Nevada is nicknamed “The Silver State,” referencing the booming silver mining industry that thrived in the state beginning in the late 1800s.
However, it seems that this title may be losing its luster. Once the site of a fast-growing solar power revolution, Nevada is now gridlocked between solar power supporters and powerful public utilities like NV Energy, owned by Warren Buffett’s Berkshire Hathaway.
The Solar Energy Model
Silver is an essential component of solar panels. It is used in photovoltaic cells, which convert sunlight into usable energy. Companies like SolarCity (NASDAQ, SWX:SCTY), Vivint Solar (NYSE:VSLR), Sunrun (NASDAQ:RUN) and SunEdison (NYSE:SUNE) saw fantastic growth over the last several years.
Two main reasons contributed to this growth:
- The federal government subsidizing “Green Energy” technologies with tax credits.
- “Net metering” payments by individual states, which let solar customers sell back extra electricity to the grid.
Given the choice, many consumers opted to have solar panels installed on their roofs. The benefits were quite obvious. The New York Times writes:
“Customers, with little or even no upfront payments, generally commit to 20-year leases to install rooftop solar systems on their homes and buy the electricity they produce for less than what they would typically pay utilities.
In addition to the federal tax break and state and local incentives, the credits that utilities give customers for excess electricity sent back to the grid — known as net metering — are a potent part of making the deals economically attractive all around.
Over the last couple of years, thanks to these generous, overlapping incentives, SolarCity’s revenue growth has been robust.”
Factor #1 has been maintained by an extension of the federal tax credit. #2 is decided by the states, however. Nevada’s Public Utilities Commission, which regulates its net metering policies, recently voted to greatly reduce the rate it pays solar customers for the electricity they sell back to the grid.
As many as 20 other states around the nation may follow Nevada’s example. According to SolarCity and its competitors, these rule changes will destroy their businesses.
Solar Loses Battle for Nevada
Solar panel installation increased substantially in Nevada until the Public Utilities Commission in December. Not only is it the “Silver State” but Nevada also basks in consistent sunshine like Arizona, California, and Hawaii also do.
One interesting plot twist in Nevada is the “Battle of the Billionaires.” SolarCity, the biggest solar company in the Nevada market, is chaired by the mad-scientist founder of Tesla Motors, Elon Musk. Meanwhile, Buffett (owner of NV Energy) is the second-richest man in America.
Many blame NV Energy for lobbying the commission and unduly influencing their decision.
As a result, SolarCity is leaving Nevada. It will instead focus on states with more favorable policies. The company says that 550 jobs will be cut.
Even worse, consumers who already set up solar panels are stuck paying the new higher monthly fees and accepting less in return for the extra electricity they sell back.
SolarCity CEO Lyndon Rive explains, “Most disturbing is the commission’s decision to retroactively sabotage existing solar customer’s investments by not grandfathering them onto current rates . . . The Nevada government encouraged these people to go solar, and now the government is putting them at great financial risk.”
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.