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Charleston Business

State of the Low Country:Solar Industry Growing, But Faces Challenges

May 09, 2018 07:18AM ● By Makayla Gay

By Dennis Quick

   Southern Current is a blue, remodeled warehouse-like structure on upper King Street. On a sunny Charleston morning, in a sunlit conference room, John Downey, president of the solar energy provider, proudly pointed out his company’s sunny success. Southern Current serves more than 370 residential customers and more than 30 commercial customers throughout the Carolinas.

“We’ve been growing very quickly,” Downey said of Southern Current, which formed through a merger of two companies in 2015 and has 70 employees. “The South Carolina legislature has been very supportive of solar, especially with what’s been going on with the nukes. A lot of people are looking for a good, low-cost solutions, and most of the time now we are the low-cost provider. We compete directly with natural gas as far as pricing.”

By “nukes,” Downey meant the two failed V.C. Summer nuclear reactors north of Columbia, an abandoned project involving energy giant Santee Cooper, its holding company SCANA, and SCANA subsidiary South Carolina Gas & Electric.

Meanwhile, business for solar energy companies continued to shine. Then, in January, a dark cloud drifted over the nation’s solar energy industry when President Trump imposed 30 percent tariffs on solar panels, most of which the U.S. imports from China.

The tariffs have stunted Southern Current’s growth. “We had planned on hiring 40 people,” Downey said. “That number is now three.”

Downey explained that solar farms—areas of land in which solar panels are installed to generate energy; they are utilities, and Southern Current has about a dozen, all in North Carolina—are required by the state to produce energy at the “avoided cost”—the marginal cost for a utility to produce one more unit of energy. Because panels comprise 40 percent of a solar utility’s total cost, a 30 percent increase in the cost of solar panels makes it difficult to meet that “avoided cost.”

Solar panels contain photovoltaic cells, which convert the energy of light into electricity. There are two types of solar panel—60-cell panels, which are used for homes, and 72-cell panels, which are used for big-box stores like Kohl’s and Walmart, two commercial entities which Southern Current serves, and in solar farms. The U.S. does have 60-cell solar panel manufacturers but not nearly enough to meet the demand. “And we don’t have and never have had the 72-cell manufacturing in the U.S.,” Downey pointed out, adding that it takes about two years to get a solar panel manufacturer up and running.

On its website, Palmetto Solar, located on East Bay Street, posted on its website an anti-tariff blog. “Now that the decision has been made, what is the impact for South Carolina? The state supports 3,000 solar jobs, more than 50 solar businesses, and has been ranked as high as #2 in fastest solar job growth and #1 in solar capacity over the last several years. However, the new tariffs are projected to impact South Carolina solar growth, with some projections showing that South Carolina could be the 5th-most affected state in the country,” according to the blog.

Despite the tariffs, Elise B. Fox, chair of the Aiken-based South Carolina Solar Council, still sees sunshine ahead for the Palmetto State’s solar industry.

“I believe that South Carolina still has a very bright future in solar,” Fox said. “There is a real opportunity with what happened at V.C. Summer to not only increase solar deployment across the state, but to also look at new and innovative programs for renewables and reevaluate how utilities can view solar as an asset and not a competitor. The recently-issued tariff is most certainly a setback for utility scale installations, which run on much tighter margins, and I expect there to be some slowdown in new project development.

“A more pressing issue is how and when the state legislature will respond to increasing net- metering caps,” Fox continued. “That cap is rapidly approaching, and if we reach it before the legislature approves additional changes or increases, the residential solar market will be badly hurt. We are fortunate to have many locally owned and operated installers, and they are the ones that will be hurt the most.”

“Net-metering” is a billing system allowing solar-panel homeowners to transfer their excess energy to the grid and receive credit for that energy on their next month’s bill. South Carolina caps net-metering at 2 percent of the state’s utility sells.

Downey mentioned new solar technologies—batteries for storing solar energy; solar film for windows and doors, which provide indoor comfort and protect furniture from the sun—that Southern Current would like to pursue. But such technological pursuits are being put on hold until the effects of the tariff play out.

Downey maintained that Southern Current is stable enough to withstand the effects of the tariff.

“We’re well positioned because we’re diversified,” he said. “We do residential, commercial, industrial. So we’re going to figure out a way to at least stay where we are. But it’s challenging.”

Donald Zimmerman, president and CEO of Charleston-based Alder Energy Systems, believes South Carolina is in the early stages of solar energy adoption, but thinks the potential is great. He says the Distributed Energy Resources Program Act, more commonly known as Act 236, which was passed in 2014, opened up the market with short-term incentives, but more needs to be done legislatively to open up the market.  With all the huge rooftops on industrial buildings around the state, it’s obvious there is a lot more room for solar expansion.

Alder serves most areas of the solar market, including residential, small and large commercial and small-scale utility projects. As for his company, Zimmerman says it has grown significantly since Act 236 was passed. He believes the macro trend of distributed generation is here to stay.

“We certainly will be a player in that marketplace,” he says. “There are ups and downs in the industry and we follow those ups and downs, but the general trend is upward and we don’t see that stopping.”