Solar is set to explode in the U.S., thanks to the recent five-year extension of the federal Investment Tax Credit. That battle has been won.

But now the battle oversolarpolicy -- particularly distributed energy policy at the local level -- is likely to intensify.   

That was made clear in Nevada this week, where regulators upheld a decision to slash net-metering rates for all solar customers in the state. 

“The question becomes which states are poised to change the growth and location of solar,” said Matt Mooren, an energy and utilities advisor with PA Consulting. 

Many states were reviewing their net energy metering policies and programs while awaiting the ITC decision.

“The solar industry has gotten its holiday wish list,” Zach Pollock, also in PA Consulting’s energy and utilities practice, said of the ITC extension. “What that has done is put additional pressure on the state policies.”

For states with vertically integrated utilities that have been avoiding the policy considerations related to potentially robust third-party solar markets, “It’s going to be more about blocking and tackling,” said Mooren. But for many states, the proceedings to overhaul net metering in light of the ITC extension could look something like the process that resulted in Minnesota’s value-of-solar tariff.

On a regional scale, the impact of the ITC extension on markets will vary. For areas with high solar penetration, such as the Southwest, it could ultimately impact load growth and peak demand growth, which could in turn impact capacity prices for generators. Even so, the impact “is not as significant as some may think,” said Mooren. Solar energy doesn’t totally align with peak demand, but in ISO-based markets like the Northeast, it can lead to an assumed 20 percent to 40 percent reduction in peak demand per kilowatt of installed distributed solar capacity.

The five-year extension of the solar Investment Tax Credit will produce an additional 25 gigawatts of additional solar capacity over the next five years, compared to a scenario in which the extension had not passed in December, according to GTM Research.

Most of that will be in the utility-scale sector, but residential installations will see an additional 35 percent growth, while commercial solar will increase by 51 percent, compared to growth rates without an extension. “It really just keeps the growth rolling beyond 2016 [without a state-level policy response],” said Mooren.

Changes were already underway in many leading solar states, such as California, before the ITC extension was passed. California recently proposed keeping retail rates for residential solar customers, but with some modest changes. Hawaii has halted new net energy metering applications and introduced two new tariffs as replacements. Nevada has gone the furthest after its recent decision to end net metering for new and existing customers.  

“Nevada has attacked the fairness issue head on,” said Mooren, referring to the issue of non-solar customers potentially paying more for the grid than those with solar.

He expects the issues of fairness and reliability to be tackled more proactively in other states, even in those with low solar penetration. Florida could be one of those states. It is primed for solar growth, but progress has been stymied by a ban on third-party sales of solar electricity. With the passage of the ITC, it could encourage utilities to step up their campaign to block solar.

Texas is another state poised for a material increase in solar growth. However, the combination of restrictions on net metering in ERCOT, less progressive NEM policies in vertically integrated service territories, and relatively low electric rates have stunted market growth so far. Even with low electricity prices, “as capital costs of solar stream downward,” said Mooren, “at some point, it’s an attractive opportunity.”

Texas is examining market reforms for distributed energy resources at the grid operator level under its DER Light and DER Heavy proposals. Any change would potentially come slowly, as they often do in ERCOT, and may affect larger assets rather than smaller projects, such as residential solar.

But there are other fixes brewing in Texas that could impact the solar market and force changes to overall market design. Last year, SolarCity partnered with energy retailer MP2 to offer net metering for solar customers. If the concept takes off, other retailers and solar providers could copy it -- potentially pushing the public utility commission and ERCOT to move more quickly on their solar policies.

“Until now, it’s mostly been reactive,” Pollock said of state-level solar policy. But with solar here to stay under the ITC extension, “It’s going to be less punitive and more of a compromise.”