residents a choice to reduce their electric bills with solar, while providing value to the grid,” said Lynn Jurich, CEO of Sunrun.

This highlights Sunrun’s ability to enter new markets in a low fixed-cost way through collaborating with local partners in the state. Sunrun’s economic investment is adding job opportunities in Wisconsin, and it is currently hiring for several positions for its solar team in Southeast Wisconsin.

Chris Crowell is managing editor of Solar Builder.

— Solar Builder magazine

PUC of Ohio seeks public comment after utilities seek higher fixed charges

Ohio utility solar

The Public Utilities Commission of Ohio (PUCO) is kicking off a series of four public hearings around the state over the next two weeks to get public input on AEP Ohio’s proposal to more than double the ‘fixed charges’ residents must pay on their electric bills each month. Fixed charges are the portion of the electric bill consumers pay regardless of what volume of electricity they use, a billing tactic that especially disadvantages those who use the least energy, families who can least afford to pay more, and households that want to support or invest in efficiency upgrades or solar.

PUCO hearings on the AEP fixed charge proposal will also be held in Marietta and Columbus, and commissioners have already been hearing on the issue in writing from concerned residents.

“If my electric bill with AEP rises, it reduces from my budget of food, medication, hospital bills, treatment costs, clothing and any other expense you’d expect to have as a mother,” wrote Michelle Peterson, an AEP customer from the Columbus area. The recent post What Ohioans are saying about fixed charge hikes proposed by electric companies provides additional quotes from letters submitted by Ohio residents to the PUCO on the AEP fixed charge proposal, as well as additional background on the issue.

RELATED: Utilities are dramatically increasing investments in distributed energy 

Around the country, utility proposals for increases in mandatory fixed charges are largely being rejected or dialed back by utilities commissions. In Ohio, AEP isn’t the only utility in the state pushing to raise mandatory fixed charges. Here’s a full roundup:

• AEP Ohio wants to more than double its fixed monthly charge – up to $18.40 a month.
• Duke Energy Ohio wants to nearly quadruple their fixed fee – up to $22.77 a month.
• Dayton Power & Light has a proposal to triple its fixed charge.
• FirstEnergy is expected to announce a fixed-fee hike proposal soon.

— Solar Builder magazine

Energy groups call for Ohio to unfreeze renewable energy requirements

Ohio solar

Ohio has a legacy of ignoring the solar energy boom in favor of trying to drive minuscule victories in fossil fuel extraction in state. Leading advanced energy companies are trying to change this, urging the Ohio General Assembly to reject proposals that would extend the current freeze of the state’s Renewable Portfolio Standard (RPS) and Energy Efficiency Resource Standard (EERS). As the legislature reconvenes, these businesses sent a letter, signed by 19 companies active in Ohio, calling on legislators to recommit the state to energy innovation instead of continuing a freeze that has paralyzed advanced energy investment here.

“The legislature has a clear choice. It can create a business-friendly environment to attract investment in advanced energy or Ohio can keep the door shut on billions of dollars of benefits,” said Ted Ford, president and CEO of Ohio Advanced Energy Economy. “By embracing advanced energy, Ohio will send a signal to the rest of the country and the world that it is laying the foundation for long-term growth and competitiveness.”

RELATED: Solar vs. the state: Net metering, rate battles are heating up around the country 

Senate Bill 310 of 2014 imposed a two-year “freeze” of the state’s renewable energy and energy efficiency requirements, which were designed to diversify Ohio’s energy sources and save Ohio electricity customers money on their utility bills. The freeze ostensibly offered an opportunity for an appointed Energy Mandates Study Committee of the legislature could evaluate the costs and benefits of these rules. In a series of hearings, the Study Committee focused entirely on the supposed costs of the renewable energy and efficiency standards, and gave scant attention to the benefits for ratepayers and the state economy. The Study Committee recommended an indefinite extension of the freeze, but Governor Kasich immediately called that “unacceptable.” The freeze is due to expire at the end of 2016.

The freeze has had a chilling effect on investors and project developers, signaling that Ohio is no longer a receptive market for innovative technologies. While Ohio saw approximately $750 million in wind and solar investment in 2012, solar investment dropped below $100 million in 2013, and wind development dropped to zero.

“The freeze on Ohio’s advanced energy standards sends a message to Ohio consumers and the rest of the country that Ohio is going backward, not forward, on energy,” said Steve Melink, CEO of Melink Corp, an advanced energy company in Southwest Ohio. “Competitive markets and innovation are driving down energy costs, giving consumers choices, and diversifying energy sources in many other states. Ohio is the birthplace of innovation, and we should be leading the way.”

Prior to the freeze, Ohio’s EERS and RPS were on track to provide billions of dollars in economic benefits to the state and its residents. After the EERS was adopted in 2008, energy savings achieved by Ohio utilities increased 2,800%, from 55 GWh in 2008 to 1,571 GWh in 2012 – the equivalent of saving over 180,000 tons of coal. Studies by the Ohio State University have shown that ratepayers saved approximately $1 billion through the EERS while it was in effect. Spurred by the RPS, renewable energy development quickly ramped up, with $1.3 billion in total investments from 2009 to 2013.

“It is important that stable policies encourage innovation and a more modern electric grid. The advanced energy standards achieved this aim by setting clear goals and allowing the market to determine the most cost-effective means of achieving them,” said Ford. “We encourage the legislature to adopt policies that create certainty in the markets and provide opportunity for energy efficiency and renewable energy to compete in the marketplace.”

— Solar Builder magazine