On Feb. 16, Xcel Energy announced catastrophic changes to its Solar Rewards solar photovoltaic incentive program. Currently, the program is not accepting new project applications until the Colorado Public Utilities Commission addresses the issue. The immediate result is that sales activity in Xcel’s solar PV market has come to a grinding halt. In the meantime, until this issue is resolved by the PUC, local solar companies only have previously approved projects, if any, to sustain them while the future of Colorado’s solar industry hangs in the balance.
Prior to this unexpected, unilateral announcement, solar incentive levels had been following a “reduction road map” that Xcel itself had established in 2009. Per the program’s original intention, the road map showed how the solar incentives would decline over time in conjunction with ongoing decreases in solar costs. Indeed, both the incentives and the cost of installing solar have decreased by about 50 percent in the past five years. Most important, the road map provided critical transparency and long-term visibility that local businesses could depend on to make important hiring and investment decisions. Since the program already charted a course for ongoing incentive reductions, it is unclear why Xcel took this unexpected detour from its own road map when it could clearly cause significant harm to the local solar industry.
Some have claimed that the cost of the Solar Rewards program is too expensive. To the contrary, existing law caps the impact on ratepayers to a 2 percent increase on their electricity bills. This amount is small relative to the double-digit cost increases that fossil fuels have experienced (Xcel’s rates have gone up over 20 percent in the last six years) and will likely continue to experience in the long term (Xcel’s rates are expected to increase another 21 percent in the next six years).
Despite the 2 percent rate impact cap, Xcel has been spending more than this amount in the short term — acting as a “lender” to provide the capital required to keep the program going, all while making a guaranteed rate of return on the outstanding “loan” balance. Should this alarm us? No, because the program was designed to allow for this, much in the same way that Xcel provides the capital to build new coal-fired power plants and then charges ratepayers a percentage of the cost over the course of 20-plus years, also while making a rate return. Indeed, this is the main way that Xcel makes its profit, so why should the construction of solar projects be any different?
Xcel’s actions threaten to reverse the progress that Colorado has made since the Solar Rewards program was launched five years ago as a result of a voter-approved Renewable Energy Standard (RES). Colorado’s RES is one of the best in the country and Colorado has been among the top five photovoltaic markets in the U.S. for many years. Since its launch in 2006, the Solar Rewards program helped create over 5,300 local solar jobs at over 400 companies that have collectively installed more than 70 megawatts of customer-sited PV systems. If Xcel’s actions are approved by the PUC, I predict that as much as 75 percent of these jobs will be lost by the end of this year, causing Colorado to lose valuable solar industry infrastructure that took five years to build.
This unilateral move by Xcel is a clear departure from the expectations of Colorado’s voters, explicit in 2004’s voter-approved ballot initiative that the solar incentive program should contribute to building a sustainable solar industry in Colorado. Given the spotlight that President Obama put on the Colorado solar marketplace in 2008, this is an embarrassment to our state that might spoil Colorado’s New Energy Economy success story.
Xcel’s regrettable and surprising act demonstrates the urgent need to replace Xcel Energy with a third-party administrator for the Solar Rewards program. I hope this is the same conclusion the PUC reaches when it addresses this issue — which hopefully isn’t too late for Colorado’s solar industry.
Blake Jones is president of Colorado-based Namaste Solar, an employee-owned solar photovoltaic company that employs more than 75 people in the Boulder-Denver area.
