Northern Michigan solar companies navigate a changing industry
The answer, it proves, is more difficult to come by than most might realize. On the one hand, most metrics show that solar power is on the rise. According to statistics from the Department of Energy, the United States generated 96.1 million megawatt hours of solar power in 2018 alone – a figure that has more than tripled since 2014. Through June of this year, the U.S. had already generated 53.6 million megawatt hours of solar electricity, indicating a possible record-breaking year in 2019.
Statistics look promising on the state level, too. Michigan ranks lower than most other states in the country for solar irradiance (or solar exposure), a measure of the amount of radiant energy making it from the sun to the Earth. Still, according to the Solar Energy Industries Association (SEIA), Michigan had more than 5,300 solar installations as of Q2 2019, with a total capacity of 160.31 megawatts – enough to power more than 26,500 homes. Michigan is growing in solar, too: while the SEIA ranks the state 32nd in solar production now, it also projects a solar capacity expansion of 921 megawatts in the next five years – enough to secure a ranking of 23rd.
The SEIA also counts nearly 4,200 jobs in Michigan solar, spanning 240 companies. Several of those players are local. In 2016, Traverse City Commissioners approved a resolution to power all city operations – including municipal buildings, streetlights , wastewater treatment facilities, and other city services – with renewable energy by 2020. And in August 2018, board members of Traverse City Light & Power (TCL&P) went one step further, approving a pledge to generate 100% of the utility’s community-wide power output using renewable resources by 2040. The TCL&P resolution made Traverse City the first city in Michigan to commit to 100% renewable energy, and one of the first hundred cities nationwide.
According to Ken Zebarah, Harvest Solar’s director of commercial sales for Michigan, Indiana, and Ohio, Traverse City’s utility-scale commitments to solar energy have opened up opportunities for homeowners and businesses that might be interested in installing their own solar systems. Harvest Solar isn’t local; the company is based in Jackson and serves customers throughout the entire Midwest. However, Harvest is still playing a role in Traverse City’s solar expansion, thanks to the 2.5-megawatt solar field it is building for TCL&P on M-72.
“Us building two-and-a-half megawatts up there allows us to build other smaller projects more cost effectively, because we can purchase better and coordinate logistics better,” Zebarah said. “Those larger-scale projects that utilities and cities are starting to implement are indirectly making small projects more cost-effective.”
Some solar companies, meanwhile, are focused on smaller residential and commercial projects. One example is Traverse Solar, a local startup that offers small-scale solar tracking systems. Solar tracking maximizes the effectiveness of solar panel setup by enabling the panels to follow the sun’s arc through the sky over the course of a day. According to Traverse Solar CEO Nathan Bildeaux, the quality of solar panel technology is improving so quickly that even the solutions the company offers have evolved considerably in the past few years.
“The technology has gotten cheaper and the solar panels have gotten better,” Bildeaux said. “Two years ago, we were buying 250 watt, 60-cell panels. It’s almost unheard of, on a residential scale, to buy that low of a wattage panel now. We’re seeing 300s, 310s, up to 400-watt panels. That allows for great power density, especially on the residential scale where people are conscious of space. It makes it much more appealing.”
Bildeaux adds that, two years ago, Traverse Solar’s main products were a two-panel system with a power generation capacity of 500 watts and a four-panel, 1,000-watt system.
“Now we’re going to 1,200 watts on a four-panel system, and that’s a 20 percent increase in just two years,” he said.
For Traverse Solar, the improvements in price, power density and capacity are making residential solar installations a more popular option in northern Michigan. However, Bildeaux also thinks that the community’s move toward renewable energy – and the push among consumers to take advantage of tax credits before they disappear – are also driving growth in the market.
“I think we’re seeing more awareness of renewable energy in general,” Bildeaux said. “A lot of that has to do with the press that Traverse City is getting, specifically their goal to go 100 percent renewable with their infrastructure. That’s putting solar at the forefront of people’s minds, so they’re considering it, and then when they hear about the tax credit for renewable energy adoption, that’s really been spiking interest for I’d say the past two years. Especially right now, because people are trying to get in before the close of 2019 when the solar investment tax credit (ITC) starts stepping down.”
Through the end of 2019, the ITC will allow homeowners and businesses to deduct 30 percent of the installation cost for their solar energy system from their federal taxes. The tax credit will drop to 26% for projects that begin construction in 2020 and will drop to 22% in 2021. By 2022, the ITC will be 10% for commercial and utility-scale installations and zero percent for residential systems. In 2015, the SEIA successfully advocated for a five-year extension of the ITC, which was nearing a similar phase-out at the time. Now, the association is pushing for another five-year extension that would keep the ITC at its current 30% value. There are currently bipartisan efforts in both the House of Representatives and the Senate to enable such an extension.
The potential loss of the ITC is not the only factor that could affect the affordability of solar power in the future. Tom Gallery, owner of Leelanau Solar, points to the disappearance of net metering as the biggest challenge currently facing the industry. In the past, net metering has been the standard protocol that has allowed solar customers to sell the electricity they don’t use back into the grid. In a net metering situation, a homeowner’s electric meter would count upwards as the customer used electricity from the grid, but run backwards if and when the customer’s solar system produced more energy output than the home needed. In true net metering, the customer is “paid” the same rate for the electricity they send to the grid as they would spend to draw that same energy from the grid. The customer only pays for their net energy usage, which means excess power generation during daylight hours can effectively count as a credit toward nighttime electricity needs.
In April of last year, though, the Michigan Public Service Commission (MPSC) approved a new distributed generation tariff to replace net metering throughout the state. Where net metering paid solar customers retail rates for their excess electricity, the new system measures – and prices – incoming and outgoing electricity flows differently. Different utilities throughout the state need to get approval from the MPSC for the rates they pay to customers for excess solar energy. The heart of the matter, though, is that most utilities will now pay below retail rates. DTE, for instance, got approval from the MPSC to bill customers the full retail rate for electricity they purchase from the grid, but to pay only the average monthly wholesale price of energy for surplus electricity that the customer sends back to the grid. Other utilities have taken similar steps.
“The next year is a watershed period for solar in Michigan,” Gallery said. “DTE and Wolverine/Cherryland have ended true net metering for business and residential solar. Consumers is filing a rate request in January to do the same. Those policies push the payback for small solar from seven to eight years to 14-20 years. Homeowners and small businesses will not invest in solar under these policies. Michigan, under the MPSC, will soon become one of the most regressive renewable energy states in the country. The only good news is that TCL&P has resisted the political pressure. They will soon be the only utility in the state with true net metering.”
Despite the questionable future of the ITC and the disappearance of net metering, Zebarah is still optimistic about the next chapter of solar energy both in Michigan and on a nationwide scale. For one thing, he says that the top priority among homeowners, businesses, and communities that commit to renewable energy isn’t necessarily cost-effectiveness or return on investment, but environmental sustainability. For another, he believes that the quickly evolving technology in the solar industry will soon render factors such as tax credits and net metering policies relatively moot.
“Some incentives are going down a little bit, but that’s not going to slow solar down at all,” he said. “It’s a small variable. The costs of the technology are still coming down. Battery storage is improving drastically. When battery storage becomes cost-effective, which is coming very quickly, then the utility policies won’t matter. People will store their own power.”