BNEF: ITC extension may lead to more pressure on net metering

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Unintended consequences are frequently a feature of policy and legislative support of the PV industry. The likely extension of the ITC could well result in another, with utilities incentivized to acquire or develop more utility scale PV in the U.S., while stepping up their efforts to wind back net metering regimes supporting residential solar in various markets throughout the country.

“My initial reaction was ten explanation marks one after the other,” commented Jenny Chase, head of Bloomberg New Energy Finance’s (BNEF) solar team. “My second thought was that if this is going to be a solar boom to end all solar booms, something else will come into solar’s way and maybe this is net metering. The result would be great for the utility sector as utilities will buy solar because it fits the load profile, but they will want to step up the net metering war.”

Proponents of net metering in California scored a considerable win yesterday with the a proposed decision issued today by the California Public Utilities Commission (CPUC) recommending that the basic features of net metering be maintained after 2017, with some minor modifications.

In terms of the ITC, BNEF’s Chase noted that it has commonly been the case that solar support regimes that provide a stable subsidy system for longer than two years, as the proposed ITC extension does, they have been changed before the program has expired as planned.

“Although this is a Capex subsidy and not a FIT so it is likely more stable because if the Capex comes down the cost to the government will come down as well,” said Chase. “Even as it stands U.S. Capex for solar projects is much higher than global levels, in the residential sector it is 30% above global levels.”

The proposed ITC extension, included in a wide-ranging supply bill currently before Congress, would see the Capex support measure maintained at 30% through to 2020, before stepping down to 26% in that year, then 21% in 2021 and beyond that at 10%, as a “permanent” measure.

On Twitter, SunEdison co-founder and solar evangelist Jigar Shah congratulated SEIA’s Rhone Resch on achieving “the perfect deal”.

In terms of developers, BNEF’s Chase concludes that the ITC extension would be good news for “the usual suspects”, including First Solar, SunPower, SunEdison and First Solar, along with Scatec Solar and construction companies such as Bechtel.

On the module supply front, Trina is well positioned to benefit from an ITC extension through its announced Indian production plans, along with other suppliers with capacity outside of China such as SolarWorld, Jinko, Canadian Solar, Yingli and Hanwha Q Cells.

“For the solar industry it is a great result as it means more money will be sloshing around,” remarked Chase. “Whether it’s the optimal result from a very long term policy perspective is unclear to me. A more gradual step down might have had some advantages in enforcing U.S. installer and supply chain optimization.”