Duke Energy’s growing investments in solar power in North Carolina help the state move closer to its renewable-energy goals, but the tariff President Donald Trump slapped on solar panels could slow that expansion.
“We know this will drive up the cost of solar,” Duke spokesman Randy Wheeless told Bloomberg Environment. “We’ve built a lot of solar, we’re buying a lot of solar. The tariff presents a challenge to that.”
North Carolina isn’t an isolated case. The tariffs are are expected to make it more expensive for the 29 states with set targets for renewable power use, or renewable portfolio standards (RPS), to meet those goals. It also could discourage other states from setting new standards because of the rising cost of solar.
The tariffs, announced Jan. 22, last for four years, starting at 30 percent and decreasing to 15 percent over that period.
“It will squeeze margins in the solar development chain and modestly increase the cost of RPS compliance,” Ryan Wiser, a senior scientist and group leader of the Electricity Markets and Policy Group at Lawrence Berkeley National Laboratory, told Bloomberg Environment. “It seems unlikely to me that it will lead to noncompliance.”
States’ renewables goals vary widely. Some are voluntary, and some are mandated.
For example, California law requires the state to obtain half of its electricity from renewables by 2030. North Carolina requires its major utilities to produce 12.5 percent of their electricity from renewables by 2021. In Colorado, utilities are required to generate 30 percent of their power from renewables by 2020. Some states have caps on how much utilities are required to spend to obtain renewable power.
“If there are states that have instituted any kind of cost expenditure limit, their ability to meet RPS could be impacted in that case,” David Mooney, director of the Strategic Energy Analysis Center at the National Renewable Energy Laboratory, told Bloomberg Environment.
Renewables Goals To Remain Within Reach
States such as California and Nevada that rely heavily on solar to meet their renewable energy requirements are likely to see the most impact from the tariff, but the effect is unlikely to be significant, Wiser said.
California Energy Commissioner David Hochschild told Bloomberg Environment that Trump’s imposition of the solar tariff will prevent some solar projects from being built in the state, but the higher cost of solar will not slow California’s progress toward meeting and exceeding its 2030 renewables target.
“We will not get as far above 50 percent as we might otherwise,” he said. “In 2000, the price of solar energy was 50 cents per kilowatt hour. Today we’re at 3 cents for utility-scale [solar]. The tariff will raise that somewhat.”
State officials in New Mexico, where utilities are required to obtain 20 percent of their electricity from renewables by 2020, do not yet know how the tariff will affect the state’s ability to meet that target.
Louise N. Martinez, director of the New Mexico Energy Conservation and Management Division, told Bloomberg Environment that the tariff’s effect on the state is “still up in the air,” but solar power projects currently under development may be sufficient to meet the state’s renewables target.
Wheeless said that in North Carolina, the cost of solar power would need to remain below the cost of a natural gas peaker plant, which is a type of plant usually running on natural gas that operates only at times of highest electricity demand. If the tariff raises the price of solar power above that point, Duke would likely build fewer solar farms, he said.
“It’s hard to put a dollar figure on it now,” he said. “We’re still looking at the issues, layers for the tariff.”
Wind May Benefit
States may look to procure more wind power over the next four years to meet their targets as a result of the tariff, Mooney said.
“This could have a positive impact on wind deployment overall,” he said. “As an example, if a state has an RPS without a solar-specific requirement, the tariff may make it more cost-effective to meet the RPS objectives with wind energy, which could drive wind energy deployment in a given state.”
That’s exactly how the Department of Energy is pitching the solar tariff to the wind industry.
Valerie Sarisky-Reed, acting director of the DOE’s Wind Energy Technologies Office, told members of the wind power industry at the agency’s Wind Industry Partnership Forum in Washington on Jan. 24 that the wind industry is a clear winner from the solar tariff.
“Who’s the winner of this tariff agreement? You are,” Sarisky-Reed said to wind industry members. “As those solar technologies for a small moment in time become more costly and more difficult to obtain, wind technologies are there and ready and actually in many places in this country cheaper, so I encourage you to take advantage of this small moment in time.”
Tariff a ‘Bump in the Road’
Ultimately, the tariff will will prove only to be a small hurdle for states with ambitious renewables targets, but a larger hurdle for others, Warren Leon, executive director of the Clean Energy States Alliance, which represents the California Energy Commission, Alaska Energy Authority, Maryland Energy Administration, and 28 other state energy offices, public utilities commissions, cities and utilities.
“This is going to be a bump in the road,” he said. “It’s going to lead to a short-term increase in cost, but the long-term trend remains clear: It’s possible to get significantly more electricity from solar, and a state that wants to commit to that is still going to be able to get there. This is only for four years, and those four years will be over and the tariff is going to go away.”
(Clarifies in 14th graf that the cost of solar must be below that of a natural gas peaker plant.)