SEIA President Rhone Resch Testifies before the U.S. House Natural Resources Committee.
"Given our vast solar resources, we could easily lead the world in solar deployment. Our industry needs stable, predictable policies for continued growth."
Rhone Resch, president and CEO of the Solar Energy Industries Association® (SEIA), testified before the U.S. House Natural Resources Committee hearing, "American Energy Initiative: Identifying Roadblocks to Wind and Solar Energy on Public Lands and Waters."
In his testimony, Resch detailed the solar industry’s success so far in developing utility-scale projects on public lands and identified significant obstacles to further progress. He outlined policy recommendations that are aimed at overcoming the siting and permitting challenges on public lands while also stimulating significant job creation across the solar supply chain, from engineering and manufacturing to construction, installation and operations.
Below are highlights of Resch’s oral testimony with links to oral and full written testimonies and key background materials:
PRESIDENT AND CEO SOLAR ENERGY INDUSTRIES ASSOCIATION
RESCH: Mr. Chairman and Members of the Committee, Thank you for the opportunity to submit testimony on roadblocks to solar energy development on public lands. I am Rhone Resch, the President and CEO of the Solar Energy Industries Association (SEIA). I am testifying on behalf of our 1,000 member companies and 100,000 American citizens employed by the solar industry. SEIA represents the entire solar industry, encompassing all major solar technologies (photovoltaics, concentrating solar power and solar water heating1 ) and all points in the value chain, including financiers, project developers, component manufacturers and solar installers. Before I begin my testimony, let me thank Chairman Hastings and Ranking Member Markey for their leadership and support of solar energy. We are grateful that the Committee recognizes the important role that our public lands play in the deployment of solar energy.
Established in 1974, the Solar Energy Industries Association is the national trade association of the U.S. solar energy industry. Through advocacy and education, SEIA and its 1,000 member companies are building a strong solar industry to power America. As the voice of the industry, SEIA works to make solar a mainstream and significant energy source by expanding markets, removing market barriers, strengthening the industry and educating the public on the benefits of solar energy.
We have an opportunity – and perhaps an obligation – to craft policies today that will guarantee a clean energy future for tomorrow, one in which our energy comes from renewable, domestic sources. Today`s hearing is an important step in securing that future. Developers face many hurdles in bringing a solar project to fruition, whether on public or private lands. Below we make recommendations for ensuring the long-term policy certainty needed to make solar energy a substantial part of our energy supply in the United States:
— Retain maximum flexibility for solar developers to site projects on public lands without being restricted to zones.
— Establish a cost recovery mechanism and consistent timeframes to expedite the Section 10 consultation process performed by the U.S. Fish and Wildlife Service.
— Extend the 1603 Treasury Program, which allows solar and other renewable energy developers to receive a direct federal grant in lieu of taking the investment tax credit, which is already in place.
— Continue support for the DOE Loan Guarantee Program and/or establish a Clean Energy Bank to provide long-term, low-cost financing to those deploying solar.
— Grant long-term clean energy contracting authority for federal agencies to reap the benefits of solar energy.
II. Overview and Recent Highlights of the U.S. Solar Industry
At a time of high unemployment and difficult economic conditions, the solar industry has become the fastest growing U.S. energy sector and one of the fastest growing industries across the entire economy. In 2010, the solar industry grew at a rate of 67 percent and now employs Americans in all 50 states. Last year, 956 megawatts (MW) of photovoltaics (PV) and concentrating solar power (CSP) technologies were installed, as well as 2.4 million square feet of solar water heating collectors. This phenomenal growth is the result of private investment, technological innovation, a maturing industry and smart federal and state policies. The federal government has received a strong return on its investment of public dollars, with benefits to our economy that far exceed their costs.
Solar is an energy source available in every U.S. Congressional district.2 At this time, Germany leads the world in solar installations with a solar resource equivalent to that of the state of Alaska. Given our vast solar resources, we could easily lead the world in solar deployment. The vast majority of Americans would no doubt support such a goal: 94% of Americans think it is important for the nation to develop and use solar energy.
Solar energy has many benefits, including the ability to be tapped in a variety of circumstances – in power plants, in residential and commercial applications, and even off-grid in remote areas where no other electric infrastructure exists. Solar also generates electricity during peak demand, when we need it most and electricity is most expensive.
The solar industry is maturing rapidly. Major companies like GE, Dupont and Applied Materials have solar divisions. Utilities from Florida Power & Light to PSEG and Arizona Public Service Company own solar assets in their generation fleet. Other energy players are increasingly investing in solar, such as NRG Energy, AREVA and Westinghouse. Even Google is making a major play, putting a 1.6 MW distributed solar generation system on its Mountain View, California campus and investing $168 million in the Ivanpah Solar Electric Generating System, a solar power plant which uses BrightSource Energy`s proprietary power tower technology.
Like most products, solar energy`s costs decrease as more and more solar is installed. The policies in place today to incentivize solar deployment not only yield dividends now, they act as a catalyst, driving down future costs. The right policy underpinnings can shave years off of the organic price drops analysts expect.
With increased deployment of solar energy, solar manufacturing and supply chain production have followed. For example:
— In 2010, REC Silicon, which produces solar-grade polysilicon in Moses Lake, Washington, expanded capacity and production to meet growing domestic demand. The facility produces 27% of all solar-grade polysilicon in the U.S. and employs 550 people in Chairman Hastings`s district.
— A 280 MW concentrating solar power plant is under construction in Gila Bend, Arizona, employing up to 2,000 people in Representative Grijalva`s district during construction of the facility. Through supply chain purchases from companies around the country, the plant supports hundreds of jobs in every region.
— Early in 2011, a 19 MW PV plant, the largest solar plant in Colorado and one of the largest in the country, came online in Representative Tipton`s district. The plant produces enough clean solar energy to power nearly 4,000 homes, and this is just the beginning. A larger 30 MW plant is under construction nearby, and is expected to become operational later this year.
More solar energy highlights by Congressional district can be found at Attachment 2.
Last year was also a noteworthy year for the Bureau of Land Management`s (BLM) solar efforts: it issued the first nine permits for construction of utility-scale solar power projects on public lands in the entire history of the agency. Today, work is underway at three of the sites and several other utility-scale solar power plants are under construction in the Southwest, employing hundreds of workers from the region. In addition, the supply chains behind each of those facilities are turning out highly reflective mirrors, precision-crafted receiver tubes, steel posts and thousands of other components in Alabama, Michigan, New Mexico, Pennsylvania, Tennessee and Virginia.
As you can see, 2010 was an exciting year for the U.S. solar industry. But we`re not stopping there: the SEIA Board of Directors set out a goal for the industry to install 10 gigawatts – 10,000 MW – annually by 2015.
III. Solar Power Plant Developers Face Persistent Challenges
Solar power plant developers face persistent hurdles in bringing a project to completion, whether the solar plant is sited on public or private lands. In the public lands arena, the Department of the Interior (DOI), thanks to the leadership of Secretary Salazar, prioritized the permitting of renewable energy projects, and SEIA commends DOI, BLM and the U.S. Fish and Wildlife Service (USFWS) for their efforts.
The overarching challenge for any industry is policy certainty. When companies are deciding where to build their next manufacturing facility, when and where to spend $1 billion constructing a new power plant or how many employees to add this year, they need a high degree of confidence in the future. This is true for public lands policy as well as tax, finance and energy policies.
A. Public Lands Policy: The Programmatic Environmental Impact Statement for Solar Energy
In 2008, BLM initiated a major undertaking studying and preparing a programmatic environmental impact statement (PEIS) for solar development in six Southwest states.4 When final, the PEIS will establish policy for solar development on public lands for the next two decades. As part of the study process, BLM proposed and analyzed 24 «solar energy study areas« on existing public lands which could be codified as «solar energy zones« and which would encourage solar energy development within their boundaries. BLM released the Draft PEIS in December 2010 and the public comment period recently closed.
A fundamental policy decision to be made in the final PEIS is whether solar energy development will be allowed across 22 million acres of public lands in the Southwest, with benefits accruing to those projects located within the solar energy zones, or if solar development will be restricted to only lands within the identified zones. Recognizing that not every acre of BLM-managed land is appropriate for solar development,6 the solar industry is nevertheless concerned that permitting development exclusively within the solar energy zones is overly restrictive, would thwart development and would undermine the renewable energy goals Congress set out for BLM in the Energy Policy Act of 2005.
Our public lands have been used for a wide variety of economic and recreational activities over the last century, and solar must be one of those acceptable uses. In fact, three out of four Americans approve of solar energy development on public lands.8 BLM should not adopt the solar energy zone-only alternative presented in the Draft PEIS. Instead, BLM should adopt the Preferred Alternative identified in the Draft PEIS and work to make the solar energy zones themselves more attractive to project developers.
Much more needs to be known about the solar energy zones to make them a useful option for solar energy developers. Only a cursory review of the zones has been conducted, and neither BLM nor a developer can affirmatively state that a solar power plant belongs within any of the zones. Not enough is known regarding the biological and cultural resources within these zones. As a result, a developer that seeks to site a power plant within such a zone will still expend a great deal of effort and money studying the site in order to receive a permit for development. The solar energy zones were intended to ease the way for development, providing a sort of «pre-approval« that such acres are suitable for solar power plants. But in their current state, the solar energy zones do not provide real incentives for solar development within their boundaries.
B. Public Lands Policy: Early Stakeholder Input is Preferable when Crafting New Policies
In 2010, the Department of the Interior faced the daunting task of permitting solar energy projects at a pace the department had never before attempted, while simultaneously crafting the policies necessary to carry out such permitting. Even now there are many new policies coming out of BLM and USFWS in Instruction Memorandum (IM) format. The pace of these releases is challenging for both developers and field office staff to react to and the regulatory continuity between the field offices is not consistent. In many cases, guidance has been crafted based on policies from other industries that BLM oversees, with limited applicability to solar energy.
As a recent example, the U.S. Fish and Wildlife Service issued draft Eagle Conservation Plan Guidance for wind developers. Just after this document`s release, some regional USFWS staff began requiring solar developers to comply with the guidelines contained therein. Such a standard is wholly inappropriate, given that the guidance was written for another industry and is only in draft form. A solar developer cannot reasonably be expected to comply with guidance for wind development.
Similarly, BLM`s Instruction Memorandum establishing performance and reclamation bond requirements for solar energy projects10 relies heavily on the requirements for the mining industry. A solar power plant`s footprint and potential impact on public lands are far different than mining and other extraction activities, and that should be recognized by the agency and reflected in policy decisions.
Finally, the rent policy BLM established for solar energy produces excessive charges to developers. In some instances, the BLM rent is double what a developer would pay for nearby private land. Developing on public lands also comes with other costs to the developer not seen for private lands: increased processing time, mitigation fees, restoration and revegetation bonding. Each of these extra costs will deter solar development on public lands, contrary to the goals of the Administration and Congress. In addition, charging high rents by BLM will lead to higher rents in the private sector, which will further damage the economics of future solar projects.
C. Private Lands Policy: Section 10 Consultations from USFWS Are Not Timely
A perennial challenge faced by solar developers (and many others) is that of securing a timely Section 10 consultation11 from USFWS. Many in the solar industry are developing projects on private lands and, due to biological considerations, need permits to be issued by the U.S. Fish and Wildlife Service to proceed with their project.12 Projects without a federal nexus (i.e., projects that are not funded, authorized, or carried out by a federal agency) may linger for years at the back of the queue while USFWS staff provides Biological Opinions and incidental take statements (if needed) to other applicants whose projects are on public lands or otherwise have a federal nexus (e.g., a recipient of a Department of Energy loan guarantee).
This is not a matter of undue preferential treatment, but of insufficient staff resources. Indeed, in Fiscal Year 2010 alone, USFWS performed over 30,000 consultations with federal agencies under Section 7 of the Endangered Species Act, leaving little time for staff to provide Section 10 consultations.13 To address this staffing challenge, SEIA recommends establishing a cost recovery mechanism through which applicants could reimburse USFWS for contracting independent, non-biased scientists and permit experts to expedite the consultation and review and process. This process is used today by BLM in processing right-of-way applications.14 In addition, we recommend that USFWS establish a consistent timeframe for Section 10 consultations, enabling solar projects on private lands to move forward in a timely fashion.
D. Tax Policy: Recent Success Demonstrates the Value of Certainty
The Energy Policy Act of 2005 created tax incentives for solar energy. Specifically, the measure provided a 30% investment tax credit (ITC) for commercial and residential solar energy systems. Congress subsequently improved and extended the ITC through 2016. The multiple- year extension of the residential and commercial solar ITC gave entrepreneurs the policy certainty needed to invest in solar energy projects. As a result, the industry has grown by 800% since the ITC was implemented in 2006. Cumulative solar capacity in the U.S. now exceeds 2,600 MW, enough to power more than a half million homes.
The 2008 economic crisis rendered solar and other renewable energy tax incentives of little immediate value. Prior to the financial crisis, many large renewable energy projects relied upon third-party tax equity investors to monetize the value of federal renewable energy incentives. The economic downturn drastically reduced the availability of tax equity, severely limiting the financing available for renewable energy projects.
In response to the dramatic decline in available capital, Congress enacted the Section 1603 Treasury Program. This program allows solar and other renewable energy developers to receive a direct federal grant in lieu of taking the ITC that is already in place. This simplifies financing for renewable energy projects and provides access to capital at a time when project developers` tax burdens are inadequate to capitalize on tax incentives and tax equity financing is both scarce and expensive.
By any objective measure, the Section 1603 Treasury Program has been a resounding success. Due in large part to the liquidity provided by this important incentive, the solar industry grew 67% in 2010, making it one of the fastest growing industry sectors in the U.S. economy. Due in large part to reliable, consistent federal policy, solar costs continue to decline. Last year, installed costs fell by 20%, and from the year 2000 to the present, the per-watt price of photovoltaics has declined by 40%. Solar is a diverse technology, and costs will continue to drop as the industry achieves greater efficiencies and economies of scale.
E. Energy Policy: Long-Term Commitments to Renewable Energy Are Vital
Solar power plants are sizable assets that have a useful life of 30 or more years. In order for a proposed solar project to be built, it needs a long-term buyer of its electricity (typically through a bilateral contract with a utility called a power purchase agreement or PPA) and a long-term loan from a bank, financing the project at a reasonable interest rate. Federal policies are needed to provide certainty regarding the financial underpinnings of projects. Such policies include the Department of Energy (DOE) Loan Guarantee Program or a Clean Energy Bank. State-level renewable portfolio standards have incentivized utilities to sign long-term contracts with solar providers. Federal agencies face similar RPS goals for the energy they use, but lack the authority to similarly enter into long-term contracts with solar providers. Long-term clean energy contracting authority should be granted so the federal government can enjoy the same benefits of solar energy that utilities and homeowners do.
DOE`s loan guarantee program was initially created by the Energy Policy Act of 2005 in 9 recognition of the great challenges that large nuclear, renewable and other low-carbon energy projects face obtaining affordable long-term financing in the commercial marketplace. In today`s economic climate, these programs are critical to attract investment in nuclear, clean coal and renewable energy projects. Until the financial community witnesses the successful completion of several of these projects, it will continue to charge substantial premiums or not lend to those projects at all. In addition to reducing component costs, access to long-term debt at a low interest rate is key to ensuring that solar power plants are cost-competitive with other electricity sources. We urge Congress to provide sufficient funding to the Section 1703 DOE Loan Guarantee Program in Fiscal Year 2012 to continue the timely processing and reward of loan guarantees to all of the projects deserving of DOE support.
Another way to accomplish this goal would be to establish a Clean Energy Bank or Clean Energy Deployment Administration (CEDA). As envisioned in H.R. 2454 (2009), CEDA could directly provide loans to an applicant that deploys a clean energy technology. CEDA would also continue to provide loan guarantees, similar to the current DOE Loan Guarantee Program.
On the purchasing side of the ledger, only the Department of Defense currently has the authority to enter into contracts of longer than 10 years with energy providers.15 However, most solar energy projects require a 20- to 30-year contract in order to be financially viable and provide electricity at a rate at or below the retail price. Unlike other sources of electric generation, solar power plants mainly consist of the up-front cost of installing the infrastructure and solar equipment. Ongoing operations and maintenance costs are quite low, and the fuel is free. Therefore, the longer the term of the contract, the cheaper the electricity is on a per-unit basis. If a buyer wants a 10-year contract, the entire cost of the power plant must be amortized and recovered over only 10 years. If the buyer can sign a 30-year contract, however, the equipment costs are spread over 30 years instead.
Nellis Air Force Base, outside of Las Vegas, Nevada, illustrates the potential of long-term clean energy contracting. There, the U.S. Air Force contracted for electricity via a 14 megawatt solar PV installation. In addition to providing 25% of the electricity needed annually for base operations, the solar project is saving the base over $1 million each year in lower electricity costs.16 Solar projects can similarly save other federal agencies millions on their utility bills over the next several decades, but these solar projects cannot move forward until civilian agencies have the authority to sign a long-term contract. Extending the contracting authority to match the life of the solar project would benefit solar companies and the public by securing long-term sources of clean energy.
Again, thank you for inviting SEIA to submit this testimony. We look forward to working with the Committee to establish long-term, stable policies which remove roadblocks, promote job creation and ensure the deployment of solar energy technologies on public lands.