What’s the Ideal Way for the Microgrid Industry to Come Back from COVID-19?
Clean energy advocates are floating a range of ideas to stimluate post COVID-19 microgrid growth — from tax credits to relief funds to support for electrification of rural hospitals.
The Solar Energy Industries Association (SEIA), Advanced Energy Economy (AEE), Institute for Local Self-Reliance (ILSR) and Alliance for Rural Electrification (ARE) are among the organizations calling for the measures.
Their proposals come at a time when more than 100,000 US advanced energy workers are out of work, a loss that wiped out last year’s growth in the industry, according to AEE. Further, nearly 400,000 industry workers suffer some form of job loss, when temporary unemployment and underemployment are considered. The majority of advanced energy businesses — about 60% — have not received any federal relief so far.
SEIA noted that in 2019, solar was the top source of new electric generating capacity in the US, and represented 40% of new capacity installed. Before the COVID-19 crisis, the solar industry was moving toward adding 50,000 more workers and investing $25 billion in the economy this year. But now, the solar industry in the US could lose up to half of its workforce — 250,000 jobs — in coming weeks.
Proposals to bolster distributed energy are emerging as Congress grapples with a fourth stimulus package in response to the virus; advocates hope that it will lead to relief specifically carved out for distributed energy resources.
Microgrid growth & tax credits
A top priority is making the solar investment tax credit (ITC) funds more accessible, offering it as a cash payment instead of tax credit, a modification needed because many companies won’t have tax liabilities.
“Direct pay won’t solve all the problems facing advanced energy companies as a result of COVID-19,” said a press release from AEE. “But it is a no-cost step Congress can take to stabilize advanced energy companies so they survive today and thrive tomorrow.”
The ITC is now the largest source of savings for average solar installations and it’s undergoing a scheduled reduction. The credit drops this year to 26%. down from last year’s 30%. Next year it falls further to 22% and then to 0% for residential and 10% for commercial solar in 2022.
Delays in getting projects going could mean that companies won’t receive the 26% ITC this year, said Geoffery Underwood, founding partner at renewable energy developer Glidepath Ventures. For projects to be considered for the ITC’s annual deadlines, they have to either start physical work of a significant nature or meet the Five Percent Safe Harbor Test, which means that the business must pay or incur 5% or more of the cost of the solar installation in the year that construction begins.
For more on post COVID-19 microgrid growth strategies, join Microgrid Knowledge June 1-3 for a free virtual conference: Microgrids as a Recovery Tool During Social and Economic Disruption.
SEIA is calling for the federal government to modify the 5% safe harbor language to respond to delays caused by COVID-19. It wants to ensure that projects qualify if the equipment is ordered and paid for by the end of 2019 and 2020, and delivered in following years. Right now, the ITC calls for 3.5-month delivery deadlines.
SEIA, the Energy Storage Association (ESA) and others also want to see the federal ITC extended to storage-only projects. Right now, energy storage only qualifies for the ITC when it’s integrated with solar resources that are eligible for the ITC.
Also on SEIA’s action list are permitting reforms that allow local jurisdictions to conduct solar permitting remotely.
Solar pay as you save model
Meanwhile, ILSR is calling for the US government to invest $450 billion to equip 30 million rooftops with 5 kW solar arrays.
“The idea is the government would pay for upfront costs, and projects done for customers who are middle class could pay back under a ‘pay as you save’ model,” said John Farrell, ILSR co-director and director of its Energy Democracy Initiative.
Under that model, part of the savings generated by the use of solar energy would be used to pay back the cost of the system. Solar users could save 5% to 10% on their bills and could pay back about half of the capital cost in about 10 years, he said.
Low-income residents wouldn’t necessarily have to pay back the government’s initial investment. Funds now used for energy assistance to low-income households could help pay for the solar.
The Department of Energy or perhaps the Federal Energy Regulatory Commission could set up a repayment process through utilities, he said.
“The solar industry at its peak did 5 GW on homes and businesses. My thought was in 2020 we would aim to hit that target,” said Farrell. That would require the industry to double its workforce capacity every year, requiring training and hiring.
“It’s a great time to be doing this, a lot of people are out of work,” he said.
Solar on roof of Shiloh Temple, Minneapolis, Photo courtesy John Farrell, ILSR
Other organizations are taking a more global perspective and focusing on worldwide rural electrification.
The Alliance for Rural Electrification (ARE) is calling for fast-tracking existing procurement and funding procedures for decentralized renewable energy projects. The organization would like to see a global relief fund created for these projects and recognition of the sector as an “essential service” whose members can continue to work. The organization also called for electrifying rural health facilities that are now without electricity.
The organization says that distributed energy can be rolled out quickly, bringing electrification to rural areas in a matter of weeks and months, not years. Distributed renewable energy, including green minigrids and stand-alone solar home systems, will be the lowest cost option for the 840 million connections needed to accomplish universal electricity by 2030, said ARE.
Clean energy as a way out of COVID-19 downturn
Advocates see these actions as a way to not only ensure the survival of the industry, but also to boost the overall economy. They argue that investment in solar, microgrids and other DERs can lift the economy out of its downturn by saving homeowners and businesses money and creating jobs while reducing carbon emissions.
As SEIA said in its fact sheet about the COVID-19 crisis, “A significant decrease in the number of gigawatts of solar energy deployed would be devastating and set the U.S. back years in our efforts to combat climate change, a setback we cannot afford.”
