Lights out for Colorado’s solar companies?

In mid-February, nearly 500 people from as far away as China came to Loveland for the annual conference of the Colorado Solar Energy Industries Association. For a sector of the economy that has swelled behind the heightened interest in clean and renewable energy, the mood was buoyant. Since 2006, solar jobs in Colorado have risen from 500 to 5,300, according to COSEIA, while the industry has also made impressive strides to raise efficiency and lower costs.

All of these shifts have occurred with support from government grants and subsidies and incentives provided by utility providers. But just a week after the conference, the industry received an unsettling shock when Xcel Energy abruptly decided to slash its Solar Rewards program.

“Up until last week, the Colorado marketplace had been hailed as a national model,´ said Neal Lurie, COSEIA executive director. Xcel’s announcement “effectively freezes the entire solar industry. This is really an urgent situation that needs to be addressed immediately.”

State-mandated minimum

Xcel, which serves 1.4 million customers across Colorado, began Solar Rewards in 2006, combining a rebate and renewable energy credit to pay $2.35 per watt to customers who install small solar arrays. In 2010, then-Gov. Bill Ritter signed House Bill 1001, which mandated a statewide minimum $2-per-watt solar rebate to help ensure 30 percent of Colorado’s energy comes from clean and renewable sources by 2020.

Solar Rewards was originally based on the California Solar Initiative, using a “capacity-based tier” system to set prices and direct how incentives would gradually ratchet down over time. But the announced cuts are a departure from that transparent process. Xcel’s decision immediately suspended any new rebates and reduced its current breaks to $2.01 per watt. The utility also filed with the state Public Utilities Commission to eventually decrease its incentives to just $1.25 per watt, which would mean severely slashing the state-mandated rebate.

“We established Solar Rewards to stimulate interest in installing solar systems on homes and businesses, and to make sure the technology is part of Colorado’s energy mix,´ said David Eves, Xcel Colorado president, in a Feb. 16 statement announcing the cuts. “The program has been successful in doing that. We look forward to the industry’s continued progress so that it can ultimately become self-supporting.”

The statement added that the solar industry is enjoying both declining prices for panels and federal tax subsidies that reduce the need for more incentives from Xcel.

Xcel isn’t the first utility in the state to cut its solar incentives. Last October, Black Hills Energy, an investor-owner utility that serves customers in Pueblo and the surrounding region, suspended its solar rebate program. The company claimed the incentives were no longer necessary because heavy participation in its program was bringing excessive costs to the utility.

But the consequences to solar businesses were immediate and brutal.

J.D. Johnson, of Yes! Solar Solutions in Pueblo, said 90 percent of his – and the regional solar industry’s – business dried up overnight after Black Hills’ announcement. The PUC still has to weigh in on the decision, and could urge the company to resume the incentives, but Johnson said the damage has already been done to small businesses.

“Investment has completely evaporated,” Johnson said.

The effect of Xcel’s announced cuts “will be very similar,” Lurie said. “But the impact is probably 10 times greater just because Xcel is the largest energy utility in the state.”

The decisions by Black Hills and Xcel could also trigger rebate rollbacks by other utilities as well.

“This is terrible news for the state, and it will significantly affect the entire industry,” added Angelina Pramatarova, of Wirsol, a German company with North American offices in Fort Collins.

Wirsol helps develops solar-power projects and works with a number of local and state-based companies across Colorado. Pramatarova said the cuts won’t make or break Wirsol, but it seriously undermines the survival of many of the company’s local partners.

Stable marketplace needed

Solar proponents don’t dispute that the industry has been doing more for less lately. Lurie said state solar-electric costs have dropped 30 percent to 40 percent over the past three years, as the industry has scaled up and more companies have established in Colorado.

But Lurie and others also say a dependable and stable marketplace is essential to continuing progress and meeting the state’s 30-percent renewable goal.

“The number one risk to being able to get additional private-sector investment – in Larimer County and across the state – is an unstable marketplace,” Lurie said.

Lurie said the PUC needs to take brisk action to address Xcel’s rebate cuts, or regulators will be effectively stranding the state’s solar businesses. In particular, solar advocates argue the state needs to empower an independent, third-party administrator for utility clean-energy rebates that can consider program changes in a transparent and predictable manner.

“Xcel is trying to destabilize the market for clean energy and choke off competition to protect its monopoly,” Lurie said. “There’s a clear conflict of interest here.”

Joshua Zaffos is a freelance journalist based in Northern Colorado who covers environmental issues for the Business Report. Contact him at news@ncbr.com.

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