Court to decide if solar energy installer is infringing on utilities' rights

Jan. 22, 2014   |  

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Grant Rodgers

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Barry Shear is the president of Eagle Point Solar of Dubuque. The Iowa Supreme Court will decide if the firm should be classified under the law as a 'public utility,' the same category as MidAmerican Energy and Alliant Energy. / Christopher Gannon/The Register

DUBUQUE LEASES ENERGY SYSTEM

Since 2006, the city of Dubuque has put an emphasis on sustainability and hoped to install a “pioneering” renewable energy project to reduce the city’s reliance on fossil fuels.
In 2012 the city began reducing its grid power use through the photovoltaic solar system installed by Eagle Point Solar on the roof of its municipal service center, said Cori Burbach, the city’s sustainability coordinator. The building houses the city’s public works and some water department employees, as well as trucks and other equipment.
The city currently leases the system from the solar energy company, though it initially hoped to use a power purchase agreement so the company could take advantage of tax credits, Burbach said.
Though the city could have installed the system through Alliant Energy or another company, city leaders hoped to help a local business by selecting the Dubuque-based company, Burbach said.
“One of the benefits that we saw was supporting a local company that was just getting into the renewable sector,” she said. “Any time we can we like to support a local business.”

WILL IOWA SEE MORE SOLAR GROWTH?

Solar energy advocates argue that allowing third-party purchasing agreements could be the push Iowa and others states need to see more growth in the industry.
However, a wide variety of factors play into the success of solar in different regions, said Vikram Dalal, an Iowa State University professor of electrical and computer engineering. Dalal has studied solar energy and the industry for more than 40 years.
The states that have seen the most development, such as California, have state governments that have “aggressively” offered incentives, Dalal said. Some states have mandated specific amounts of solar energy be part of a utility company’s portfolio.
In 2013, Minnesota lawmakers passed a law requiring utility companies to generate 1.5 percent of their energy from solar by 2020.
California and other states have also seen more development because energy prices are higher per kilowatt-hour, Dalal said. In Iowa and the Midwest, where energy prices are lower, there’s less incentive to install solar technology, both for companies and for consumers who already enjoy smaller bills, he said.
— Grant Rodgers

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The outcome of an Iowa Supreme Court case pitting electric companies against a Dubuque solar energy company will be watched nationally and may help shape the future of how solar energy is sold in the region, advocates say.

The case hinges on whether Eagle Point Solar can install its solar systems on a business or municipality’s building and then sell the electricity produced back to the entity even though a utility has exclusive rights to the customers.

Advocates say the agreements, known as “power purchase agreements,” lower the costs for companies and municipalities interested in using solar energy but don’t want the upfront expense of buyingor leasing the solar systems.Also, nonprofit entities, including cities, cannot take advantage of attractive federal and state tax credits because they do not pay taxes.

Attorneys for Alliant Energy, MidAmerican Energy and the Iowa Association of Electric Cooperatives argue that the arrangements violate Iowa law, which gives utility companies exclusive rights to sell electricity in defined areas. In exchange, the companies are required to serve all the customers in the area.

The attorneys for Eagle Point Solar, a coalition of solar energy and environmental advocacy groups, the Iowa Utility Board and Iowa’s electric companies will argue in front of the Iowa Supreme Court this afternoon. It will be up to justices to determine whether Eagle Point Solar should be classified under the law as a “public utility,” the same category as MidAmerican Energy and Alliant Energy.

A ruling in favor of the Dubuque firm could open the door for the company and others to work with more Iowa cities to reap the benefits of renewable energy and tax credits. But a ruling against the company would preserve the state’s current laws, keeping the right to sell electricity with only the established utility companies.

For solar energy advocates the pending case comes down to giving energy customers one more option to help pay for setting up solar systems, said Josh Mandelbaum, an Iowa attorney with the Environmental Law and Policy Center who will argue in the case. Nationally, the third-party power purchase agreements are a popular model, with 22 states allowing the agreements, according to solar industry trade groups and the U.S. Department of Energy.

Interested residents or cities can already pay outright or take out loans to lease or buy solar installations, Mandelbaum said.

“The broader implication is, this would allow more projects to be built,” Mandelbaum said. “You give consumers more choice, more Iowa consumers are going to be able to take advantage of this.”

The case comes at a time when companies and cities in Iowa and nationwide are looking for ways to increase the amount of renewable energy being used in efforts to reduce reliance on fossil fuels. Alliant Energy, which serves, much of Iowa, Wisconsin and parts of Minnesota, has seen about 1,000 customers install renewable energy systems on homes and businesses, said Justin Foss, a spokesperson for the company.

That number includes 726 solar photovoltaic solar units, he said.

Construction is scheduled to begin in March on Iowa’s largest solar power installation. The project, a partnership between Eagle Point Solar and Farmers Electric Cooperative, will include 2,000 panels near Kalona.

Still, even as Iowa is a leader in wind energy, it has lagged behind other states in developing solar power, said Nathaniel Baer, the energy program director of the Iowa Environmental Council. In other states, such as Colorado, legislators have specifically written laws to allow the power purchase agreements for solar companies.

When Eagle
Point Solar installed the system on a Dubuque operations center in 2011, Alliant Energy told the city that the agreement violated its monopoly in the territory. The solar company, which has completed projects in eastern Iowa and Illinois, took its case to the Iowa Utilities Board, which ruled against it in April 2012.

A Polk County District Court judge in March ruled the company’s arrangement to provide a portion of the power to Dubuque building was legal. In her ruling, Judge Carla Schemmel rejected arguments that Eagle Point Solar should be barred; the company would only provide a portion of the electricity the city building would need and none of the infrastructure used by energy companies would be necessary, she wrote.

Further, the goal of installing a system like Dubuque’s is not to provide electricity to mass amounts of customers, but to help customers reduce their reliance on power from the grid through individual installations, Schemmel wrote.

“Eagle Point does not furnish electricity ‘to the public’ and thus does not meet the definition of a ‘public utility,’ ” Schemmel wrote.

There’s a misconception that the case is about utility companies being against renewable energy, Foss said. Rather, it will determine where Iowa law stands on who has the right to provide that electricity, he said.

“Sometimes you get these outside interests coming in and they have been in a state where it’s not regulated, so they have this view of how things work and then they come to Iowa and try and push those views on the state,” he said.

Other financing options exist for installing solar photovoltaic systems that are permitted by Iowa law. When Alliant Energy raised concerns about Dubuque’s purchase agreement, the city changed the payment method to lease the equipment from the company instead.

The solar installation continues to generate about one-third of the building’s power needs from the system. Iowa law establishes that leases or buying solar panels outright avoids the conflict created by selling actual electricity, Mandelbaum said.

But nonprofit entities, including cities, school districts and churches, cannot receive state and federal tax credits designed to incentivize and lower costs for installing solar power systems.Under the long-term lease agreement between Eagle Point Solar and the city of Dubuque the money-saving tax credits simply “evaporate,” said Barry Shear, the company’s president.

In 2005 
Congress created a 30 percent solar investment tax credit for residents and businesses that install solar energy systems. The credit has helped lower costs of the systems and spurred installation rates that have seen compounded growth of 76 percent each year since 2006, according to the Solar Energy Industries Association.

The Iowa Department of Revenue awarded $632,567 in solar energy tax credits in 2012 and met its $1.5 million cap in 2013, according to the department.

There’s a correlation between states that have allowed more financing options, such as power purchasing agreements, and states that have seen more development in solar energy, said Michael Vickerman, program and policy director for RENEW Wisconsin. The Madison, Wis.-based nonprofit group advocates on renewable energy policies in the state.

“A bank will offer a loan to the system owner when the system owner and the energy customer (is) one and the same,” Vickerman said. “But as soon as you introduce a third party, they get nervous because they’re just not sure that the arrangement can survive.”

Wisconsin experts will closely watch the outcome of the Iowa case, Vickerman said. Wisconsin has a similar regulatory system, and Alliant Energy covers much of the southeastern and central sections of the state, he said.

The uncertainty surrounding the legality of power purchase and other third-party agreements in Wisconsin has stalled solar energy development, Vickerman said.

Vickerman is also optimistic that by clearly allowing power purchase agreements, companies like Wisconsin-based Kohl’s department stores will expand solar energy efforts in the state. Kohl’s already has solar energy systems installed in three sites in Wisconsin and at least 137 sites total across the country, according to the company’s 2012 social responsibility report.

Many of the systems used at Kohl’s locations are operated through power purchase agreements, the report said.

In briefs filed by attorneys for MidAmerican Energy and Alliant Energy, the companies warn that if the court allows third-party purchasing agreements, it could amount to “backdoor deregulation.” Scott Brennan, a Des Moines attorney, will argue before the court today on behalf of the utility companies.

“The District Court’s judicially crafted exception for third-party PPAs would not be limited to renewable energy and would allow back-door deregulation, including fossil-fuel generators set up through third-party PPAs, without any legislative discussion or consideration,” the brief said.

Shear, the president of Eagle Point Solar, believes the concern is unfounded and not supported by evidence in other states where the agreements are allowed.

“The parade of horribles that is going to occur ... it’s a fiction,” he said.