New solar incentive promises scant business benefit

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A pilot program geared to boost the number of solar panels on the roofs of homes and businesses across Oregon will allow few opportunities for businesses to build medium and large solar installations in its first four years, experts say.

The Oregon Legislature approved the creation of the feed-in tariff program in July 2009. The Oregon Public Utilities Commission, which will operate it, approved additional rules Friday.

Under those rules, those who qualify for the program are paid to generate solar power from newly built systems regardless of whether they consume the electricity generated or sell it back to the grid.

Participants go to the free market to build the systems and shoulder the costs. Once they’re up and running, however, they can receive payments between 55 and 65 cents per kilowatt-hour for systems smaller than 100 kilowatts for 15 years. That rate will undergo review every six months. Rates for systems larger than 100 kilowatts are set by a competitive bidding process.

Both small and large-sized systems are eligible for federal tax credits, but not state tax credits or incentives from Energy Trust of Oregon.

Customers of Portland General Electric, Pacific Power and Idaho Power — which account for 75 percent of electricity customers in Oregon — are eligible. Businesses and homeowners alike can begin filing applications with the utilities to participate July 1, and a first-come, first-serve process for approving applicants could send hoards of prospective solar generators scurrying.

Those familiar with the program, however, say it will have few short-term impacts for businesses, benefiting primarily residential customers in its inaugural four years.

That’s because the four-year pilot caps capacity at 25 megawatts, which is enough power to serve roughly 2,500 homes. The relatively small size of the effort, combined with a legislative mandate to draw 75 percent of the power produced from small-scale systems, leaves room for only 984 kilowatts to be generated by the medium and large solar systems, typically built by businesses. That capacity could be divided between fewer than ten 100-kilowatt systems, twenty 50-watt systems or some other combination. Solar systems up to 500 kilowatts in size can apply.

“It will probably be fairly beneficial to the residential installers but relatively meaningless for commercial installers,” said Alan Hickenbottom, founder and president of Tanner Creek Energy, which installs commercial and industrial solar projects.

Hickenbottom said the program is likely to draw hundreds of commercial applicants.

“I suspect it’s going to be a lot like a lottery ticket and that’s no way to run a business,” he said.

Business leaders say the project is a good start, however, and they’re hoping for long-term success.

“We are all looking for an alternative to a tax credit model given the struggles and challenges that are faced with the BETC (Business Energy Tax Credit),” said Robert Grott, executive director of the Northwest Environmental Business Council.

The Business Energy Tax Credit, a costly incentive program plagued with problems, is likely to be revamped and may end altogether when it sunsets in 2012. Without approval of this new feed-in tariff, which is paid for by utility rate-payers at no cost to the state, the uncertain future of the Business Energy Tax Credit would leave Oregon businesses with little incentive to develop solar power, despite a state push to expand.

The approach being tried in the four-year pilot is already successful in Germany and is being tested in Ontario, Canada. It is the first of its kind in the United States.

Bob Valdez, spokesman for the Oregon Public Utilities Commission, said it’s too soon to say whether the legislature will reshape the mix of commercial and residential customers in the program during its first four years.

“Everything is really dependent on how many people sign up, and in which areas and what size,” said Valdez.

He said the agency would receive reports from participating electric companies every six months to help adjust rates and advise the legislature on whether the program effectively tests the impact of incentives on solar production for both business and residential participants.

The PUC expects feed-in tariff applications to become available from utilities by mid-June and a public meeting of the commission on June 22 will address concerns about the process.

Lee van der Voo, lvdvoo*at*gmail.com, is a freelance writer for Sustainable Business Oregon.