According to the U.S. Energy Information Administration , capacity increased from just under 1700 megawatts in 2010 to nearly 25000 MW in 2019. While this is still just a small fraction of generation capacity overall, in 2016 it accounted for fully 12 percent of new capacity additions, and analysts expect the industry to continue to grow rapidly over the next several decades . Rooftop solar now is seen by many climate advocates as a key piece of the energy transition.9 While the role of technological advance should not be understated—the price of solar panels has fallen exponentially, from 100 dollars per watt in 1975 to 10 dollars per watt in 1990 to under 1 dollar per watt in 2015 —policy has played a key role at each step. Government R&D policy drove advances in technology, and deployment policy has driven cost declines through economies of scale and learning-by-doing . At the federal level, the most important market-stimulating policy for rooftop solar has been the Solar Investment Tax Credit . The ITC, enacted in 2006 and extended multiple times , provides a tax credit for the installation of both utility-scale and distributed solar systems. Solar advocates view the ITC as a critical component of solar energy’s growth 2019. But the growth of rooftop solar depends perhaps even more fundamentally on favorable state-level policies. Historically, states have taken the lead in shaping electricity generation, transmission, and distribution systems through policy and regulation . States have promoted rooftop solar through pricing policy, interconnection rules, rebates and tax credits,vertical grow systems as well as mandates that utilities draw a determined amount of power from distributed sources.
The importance of state policy to rooftop solar growth has led to enormous variation across the states, as demonstrated by Figure 1. Notably, many of the leading states like Vermont and New Jersey are not particularly sunny—but have pro-solar policies. What is the relationship between state policies and rooftop solar growth? To address this question, I match solar capacity data from the U.S. Energy Information Administration to data measuring the favorability towards distributed solar of each state’s policy. Data on solar policy comes from the website Freeing the Grid, which is managed by two pro-distributed solar interest groups: VoteSolar and Interstate Renewable Energy Council. From 2007 to 2017, these groups graded state-level NEM and interconnection policies from F to A . I average grades across these two dimensions to produce a measure from 1-5 of distributed solar policy favorability.Variation in this measure across the states and over time is presented visually in the appendix. To measure solar capacity, I use EIA data available starting in 2010. Two-way fixed effects and multilevel models are used to investigate the association between policies and rooftop solar growth for the 50 states from 2011 to 2017. These panel regression models account for potential confounders within years and states, and also account for concerns of reverse causation. Specifically, I model logged increase to rooftop solar capacity in state s and year t as a function of policy in state s at the start of year t. Results are presented in Table 1. Estimates from the two-way fixed effects model presented in column suggest that, within states, a one-level change in policy is associated with a 17 percent increase in solar growth. Column presents results from a multilevel model that allows for incorporation of state-level, time-invariant variables. Specifically, I model a state’s solar resource,GDP per capita, and electricity prices. The multilevel model yields similar estimates as the fixed-effects model. Altogether, the empirical analysis supports the view—widely shared by those in the field—that state policy is a crucially important factor driving distributed solar growth.
The rise of rooftop solar has created new business opportunities and interests along an entire supply chain from manufacturing to installation, but large installers have been particularly politically active. Installers’ key role is driven by two main factors. First, unlike manufacturers, the largest installers are domestic. Second, installation is highly labor intensive , which gives installers greater political leverage. In the early 2000’s, with the industry still undeveloped, installations were generally carried out by small, regional firms. Starting around 2007, several VC-funded firms entered the market offering “solar as a service” . In this model, customers could lease third-party owned systems instead of purchasing large systems outright, paying TPO installers, not utilities, for electricity. Notably, the major TPO installer firms emerging in this period—Sunrun and SolarCity—came out of California, where their business was bolstered by the California Solar Initiative, a large incentive program that ran through 2016. The industry’s fast growth in the early 2010’s was driven by the expansion of these large installers. For instance, Sunrun was active selling systems in just 7 states as of 2010, but by 2015 was operating in 15 states, and by 2019 was selling systems in 22 states. As Figure 2 demonstrates, the period of economic expansion for large solar installers has also coincided with greater political engagement. From 2010 to 2016, the number of state-level lobbying registrations from installers that lobbied independently over the period grew from under 50 to over 300.Rooftop solar has grown despite opposition from incumbent electric utilities. Although models vary across the states, electric utilities generally profit by delivering power through transmission and distribution systems to customers. If customers are able to procure power more cheaply from solar panels on their roofs , utilities’ investments in grid infrastructure become less valuable. Utilities for the most part acquiesced to the diffusion of NEM across the country in the late 1990’s and early 2000’s since, even with favorable pricing policies, the high cost of solar panels ensured rooftop solar would not threaten their business .
However, with solar panel costs dropping rapidly and the emergence of TPO installer firms in the early 2010’s, electric utilities began leveraging their long-standing political sway to push back. In efforts to retrench NEM and block the expansion of pro-rooftop solar policies,utilities have in some cases partnered with fossil fuel, manufacturing, and conservative interests . Despite its vast resources and connections, this coalition has met mixed success. Growth slowed, but was not halted, in states like Arizona where utilities successfully rolled back NEM—and utility victories were soon reversed in Nevada and Maine. One reason for utilities’ mixed success is the feedback effects of prior policies that spurred the rooftop solar industry’s growth. As the industry has grown, large installers have developed political operations capable of challenging utilities . Moreover, I argue that, in addition to “feeding back” into the politics where they are adopted,vertical grow rack state policies have also “fed into” the politics in other states due to the horizontal mobilization of installers. Since the causal process is somewhat complicated, I first present a short illustrative case before presenting quantitative data indicating that the dynamics observed in the case are systematic.South Carolina was a distributed solar laggard up until recent years. In 2014, South Carolina’s NEM policy was given an “F” by the pro-solar website Freeing the Grid, and its interconnection policy was given a “D”. That year, local environmental and clean energy groups worked with major utilities to draft new distributed solar legislation. Early versions of the bill, which featured a buy-all sell-all provision and allowed utilities to use their monopoly status to dominate the solar market, were not seen as particularly favorable to distributed solar. Sunrun intervened late in the process, mounting a lobbying and social media campaign advocating for several distributed solar-friendly revisions to the bill. Notably, Sunrun was not, at the time, selling systems in South Carolina. Rather, Sunrun’s business depended on strong growth in states with favorable policy environments. At the time Sunrun was only active in states rated by Freeing the Grid as “A” or “B” for both NEM and interconnection policy, for an average overall score on a 1-5 scale of 4.6 . Sunrun’s intervention, while criticized by the utilities, likely had an effect. Favorable provisions like dedication of incentives to distributed solar were added to the bill, while options for utilities to meet targets through direct procurement were struck. To be sure, at the same time, the bill’s success also depended fundamentally on prior work and negotiations with utilities from South Carolina environmental groups like Coastal Conservation League and Conservation Voters of South Carolina.With the new legal environment in place, Sunrun prepared to enter the market. In early 2015, Sunrun hired a lobbyist with a strong background in conservative Southeast politics to represent them in South Carolina and other states in the Southeast—their first Southeast-based policy hire. Sunrun’s summer of 2015 entry, coupled with the new policy regime, spurred rooftop solar growth from just 6 MW at the end of 2015 to 127 MW by the end of 2017. As rooftop solar’s economic presence grew, so did its lobbying presence. The number of dollars spent by the industry grew from 0 in 2013 to over 150,000 in 2017.
From 2014 to 2017, South Carolina’s Freeing the Grid NEM score went from “D” to “B”; its interconnection score went from “F” to “A”. Moreover, rooftop solar growth precipitated an expansion of the coalition beyond long-standing environmental groups and emergent rooftop solar companies, with groups like VoteSolar and Solar Energy Industries Association developing a greater political presence. The coalition of emergent clean energy interests and existing environmental groups has been crucial to defending and expanding the new policy regime. Utilities started hitting NEM caps in 2018,17 far earlier than lawmakers and advocates had predicted. Solar advocates promoted a bill in the 2018 legislative session that would extend the cap indefinitely, but the utilities mounted an aggressive campaign against the bill. The bipartisan bill received majority support, but ultimately was not able to pass a procedural vote that required a 2/3 majority. The coalition of solar and environmental advocates regrouped in the 2019 session. While they were badly outspent by utilities in the 2018 cycle, in 2019, according to one solar advocate, the number of lobbyists representing each side was approaching parity—with Sunrun playing a major role particularly in highlighting the job-creation benefits of distributed solar. The Republican Speaker of the House, perhaps not wanting to preside over another tough legislative battle that would divide his caucus, encouraged members to reach a deal. The Energy Freedom Act, which would eliminate the NEM cap in addition to promoting solar energy through other provisions like raising the maximum size of leased systems, passed unanimously in 2019. To evaluate these questions, I match lobbying data from National Institute on Money in State Politics to solar installation data from the U.S. Energy Information Administration , which I use to measure economic activity. According to NIMSP, only 5 installer firms lobbied state governments independently between 2015 and 2017: Sunrun, SolarCity, Vivint Solar, SunEdison, and SunPower. These were also the top 5 firms by installed TPO capacity as of 2015. The analysis focuses on the relationship between installations and lobbying activity for these firms.I should note that some smaller firms were politically active via membership in Solar Energy Industry Association and local industry groups, but this activity cannot be systematically documented. NIMSP collects two types of lobbying data at the state-year level: total firm-level lobbying expenditures and firm-level lobbying registrations. While lobbying expenditures is a preferable measure, it is only available for 15 states from 2015 through 2017 . Lobbying registration data, on the other hand, is available over the full set of states. The measures of lobbying expenditures and registrations are highly correlated . To measure installations, I use data available starting in 2015 recording the total third-party owned capacity for each of the major installers.Although it introduces some measurement error, TPO capacity provides a useful measure of a firm’s economic activity since 1) over this period TPO capacity comprised a significant portion of total distributed solar installs , and 2) TPO development was an important piece of each of the firms’ business models over this period. I model lobbying activity for firm i in year y and state s as a function of 1) installed generation capacity for firm i in year y and state s; and 2) installed generation capacity outside of state s for firm i in year y.