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Florida is the sunshine state. It is also the hurricane state. The latest, Ian, knocked out power to about 2.5 million customers. Given the abundance of cosmic fuel and the threat of blackouts, it follows that Florida should be the solar-panel state. Curiously, it isn’t.
Only about 1% of customers in Florida had solar systems in 2021, slightly below the US average, far below the likes of California, and even below gloomier places like New York.(1)Yet, it ranks eighth among the continental states in terms of rooftop solar-power potential.(2)
One obstacle to rooftop solar in Florida is its peculiar approach to power purchase agreements. These long-term contracts, whereby the solar company sells power to the householder, are commonly used to finance installation elsewhere in the country. Florida effectively bans these, owing to a judgment by the state supreme court in a case over 30 years ago that treats any provider of electricity, no matter how small, as a public utility, deterring independent developers.(3)
In 2018, Florida’s Public Service Commission, which regulates utilities, got around to clarifying that a rooftop solar company could lease panels to customers, so long as it was specifically a payment for equipment rather than electricity. It’s a workaround that finally enabled the market to get going but comes with drawbacks for customers. “I can’t guarantee power production in the lease,” says John Berger, chief executive of Sunnova Energy International Inc., one of the largest rooftop solar companies in the US. “I don’t have to deliver a minimum like I do in the other states.’’
Florida doesn’t offer state incentives for solar power besides net metering, whereby solar-panel owners effectively sell their excess output back to the grid, reducing their bills. Residents can also take advantage of the 30% federal tax credit. State regulators ended a limited rebate program for solar installations in 2015, saying it wasn’t needed, which is odd when you look at how slow the market was back then. This makes it tougher for solar to compete with grid power that averages about 14 cents per kilowatt-hour in Florida. Even leaving out the cost of a battery to store excess power, it takes just under 10 years for a 10-kilowatt-hour solar system to pay back, assuming you bought it outright.(4)
Yet, this April a utility-drafted piece of legislation looking to phase out net metering fell just short after Governor Ron DeSantis tossed it, surprising many. But if grid power is so competitive, why did utility lobbyists feel the need to push that bill in the first place? (Disclosure: My wife runs a company that develops software for distributed energy assets).Ari Peskoe, a specialist in electricity regulation at Harvard Law School, points to the inherent conservatism of utilities and the political support they enjoy in Florida. He cites another state supreme court decision from 2000, Tampa Electric Co. v. Garcia, as making Florida an “outlier.” This ruling makes it difficult for any developer other than a public utility, or one that has a long-term contract to sell to a public utility, to build solar projects above a certain size.
The ruling pertains to large-scale projects rather than rooftop ones, but it speaks to a broader culture of entrenching the interests of the state’s incumbent utilities. A hallmark of the solar boom elsewhere is the leading role played by new entrants.Regulated utilities were formed a century ago in part to raise the enormous sums necessary to build the grid. But the renewables business doesn’t need that; solar power is a capital magnet anyway. In a delicious irony, NextEra Energy Inc. simultaneously owns the biggest regulated utility in its home state, Florida Power & Light Co., yet is also the biggest developer of renewable power projects in competitive markets across the rest of the US.
DeSantis framed his veto as an anti-inflation measure, and it remains to be seen if he would block subsequent legislative attempts once gubernatorial elections are out of the way. Yet the obstacles to competition in Florida’s power market ought to sit uneasily with its Republican leaders anyway.
Another possible impetus for change concerns the aftermath of Ian. The community of Babcock Ranch, just north of Fort Myers, is by now famous for keeping its lights on during and after the hurricane, thanks to sensible flood defenses and two dedicated, large-scale solar projects. Solar systems, especially when paired with batteries, offer some resilience against such disasters.
Florida’s utilities, perhaps as a result of practice, have a good record on reconnecting most homes and businesses within days. Yet days tend to feel like years when the lights (and everything else) go out. An analysis published last month by Berkeley Lab concluded that a rooftop residential system paired with a 10 kilowatt-hour battery would have met 71% of the critical power needs of a single-family home, at the median, during the outages after Hurricane Irma, which hit Florida five years ago. The value of that insurance will differ from household to household, but ought to figure in comparisons of electricity costs vis-a-vis the grid.
It also ought to figure in debates about power market reform in Tallahassee, although that may be hoping for too much. Regulated monopolies have a tendency to monopolize regulators. Florida appears to be no exception. Still, the lack of support for rooftop solar in a state peculiarly exposed to the rising sea levels and the more intense storms that come with climate change looks ever odder as the hurricane seasons roll by.
More From Bloomberg Opinion:
• Use Market to Combat Climate Change and Hurricanes: Tyler Cowen
• Throwing Shade Is Solar Energy’s New Superpower: Adam Minter
• Energy-Rich Texas Should Love the Climate Bill: Liam Denning
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(1) Data as of June 2021. Source: Bloomberg NEF.
(2) Florida was estimated to have enough potential rooftop solar-power capacity to meet 46.5% of its retail electricity sales, eighth highest in the continental US, in an analysis published by the National Renewable Energy Laboratory: “Rooftop Solar Photovoltaic Technical Potential in the United States: A Detailed Assessment” (January 2016).
(3) In the case PW Ventures Inc. v. Nichols (1988), the Florida supreme court backed the Public Service Commission’s position that any entity selling electricity “to the public”, even just one member of the public, made that provider a public utility subject to state regulation.
(4) This assumes average annual electricity consumption of 13.15 megawatt-hours per household at 13.95 cents per kilowatt-hour, and a 10 kilowatt rooftop system at $2.55 per watt (sources: Energy Information Administration, Bloomberg NEF).
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’s Lex column.
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