LIPA Rebate Pits Local Solar Installers Against Financiers

“Solar is not magically being installed from California.”

Eric Wesoff August 26, 2013

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

New York's Long Island Power Authority (LIPA) has been tuning its solar rebate program -- and it's causing some friction between the utility, local installers, and national solar financiers.

Since 2000, LIPA has provided financial incentives for over 6,500 residential and commercial solar rooftops on Long Island through its Solar Pioneer program. The program, funded by LIPA ratepayers, costs $18 million per year.

Until late last year, LIPA policy prohibited leasing options -- meaning that national third-party ownership (TPO) solar providers such as SolarCity, Sunrun, and Sungevity were not allowed in the territory. LIPA has since opened up the market to TPO and just recently lifted the $75,000 annual contractor cap. The rebate value has dropped to $0.99 per watt.

Bill Feldmann, Chairman of Long Island's Solar Energy Industry Association, told GTM, "For years, the local solar industry has been working hand-in-hand [with LIPA] to develop the program so that funds would last through the year." He added, "Since opening it up, about half of the rebate funds go to third-party ownership customers such as SolarCity, SunPower, Sungevity, and Sunrun."

The Long Island solar installation industry is small, with only about 600 employees in total, and Feldmann sees it as a jobs issue. He spoke of SolarCity's "sales machine" which "over-hired lots of sales people on the ground" and caused "other established businesses to lose employees." He said, "SolarCity [and the others] will hire and then lay off folks when the funds run out."

Feldmann said that the local installers are "afraid for their livelihoods as they see their businesses slipping out of their hands." He noted that he's not against TPO, but asserts that it's not a level playing field, saying, "Leasing should get 30 percent less of a rebate because they get the 30 percent tax rebate. Then we can let the market decide the proper course." He suggested that the subsidies be levelized and funds split for leased versus purchased systems.

Feldmann added, "The leasing companies get a five-year depreciation that purchase-to-own doesn't get. Therefore we believe that LIPA is overpaying and not being a good steward."

Another local installer, Sail VanNostrand of Energy by Choice in Northport, New York, said he was "not anti-leasing" but that different ownership models should have appropriate subsidies. He echoed Feldmann's claim that solar roofs installed by national leasing and installation companies "transfer jobs and profits" out of the area.

Not every local installer disagrees with the ruling. David G. Schieren, CEO of EmPower Solar, supported the tariff change. "It has specifically helped EmPower build a team of 60 solar professionals headquartered on Long Island, and [bring solar to] 650 residential, commercial and non-profit clients. Given the dynamic state of the regional, national and global solar industry, we applaud LIPA for staying flexible and maintaining its resolve to make solar a major component of the energy mix," according to a statement.

One of Feldmann's fellow NYSEIA board members supports the policy change. "Long Island is one of the most important solar markets in New York. This is an important step, as LIPA has acted quickly to deploy an incentive that is the lowest in the state and will continue to support job creation and solar development. This will drive the market closer to realizing the goal of deploying clean energy incentive-free, to the benefit of all ratepayers," said Shaun Chapman, President of NYSEIA, in a press release.

SolarCity's regional VP on the East Coast, Lee Keshishian, told GTM in an email, "This is smart policy and an excellent first step. The changes allow more Long Islanders to go solar at a lower cost to the program. The next step would be to include a transparent step-down to an incentive-free program."

Evan Dube, the Director of Government Affairs at Sunrun, said that the utility's program was about market growth and larger scale, as well as "creating a self-sustaining industry." He suggested that TPO "expands the solar market. Some want to view residential solar as a zero-sum game -- it's really not. While leasing did very will under the California Solar Initiative, the fact is that the purchase market is growing and expanding the entire market."

Dube added, "Residential solar is inherently local. Even when SolarCity comes into a market, it's hiring locally. Solar is not magically being installed from California; it's growing the local green economy. To me, the recent LIPA action is about good public policy," he said, adding, "It's about providing customer choice and expanding solar."