Thursday, April 21, 2016

Beware the Panacea: Energy Storage Tax Credits & Rebates

With the end of the 2016 Hawaii Legislature in sight, final versions of bills are being hammered out.   Two bills, House Bill 2291, HD2, SD1 (HB 2291) and Senate Bill 2738, SD 2, HD 2 (SB 2738), offer tax credits and rebates for energy storage, which many tout as a panacea for the over-production of solar electricity during the day to store for use during the evening peak.  In my opinion, energy storage being marketed is expensive and nascent technology for bulk storage.  For residential use, it is cheaper to rely on the grid and buy a back-up fossil-fueled generator for longer outages.

But the marketing hype continues to distort the economic realities of energy storage and many photovoltaic panel installers promote energy storage as a solution to continue to install at unsustainable exponential growth.

Here are two interesting articles.  In mainstream media, one does not read much about Tesla's Powerwall after its big debut a year ago but this GreenTech Media review examines the cost and performance of the Powerwall and a competitor comments on the Powerwall in the following article.

Utility Dive's editor, Gavin Bade, interviewed Boris von Bormann, the CEO of Sonnen, a German storage company at the Maui Energy Conference.   Interestingly, von Bormann outlines his Hawaii strategy under the self-supply tariff and comments on the payback period:
After Hawaii utility regulators decided to abandon retail rate net metering for rooftop solar systems last year, many [pv solar] installers reacted with alarm, saying it would slow adoption of rooftop solar systems. 
But for residential storage, the story is much the opposite, von Bormann told Utility Dive. When the regulators ditched net metering, they replaced it with two options — a grid-supply option for customers who want to export generated electricity back to the grid and a self-supply option for those who want to generate energy for personal use only. 
That second option — the self-supply tariff — provides an excellent opportunity for Sonnen’s storage product, von Bormann said. Under that option, Sonnen’s 4 kWh battery system paired with a rooftop solar system should provide a return on investment in about 6.5 years.
In general, I surmise State Legislators would be concerned about the use of the taxpayer or ratepayer collected funds being used to incentivize investments that are for the sole benefit an individual.  That is why I think HB 2291 needs careful consideration and a cost/benefit analysis to understand its impacts on the general fund and SB 2738 should be killed.

Let me start with SB 2738.  This bill establishes an energy storage rebate utilizing funds from the Hawaii Green Infrastructure Loan Program (HGILP).  The primary purpose of the program was to provide low-cost capital to finance solar photovoltaic systems and other clean energy improvements for those who may otherwise have difficulty obtaining financing for these types of projects.  The HGILP was envisioned as a self-sustaining loan program which could eventually replace the existing renewable energy income tax credit (REITC) and other cash incentives from the public benefit fee when these projects demonstrate electricity savings to reduce a customers electricity bill, moving more towards a market based approach rather than relying on tax credits or electricity ratepayer fees to incentivize installation.

This bill has the consequence of providing unwarranted subsidies to people who have already installed rooftop solar systems and have benefited from the net-energy meter tariff and the REITC which resulted in the return on investment being exceedingly fast and generous.  I do not believe it is the intent of the legislature to continue to give subsidies to the same individuals and businesses who have already been subsidized and will continue to benefit for the life of these systems.  The HGILP proceeds should be made available to these individuals and businesses as a loan, not a rebate.

What is disturbing is the simplistic cut and paste testimony prepared by the bill proponents that Legislators will received from their constituents which reads as follows:
I strongly support SB 2738 SD2 HD1, creating a smart rebate program that kickstarts the deployment of energy storage and helps the "little guy" be a part of Hawaii's clean energy future. This measure is a critical step in securing Hawaii’s energy future, reducing our contribution to global climate change, and reducing the cost of living in Hawaii. Much like existing rebates for CFLs, LEDs, and solar water heaters, this measure is a common-sense policy that has the long-term interests of Hawaii residents in mind.
Should this bill pass, the "little guy," the person that will not or does not have the opportunity to install energy devices on the customer side, will be screwed again as public resources and attention is diverted and focused on those that already have benefited from generous State subsidies through the REITC and do not contribute to their fair share of the public benefit fee and are likely free riders.

HB2291 amends the existing REITC into two eligible categories, a "solar or wind energy property" and "energy storage property."  While I agree with the concept of a ramp-down and the sunset of the REITC, and requiring all systems to be grid-connected outlined in the bill, energy storage should be a part of a total system package when installing a new photovoltaic and storage systems, not as a separate tax credit eligible category.  Again, I don't see a reason to further subsidize existing photovoltaic systems that have already utilized the REITC and have the additional advantage of net-energy metering.  Also, if, under the current tax credit and tariff rates, the return on investment is 6.5 years, as stated in the Utility Dive article, what is the minimum amount of subsidies should State give for a longer but still attractive payback period?  These issues need to be answered before this bill can be passed.

I find it totally ironic that as we all lament about the high cost of electricity, the political and vocal "populace" trajectory - no LNG, pro-NEM, pro-REITC - continually stick it to the "little guy", the electricity customer/taxpayer who cannot afford or do not have access to renewable and energy efficiency solutions to dramatically lower their electricity bills and must rely on the electric utility to lower its fuel and operational costs to result in lower bills.  These customers tend to be renters and lower income households - families living paycheck to paycheck.  Unfortunately, with these bills the benefits keep coming to the haves not the have nots.  

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