This month, Utah Business partnered with Holland & Hart to host a roundtable event featuring renewable energy experts to discuss sustainable business practices in Utah. Moderated by Adrienne Bell of Holland & Hart, here are some highlights from the event.
What is the state of the renewable energy industry?
Ryan Evans | President | Utah Solar Energy Association
Nationally, there’s no turning back on renewable energy. Across the country, the number of states that are adopting it more, the number of large corporations, small companies that want to implement cleaner electricity options are growing and growing exponentially. Utah is a little bit of an unknown and I think that’s the challenge we face due to certain policies and regulations here. We certainly have great opportunities, but there are limiting factors that keep us from keeping up with what the potential is nationally.
Paul Gaynor | CEO | Longroad Energy
There’s a fair amount of momentum in the renewable energy industry nationally, but it’s definitely in transition. Most of the growth in the industry has been driven by federal incentives; production tax credits (PTC) and incentive tax credits (ITC). On the wind side, those production tax credits are going away. So there’s a big bubble of activity in 2020 on the wind side, but that will very rapidly decline over the next two or three years. And the same thing is happening on the solar side, it’s just a little bit staggered.
So if you think about the long term for Utah, you have to assume that those incentives are going away. And then what is the competitive advantage of the state vis-à-vis other states around it? And the reason that’s relevant is that today, Utah is exporting energy outside of its borders. And it’s a great opportunity for Utah to become kind of a massive net exporter of solar energy. But you’ve got to get other people on board.
Dan Black | Chief Legal Officer | Vivint Solar
It’s definitely true in the DG space as well the federal ITC for solar is already declining. And those companies that are capable of safe harboring and taking advantage of commencing construction roles are going to be able to, but your homeowners can’t. So those companies that are purchasing solar can’t take advantage of that. They’re already eating four percent of the ITC this year and so on until it’s completely gone for the residential tax credit in four years. And then in the commercial space, it’s only 10 percent. Meanwhile, you’ve got net metering policies that are about as draconian as I’ve ever seen being proposed by PacifiCorp, and you have a state declining tax credit as well.
So it’s a recipe for completely killing the DG market in Utah. Compare that to other states we’re active in, and while there are always regulatory challenges, California is going through what they call the metering 3.0, and that’s going to be challenging because they have their own unique issues, renewables aren’t going anywhere in that state. So there are lessons to be learned from neighboring states that have messed up when it comes to renewable energy policies, but it’s going to take more than just the utility being pushed. We need voters and we need our state and city governments to take action.
What are the key policy proposals that you’re monitoring and how might they impact the industry?
Michael Shea | Environmental Manager | Salt Lake County
There is a possibility of the ITC and PTC getting renewed. But I’m curious what you see the two different futures [looking like] if they do get renewed, how much more penetration can we get versus if they’re not, [and] what the market is going to look like over the next five or 10 years?
Paul Gaynor | CEO | Longroad Energy
I’m skeptical that there’s going to be a straight renewal of PTCs or ITCs. By the time the ramp down is complete, then wind and solar costs will be at a level where they won’t need any subsidies. Solar prices continue to come down and down and down in terms of the cost to install, so that’s pretty competitive and it just depends on where you are.
For purposes of how big the market is without it versus with it, the solar market is a lot better positioned than the wind market just given the trajectory of solar costs and there’s kind of a brighter future relative to wind. And what this is going to turn into, if you’re still committed to buying power by 2030, the projects are still going to be there, you’re just going to pay more. So if the commitment is there to pay, then it’s great.
One of the reasons why there’s so much demand right now, particularly on the corporate side, is because it’s cheap; it’s really, really cheap. You ask Facebook and all these other folks who are building these projects, they’re not paying premium prices for this energy. And that’s the reason why there’s so many corporations buying this stuff, and they’re buying it now because they know it will be cheap until the subsidies run out. And so when the subsidies do run out, if all of these folks are still committed and they’re willing to pay a little bit more, then the market will still be there.
Tim Donaldson | Chief Strategy Officer | Utah School Trust Lands
At the state level, it seems that every session there’s five or 10 pieces of legislation that are tackling a tax credit or an incentive. But it seems like it’s just piecemeal one-offs that are dealing with little details around the edges and not getting to the core of the problem. It seems to me that we have, on the one hand, great supply and we also have great demand, so the outlook should be bright. But in between, you have utilities, and the incentives that they’re operating under are quite perverse. They don’t have any incentive. In fact, they have a lot of dis-incentives to do things that could help renewables.
And the name of the game is transmission in renewables, and yet if they can’t get cost recovery on the infrastructure, if you have producers who come in and put projects together and pass them on to financial institutions that take the tax benefits and then eight years later the carcass of what’s left, it’s kind of forced over to the utility and they have to take it.
Vicki Bennett | Sustainability Director | Salt Lake City
One of the big things that Salt Lake City is working on and talking to our congressional representatives at the federal level is the idea of [putting] a price on carbon. We really feel that that’s something that would accurately place the risks where it should be, because we’re all getting our energy from carbon-based fuels and it’s causing a lot of external issues that we need to put a true cost on.
We did a study through the county health department looking at the health issues of climate change and our current energy mix and it’s extreme, and the cost to just our residents is really large. So that’s something, as a city, that we are pushing for and we’ve brought it up at the state level. Truthfully, it really is something that should be at the federal level to put a true price on the energy that we’re using now.
Kate Bowman | Renewable Energy Program Manager | Utah Clean Energy
The state legislature this session is HB 194, which has an amendment to update Utah’s renewable portfolio standard. We currently have a goal of 20 percent renewable energy for the state by 2025 and this would update the renewable portfolio standard to be a target of 50 percent zero-emissions electricity by 2030. While it doesn’t go as far as we need to, it’s an important first step and really valuable to demonstrate state leadership.
Ryan Evans | President | Utah Solar Energy Association
Rocky Mountain Power recently filed their new proposal for what would be future solar rates for homeowners and businesses in the State of Utah. They had, back in 2016, proposed a very draconian, very harsh change to solar net metering rates. And after about eight months of negotiation, we were able to settle with them on something better.
The current proposals would make it very difficult to continue that distributed market here in Utah solely because they have recommended their average export credit would be on an 85 percent decrease over what is currently offered to customers, as well as proposed to possibly update that rate every single year going forward, which essentially takes out certainty. And one of the guiding principles in rate making should be gradualism. And the challenge there is it’s really hard to compete and continue doing business in a state without some kind of a glide path to a new rate structure.
What does the development of renewable energy storage look like?
Dan Black | Chief Legal Officer | Vivint Solar
Just in the lithium-ion battery storage space, it’s been extremely expensive. But there are use cases now where it’s already been deployed in considerable large quantities, at least in the residential space. And customers love it for intermittent backup. It’s cleaner than putting a large natural gas generator. You don’t have the flicker associated with a grid going down and then the natural gas generator flipping up, you have whole home backup which is pretty incredible. There’s some big, big companies out there that are pushing lithium-ion and similar technologies in the battery storage space that are economically viable today in certain markets. It’s just a matter of time until we start seeing that deployed in scale here in Utah too.
Zac Cook | Energy Manager | Utah State University
I really do see [net metering] as driving the future of renewables because we all understand that the biggest hurdle in renewable energy is it doesn’t have baseload. It doesn’t necessarily come at the times that we need it. And this concept of microgrids, central storage, and batteries, it’s really driven that and it’s going to help lead to future renewables. On our campus, we have a huge thermal demand night and day, and it’s driven us to start looking at what ways we can use power when it’s available. We have a two million gallon internal storage tank and we can shed basically a megawatt of load by chilling water. The unfortunate net metering situation right now is going to drive advancements on how we can utilize power.
Ryan Evans | President | Utah Solar Energy Association
Here in Utah, we’ve got this challenge of a population center where most of our electricity is being generated far away. Typically, solar doesn’t get attributed to benefiting air quality at the distributed level. But there is that benefit when you consider 37,000 homes that have solar on them.
Kate mentioned the Soleil Lofts project, which is a 600-unit apartment complex in Herriman. It’s a microgrid, but it will have 5.3 megawatts of solar on top of the 26 buildings, over 600 batteries. And the reason that I bring that up is the utility actually invested in that project to some degree because they saw the value of being able to pull that energy at peak time so they can access that stored energy from that complex to serve the surrounding communities, that potentially impacts our need for peaker plants in the summertime. Additionally, that community is going to be 100 percent electric heat.
Natural gas heating in homes is the norm and it should have been the norm for a long, long time. This project, because of the fact that there is so much storage built-in with so much local solar energy, it allowed them to actually implement electric heating throughout that entire community. So here’s 600 permanent structures, 600 units of residential living that will be there for decades and decades and decades. And it’s 100 percent net-zero, if not a completely carbon-free development.
Roland Howard | Renewable Energy Division Manager | Hunt Electric
We can’t just rely on one resource, whether it be solar, geothermal, or any other type of natural gas. We put in a fully functional microgrid at our corporate office here and really it deploys everything. We have natural gas and solar generation onsite. We have battery, we have energy storage. Really, we can pull energy from any source and make ourselves not only more resilient, but we’re contributing to the overall benefit. We use that same method with all of our customers.
We’re looking at some very large energy storage sites. We don’t want to just push batteries alone. You’ve got to look at it from the holistic view, every resource needs to be applied to the application. We can’t just look at solar alone, we can’t just look at geothermal alone, we can’t just look at nuclear alone, and we can’t just look at individual resources. All of them have to come together in harmony so that we really get a better benefit that’s more resilient and better off for all of our deployment.
Vicki Bennett | Sustainability Director | Salt Lake City
Salt Lake City has been part of the group of cities across the nation working on building electrification initiatives and it has been a really interesting project looking at the different options, the cost-benefit ratios, all of the approaches of ground-source heat pumps, air-source heat pumps, be it in individual homes. We’re also looking at what the possibilities would be for retrofits because every single one of our homes right now has a natural gas line. And as we reduce the amount of natural gas that we want to put into the atmosphere, we’re going to be trying to find ways to look at some of these new air source heat pumps. Anybody who has an air conditioner and a furnace should think of exchanging both out because you get an air-source heat pump and it could cover most of your heating and cooling needs.
So there’s a lot of new technology out there, but we don’t have control over the building codes. I don’t know if we ever will, but I laugh when I say that when I started working with Utah Clean Energy in 2001, and our first solar goal was, well, maybe in 10 years we could get 10 megawatts of solar across the state. And we all laughed, said, “Ah, there’s no way." Well, in 10 years from now, how are we going to be heating and cooling our homes? We think that we’ve got some great opportunities and the market is changing quickly.
Are there any areas where you see a role for the state to support renewable energy development?
Josh Neves | General Counsel | Blue Raven Solar
Our companies play such a huge role in educating the public, providing some new ways to think about solar that it’s very unfortunate that there’s not a huge reason for the companies. There are so many successful companies in Utah but all that energy and all that investment is escaping because the state’s just not keeping up with others. So the state can really help out by focusing more on DG products, projects educating the public, and providing incentives for low-income residents trying to fix or address this patchwork of building codes. NDC codes to make it easier for private companies that call Utah home to actually do business.
Michael Shea | Environmental Manager | Salt Lake County
I think we can be harsh on the utility and the state regulators, but the state’s regulatory framework and the utility business model was built for a very traditional [model]. You’ve got long transmission lines to deliver power to metropolitan areas. And the grid and the technology is changing so fast that you really do need top-down leadership on a state level to be able to manage that transition much smoother than it is currently being done.
It’s akin to trying to fit a square peg through a round hole the way the grid is currently set up and then the regulatory framework for that grid is not matching where the technology’s heading. And so it needs to come from the governor’s office and the legislative leadership to better manage that transition because even all of us utility regulators included are really feeling in the dark as to how to best implement all these different changes that are happening. And so the state needs to kind of step up and act as a guide in managing this transition.
Justin Owen | Energy Manager | Weber State University
I want to add one other perspective on distributed generation. I’ve had a lot of conversations with utilities on this topic and as someone who has installed solar on their home, I did it myself. It should be an investment. It’s an alternative investment for the utility customer. And so our policies should be geared towards that sort of thinking because once you make that investment and it’s paid for itself because that’s what solar does, it pays for itself, then that money’s back in the economy. I’ve got $150 a month that I’m doing whatever I want with.
It’s my opinion that we should be subsidizing these customers because of the environmental problems that we have, whether that’s air quality or climate change, whichever one happens to resonate better, but that’s something that we should be looking at. Whether we look at tax credits, that’s one way to do it, or through net metering policies that make sense for the investment by the customer.
What are the most significant opportunities are for your company, your industry, and your agency going forward?
Vicki Bennett | Sustainability Director | Salt Lake City
Salt Lake City’s biggest opportunity is continued leadership. We’re working with our partner cities on HB 411 to look at building electrification opportunities. Hydrogen storage is something that’s exciting to us and we’re watching that. We have cities from across the nation coming to us asking, “How do we get these things done?" Our partnerships with the utility are fairly unique and can we build on that? And I think most importantly is what can we do to really educate our residents and not… when I say our residents, I start with Salt Lake City’s but residents throughout the state as to what benefits there are to all of these different programs and how we can help them become part of them.
Luke Cartin | Environmental Manager | Park City Municipal
One of the areas that we’re pushing is talking to other municipalities and being this proof of concept. And the biggest area that we’re focused on is we’re trying to call their communities towards a carbon-neutral by 2030 because that then makes you choose a clear pathway rather than backload or push out or hope.
And we had some huge impacts, we actually hosted 35 mountain communities in Park City in October and over 20 of them have had very serious community conversation saying, “We can do this." It’s not about saving, it’s always been about what we have to do. And we have shown that the upside of setting an aggressive carbon-neutral goal has massive economic and environmental benefits as well.
Judd Cook | Director Gas Operations | Dominion Energy
What I’m excited about are the opportunities that I see for us. We may not even know what they are yet. The energy industry is changing every day. New things are happening. But they’re just the tip of the iceberg. As an example, we’ve talked about hydrogen. 60 to 65 percent of the electricity generated in the state today is generated with coal. Why are we not asking the question, “Well, if you went to natural gas, you could cut that in half today." And I know the argument’s going to be made for moving away from natural gas at some point in the future, maybe 10-15 years down the road, those assets that they’ve invested, billions of dollars in are no longer used and useful.
Well, I’ve made the argument 10 to 15 years from now, they could run on hydrogen. We’re doing our own internal studies with huge power plants in Greenville. Some of the biggest natural gas combined cycle facilities in the country. And we’re looking at them and saying, could they burn zero-carbon hydrogen 10 years from now? And the answer is yes, we’d have to make modifications to the facility, to the piping, but the turbines themselves, so that they can burn hydrogen, but there’s real potential there. And those are exciting things, and that’s just one piece. Hydrogen is just one piece. And there are other things that are going to come that we haven’t even thought about yet.