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Reversal on rebates stings solar industry

Reversal on rebates stings solar industry

Incentives to buy pricey clean energy systems are struck down by court.

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Missouri's fledgling solar power industry could be severely wounded by a recent court decision declaring that mandated rebates on solar installations violate the state constitution.

The $2-a-watt rebate, approved by Missouri voters in 2008, shaves thousands of dollars off the cost of solar energy systems — the smallest of which can cost as much as a new car. Without them, the price of installation could become too much for even environmentally conscious consumers to bear.

"I wouldn't say that nobody would do solar, but it would definitely take people out of the market," said Marc Lopata, the president of Clayton-based Microgrid Energy, a firm that specializes in renewable energy and energy efficiency. Microgrid has installed more than 400 kilowatts of solar energy systems so far this year — much of it made possible by the rebate.

Together with a 30 percent federal tax credit, the incentives put clean energy systems within reach for many consumers. But the June court ruling struck down the incentives as an illegal taking of private property.

Cole County Circuit Judge Daniel Green agreed with an argument by the Missouri Retailers Association that the system unfairly takes money from Ameren — and from the bulk of its customers by increasing their share of electric rates — in order to cut breaks to solar consumers and boost business for installers.

Almost three weeks later, solar installers and renewable energy proponents are wringing their hands over the possible fallout from the court ruling. Ameren Missouri on Friday announced it had requested permission from the Missouri Public Service Commission to suspend rebate payments on solar systems the utility had not approved before the court decision.

Steven Reed, the commission's general counsel, has said he believes the rebate should legally remain in place while the case is being appealed. And because the validity of a statute is in question, it may be the Missouri Supreme Court that ultimately decides the matter.

WILL OF THE PEOPLE

The rebates were authorized by a 2008 ballot initiative, Proposition C. The measure, approved by two-thirds of voters, requires utilities to get 2 percent of their electric generation from renewable energy sources this year, a percentage that grows to 15 percent in 2021. A fraction of the renewable energy must be solar power. And the rebates — which have been available in amounts up to $50,000 — were intended to stimulate solar development in a state that still gets 80 percent of its electric generation from coal.

Proposition C drew no organized opposition. One of the state's big utilities, Kansas City Power & Light, even supported it. But implementing the law hasn't been so easy. In August, a group of utilities, including Ameren, and several Missouri business groups sued the Public Service Commission, the state agency in charge of implementing the law. The lawsuit challenged several aspects of the PSC's administrative rules and the solar rebate.

Tim Schwarz, a Jefferson City attorney who represents the Missouri Retailers Association, said his client took exception to the solar rebate because the utilities are required to pay out thousands of dollars and get nothing in return. It's like a gasoline station being required to give rebates because Ford or General Motors sell a car.

"It's not a rebate," Schwarz said. "The way it's currently structured, it violates" the constitution.

Judge Green agreed in the June 29 ruling. "It does not advance the public purpose — changing utilities' energy portfolios — by one kilowatt," he wrote.

The PSC on Wednesday agreed to appeal the ruling, and the solar industry is likely to seek to intervene in the case. "This is an accepted practice," said Joe Maxwell, a lawyer in Mexico, Mo., and former lieutenant governor who represents the Missouri Solar Energy Industries Association. Maxwell noted that other states, including Colorado, require utilities to offer customers solar rebates.

'GAME CHANGER'

For the 12 months that ended in February, Ameren paid $885,000 in solar rebates, representing 442 KW of installed capacity.

Tim Anderson, who put a 3.5-kilowatt solar energy system on his Westport area home last month, said the rebate, which covers 28 percent of the total cost, was a key to making the investment. "It was a total game changer," said Anderson, who's still waiting on his rebate check from Ameren. "We would have not been able to afford this system without the rebate."

Anderson and his wife had long viewed solar power as an environmentally friendly way to lock in some of their electricity costs — a hedge against rising fossil fuel prices. But they didn't think they could afford the steep upfront cost until they learned about the incentives available.

Rebecca DiFilippo likewise said the rebate was pivotal to her family's decision to install solar panels on their St. Charles County home.

"Even with the rebate, it's still going to take us seven or eight years just to break even," she said. "The rebate should be larger, especially for those of us who are willing to invest in these systems."

St. Louis solar installers, meanwhile, are bracing for the blow of lost business. One of them, StraightUp Solar, had been on track to quadruple its revenue to more than $2 million this year, said Eric Swillinger, vice president of business operations.

The company has installed 55 solar energy systems in the area, mostly on the Missouri side of the Mississippi River, ranging from 100-kilowatt projects like the one at Novus in St. Charles to small systems on residential rooftops.

"I would say 80 percent of that was done after Proposition C was passed and went into effect," Swillinger said. Since then, the company has also hired a half-dozen new employees, bringing the total to 10.

Membership in the state solar association has grown from a handful of companies a few years ago to 30 businesses that are generating taxes and creating jobs, Swillinger said.

SUSTAINABLE MODEL?

The expected crash of the solar industry underscores the continuing dependence of many green technologies on government subsidies to compete in the marketplace.

Renewable energy advocates say the rebates are necessary to help jump-start the industry. Silicon and solar panel prices haven't declined enough to make solar energy an affordable option for most homeowners.

That's especially true in Missouri, a state that has among the lowest electricity rates in the country because of its reliance on coal. Lower electricity rates mean it takes longer for owners of solar energy systems to break even on their investment.

But they say the equation is changing as solar prices fall and electric rates continue to rise.

"Energy problems are not like bell-bottoms that are going to go away in three years," said Microgrid's Lopata. "They're only going to get worse."

Meanwhile, Renew Missouri, the advocacy group that drafted Proposition C three years ago, is studying the possibility of another ballot initiative to increase the state's renewable energy requirement and resolve some of the legal issues that have been raised since the law was passed, said P.J. Wilson, the group's executive director.

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