Connecticut has adapted creatively to the call to develop clean energy markets, combining energy efficiency and solar power as it brings in private financing. There is extensive work in progress to strengthen its programs. In this interview, Bryan Garcia, president and CEO of the Connecticut Green Bank, outlines the current business environment.
CEFF: How would you describe the solar-energy market's current successes and challenges in Connecticut?
Garcia: In Connecticut, we have four solar-energy markets. These include behind-the-meter residential and non-residential solar, grid-tied utility-scale solar, and community solar.
Since the Connecticut Green Bank (“Green Bank”) has a statutory obligation to serve residential solar due to Public Act 15-194, I will offer my perspectives on the successes and the challenges of this market.
With regard to successes, there are a number of metrics that describe the market since the Green Bank’s inception in July 2011, including:
- These resources have declined by nearly 85 percent from $1.65/W to $0.28/W. This makes the market less and less reliant on state incentives for growth. This final figure is equal to about $2,250 per household.
- An increasing market of local, regional and national installers has increased deployment by an average compound annual growth rate of 50 percent from 2.5 MW to about 50.0 MW a year.
- Owner-occupied households earning less than 60 percent of the area median income (AMI) are installing solar proportionally more than non-low-income households by more than 10 percent.
- Financial support has increased from $15 million to over $180 million a year. A significant majority of this is from the private sector. This contributes to the improvement of Connecticut’s economy by reducing the energy burden on households while creating tax revenues for the state.
- Connecticut is deploying solar as effectively, as measured in W/capita, as its neighboring states such as Massachusetts, New Jersey, and New York. But it is doing it more efficiently in its use of [financing] (W/$1 of state incentive).
In terms of challenges, there are two issues that Connecticut’s residential solar market faces in the years ahead.
- State Transition – The state is moving from net metering to a tariff structure with two pricing options, including “buy all–sell all” and “use–buy–sell.”
In a “buy all–sell all” scenario, the customer must buy energy from the grid at a retail rate based on all of the household consumption and then sell all of the solar photovoltaic production at a specific tariff rate.
In the “use–buy–sell” scenario, whatever solar production is simultaneously produced and consumed is priced at the retail electric rate like net metering, with the remaining solar photovoltaic production exported to the grid being sold at a specific tariff rate.
Markets that grow accustomed to consistency can be threatened when the underlying economic structure undergoes dramatic change. Customers, contractors and funders will need more information to understand the changing economics of solar in Connecticut. The Green Bank will have to help the market transition to ensure its sustained orderly development.
- National Transition – From Chinese panel, steel and aluminum tariffs imposed on foreign imports to the phase-out of the Investment Tax Credit (ITC), the low-cost economics of solar are being challenged for customers and contractors. Changes in tax policy, depreciation treatment, and interest rates present unique challenges and opportunities for capital providers.
With these successes and challenges, the future of the residential solar market in Connecticut will rely on how well the state pursues its grid-modernization efforts.
For example, peak demand in the summer and winter months can be achieved through “cost-effective” solar deployment combined with battery storage.
Currently, time-of-use rates and backup power are available to households. But is that enough to socialize some of the benefits a homeowner receives from solar to the rest of those on the grid?
Solar with battery storage can be combined with demand response, energy efficiency, renewable heating and cooling, and electric vehicles. This represents an opportunity to continue to drive investment that modernizes the grid while reducing greenhouse gas emissions to confront climate change.
CEFF: What is your perspective on the energy efficiency market's successes and challenges at this time in Connecticut?
Garcia: One of the aspects that differentiates Connecticut’s market from that of its neighbors in the Northeast is that energy efficiency and solar are seen as mutually important.
For example, in Connecticut, between 80 and 90 percent of the nearly 30,000 homes that have installed solar since 2012 have also received an energy assessment through a utility-administered Home Energy Solutions (HES) program. This is an award-winning Home Performance with Energy Star program.
With a co-pay of $150, an average household receives $1,000 in services. This includes sealing air leaks and installing energy efficient lightbulbs, faucet aerators, and low-flow showerheads.
HES has successfully helped nearly 90,000 homeowners since 2012 save between $200 to $250 a year in savings on their energy bills. Meanwhile, it is helping our utility partners deliver “cost-effective” energy efficiency resources to the grid.
One of the challenges for HES… is helping households go beyond the energy assessment and undertaking “deeper” energy efficiency measures.
As part of the HES assessment, contractors also recommend that households pursue other actions. These can include installing Wi-Fi thermostats, building insulation, Energy Star air heating and cooling and water heating, efficient windows, and Energy Star appliances.
Approximately 20 to 25 percent of households that participate in HES are “going deeper” by taking advantage of the contractor recommendations through additional incentives from the utilities.
Another challenge for HES and the residential energy efficiency market is that 25 percent of visits have to be deferred due to the presence of health and safety issues. This is not unique to our state. It is due to our older housing stock.
The Green Bank has partnered with the Department of Public Health, six other state agencies, the two major utilities, and the Green and Healthy Homes Initiative. They developed a statewide integrated funding and delivery model that combines housing interventions that tackle energy, health and safety issues that lead to reduced energy bills and use. These interventions also lead to better health outcomes and reduced public healthcare costs.
In the second half of 2017, through the Energize CT Smart-E Loan offered by local community banks and credit unions, the Green Bank launched a pilot interest-rate-buydown program using repurposed ARRA-SEP funds to encourage combined energy efficiency and solar projects.
As a result of the various campaigns run by the Green Bank, nearly 3,250 households participated. These included 0.99-percent- and 2.99-percent-interest-rate offers. They undertook over 3,600 energy-conservation measures (such as efficiency improvements for HVAC, insulation and windows), 846 solar installs, and 27 health and safety projects. This totaled nearly $52 million in loans.
As a result of these campaigns, there are now more contractors engaged in the financing program. We are seeing our local capital providers partnering with those contractors to offer special interest rates to encourage and support households pursuing energy efficiency and solar power.
Financial innovation is also helping bridge the gap between energy efficiency and solar through the Green Bank’s partnership with PosiGen through the “Solar for All” campaign.
Through an innovative financial structure involving a solar lease and an energy efficiency energy savings agreement (ESA) product, low-to-moderate-income (LMI) households are “going deeper” on energy efficiency.
PosiGen offers solar customers more extensive energy efficiency upgrades beyond the HES assessment. This takes place through a $10 a month payment over 20 years for measures including attic insulation, advanced air sealing, chimney balloons, LED lightbulbs, and Nest thermostats.
To date, through “Solar for All,” over 1,650 solar installations have occurred on households. 75 percent of the installations have been in LMI census tracts with less than 100 percent AMI.
All participating households participate in an energy assessment and nearly 70 percent have opted for “going deeper” on energy efficiency through the ESA in addition to the solar lease.
Whether it is solar energy or energy efficiency, Connecticut is pursuing an “all of the above” market strategy through its Comprehensive Energy Strategy. This is being done in order to ensure that households not only have the resources they need to pay for these improvements but to also ensure that the public policies in support of this market are cost-effective.
CEFF: What stakeholder decisions would catalyze forward movement in these two markets in Connecticut?
Garcia: In Connecticut, through some recent legislative and regulatory actions, stakeholders are reshaping the markets for solar and energy efficiency towards the grid of the future while combatting climate change.
The legislative actions include the following:
- Public Act 18-50 – “An Act Concerning Connecticut’s Energy Future” established a number of important public policies, including:
- Class I RPS increased the Class I Renewable Portfolio Standard (RPS) from 20 percent by 2020 to 40 percent by 2030 while reducing the alternative compliance payment (ACP) from $55 to $40.
- Domestic Renewable Energy Procurements establish renewable energy-procurement programs for projects located in Connecticut that transition the market from net metering to a tariff structure.
- Energy Efficiency Targets establish mandates to reduce energy consumption by 1.6 million MMBtus and fuel blind services for all households, supporting efficiency work on the many households heated with oil.
- Protection of Funds transferring $3 million from the Conservation & Load Management Fund to the Conservation Adjustment Mechanism for a total of $6 million for energy efficiency programs administered by the utilities and strengthening the contract non-impairment provisions of the Green Bank.
- Public Act 18-82 – “An Act Concerning Climate Change Planning and Resiliency,” which establishes a midterm greenhouse gas emissions reduction target of 45 percent below 2001 levels by 2030. A recommendation made by the Governor’s Council on Climate Change, the midterm reduction targets will encourage decarbonization of the grid through zero-emission-generation sources (including energy efficiency), vehicle electrification, and space-heating electrification.
- integrating distributed energy resources (such as distributed generation, demand response, energy efficiency, and storage)
- modernizing data, analytics, control and communications capabilities
- considering alternatives to traditional capacity solutions
- implementing appropriate rate design to optimize system benefits.
Energy efficiency, solar power, and other distributed energy resources have different degrees of visibility and controllability in the market.
The extent to which the market can see and utilize these assets is defined by legislative as well as regional (i.e., ISO New England) and statewide regulatory policy frameworks. [They are also shaped] by complimentary technologies that help the market make use of these energy resources.
The utilities accept distributed energy resources onto their system as a reduction in demand and load. However, they can also further integrate these technologies in with grid planning and operations. This can therefore create new value streams and markets associated with these technologies.
This will be determined in part by how cost-effectively integration can occur. It will also be determined by whether the regulatory scheme favors customer empowerment and utility control – or what I would like to see through a combination of the two.
Now that PURA is taking actions that follow from this year’s passage of “An Act Concerning Connecticut’s Energy Future,” stakeholders are establishing a shared body of knowledge and diving deep into the data to collectively help determine more precise ways to value distributed energy resources by their various characteristics. These include technology, time, availability and location. Social and environmental benefits also factor in.
Together, PURA’s leadership [goals] on these public policies are engaging stakeholders to come out of their technology silos and work together to modernize the grid through integration. This will help Connecticut reduce greenhouse gas emissions and confront climate change.
Note: Emma McDonald contributed research to this article. Bryan Garcia is in a leadership role on the advisory board of Clean Energy Finance Forum.