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(Bloomberg) — The so-called Sunshine State hasn’t been a great place for homeowners to install solar panels. Florida ranks near the top for the amount of solar potential, yet comes in 15th for home solar systems. Texas, which rivals California for most sun resources, comes in 11th in installed residential panels, according to GTM Research in Boston. What makes them different from California, the top market for solar power, is cheaper utility rates and the lack of policies to encourage rooftop panels. Policy issues are due in part to conflicting interests between power companies and consumers, and how states like Texas and Florida choose to address this may provide a model for other states to follow.
“Just being a very sunny state is not always enough for people to take full advantage of solar,” said Chad Singleton, an analyst with energy industry consultant Wood Mackenzie. Plunging prices for equipment and advancing technology are making solar more attractive to consumers. The average cost of a home solar system has dropped about 70 percent since 1988, and they are now cost competitive with grid-supplied power in 42 U.S. cities including Dallas and Miami, according to a recent government-funded study by North Carolina State University. Many utilities, meanwhile, have been cautious about encouraging residential solar because they lose revenue when customers start producing their own power. Utility power rates are expected to rise as much as 83 percent over the next 25 years, according to U.S. government data.

Leasing Limits

Under Florida law, only utilities can sell power to retail customers. That effectively shuts down solar leasing, the no- money-down model that’s made residential the fastest-growing part of the U.S. solar market. With leases, sometimes called power-purchase agreements, companies like SolarCity Corp. own the panels and their customers sign long-term contracts to buy the power. Pro-solar activists are gathering votes for a ballot initiative in Florida that would open the door to SolarCity and similar companies. “It’s appalling that the Sunshine State has policies in place that blocked the sun,” said Debbie Dooley, one of the leaders of the movement and founder of the Green Tea Coalition, a conservative group that supports solar energy. Florida’s two biggest utilities, owned by NextEra Energy Inc. and Duke Energy Corp., say they support policies that promote solar as long as they’re fair to all customers and keep bills low.

Solar Farms

NextEra, North America’s largest generator of wind and solar power, is making plans for its own large-scale solar farms, saying that’s more cost-effective than individual rooftop systems. The company’s Florida Power & Light unit said last month it plans to build three solar plants by the end of 2016 that will triple its total photovoltaic capacity to about 335 megawatts. Solar advocates point to the state’s lack of a renewable power standard as another impediment. Texas has such a mandate, a requirement that utilities get a certain amount of power from renewable sources, and most of that is met with the state’s abundant wind energy. Solar makes up less than one percent of the state’s energy mix, which is dominated by coal and natural gas. Texas is one of seven states that doesn’t require utilities to buy power from consumers’ home-solar systems. This arrangement, known as net metering, is how most people recover the cost of installing rooftop power; without this payment, home solar is far less economical.

Austin Incentives

Most of the home solar installed in Texas is in San Antonio, where the local utility does offer net metering, and Austin, where a similar arrangement provides customers with statement credits for energy produced by rooftop power systems. NRG Energy Inc., the nation’s biggest independent power producer and largest electricity retailer in Texas, sees a growing business opportunity in rooftop solar as prices continue to slide, Chief Executive Officer David Crane said in an interview last month. The company sells residential systems in Texas through its NRG Home Solar unit. Solar in the North American power market has “snowballed from a science experiment and a niche technology” to “a potential disrupter of utility business models and the power industry at large,” Prajit Ghosh, a power analyst at Wood Mackenzie, said in a report this month. Just as shale drilling changed the math for oil and gas markets, Ghosh wrote, “no other technology is closer to transforming power markets in a similar fashion.”

Voted Down

Not yet, though, in Florida and Texas. Bills in recent years that have proposed solar incentives in Texas have failed to pass the Legislature, said Terry Hadley, a spokesman for the Public Utility Commission of Texas. Cracking markets like Texas and Florida, which have low power prices and few financial incentives, “would really be a signal of the market reaching an unprecedented level of maturity,” said Cory Honeyman, a solar analyst with GTM Research.

–With assistance from Christopher Martin in New York.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net Will Wade