Our solar future is bright in Oklahoma! Some of you may be wondering whether you should go solar, what is the law and what is the risk. I get these questions often. As a co-founder of the Oklahoma Solar Association, I am familiar with Oklahoma’s solar potential, and I agree with what Thomas Edison said: “I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that. I wish I had more years left.”[1]

Let me share some facts, and let’s start at the beginning. Oklahoma, widely known for its oil and natural gas industries, also has abundant natural energy resources such as wind and solar. But since it is not feasible for everyone to have an oil or gas well or even a wind turbine at home, solar energy can benefit any Oklahoman. According to data from the National Renewable Energy Laboratory, Oklahoma is tied for No. 6 in the nation for its solar potential.[2] Oklahoma is ranked No. 8 in peak sun hours, which is an hour in the day when the intensity of the sunlight (or solar irradiance) generates approximately 1,000 watts (or one kilowatt) of energy per square meter of surface area.[3] This means Oklahoma is a top 10 state in solar irradiance and solar potential, yet we find our state in the bottom 10 for solar deployment. Put simply, we can do better.

In our country, ideas we value are typically followed by capital to support further research and development, but sometimes politics get in the way of this pursuit. Take, for instance, the White House solar panels. Although President Nixon first inquired about the possibility, it was President Carter who, in 1979, installed the White House solar panels and established funding for the then-nascent Department of Energy (DOE). However, by 1986, President Reagan removed the panels and slashed renewables in the DOE budget in favor of continuing to fund oil and coal production.[4] The result of this political tug-of-war begs the question, how much more advanced and inexpensive could rooftop solar be today if the technology and policies had nearly four additional decades to develop? Even despite losing that extra time, technological improvements and declining solar costs make it financially feasible to install solar today. This fact helps solar rise above politics. After all, good investments are favored by all political sides.

As consumers become better educated and more thoughtful about their energy choices, electric utilities across the country are shifting business models in efforts to adjust to the changing marketplace for consumers. Consequently, the laws and regulations around solar are changing. Now more than ever, people understand their electric consumption, the different technologies that supply their energy and the associated costs and fees, and they want more control over the sources of their energy and a hand in efforts to contain costs from rising utility rates.

SOLAR ENERGY 101

When discussing solar, a few definitions are important. Distributed generation (DG), often called “behind the meter” solar, is comprised of “technologies that generate electricity at or near where it will be used, such as solar panels and combined heat and power.”[5] For simplicity purposes, solar developments can be divided into three categories: utility-scale, community and rooftop. First, utility-scale solar consists of very large projects located “in front of the meter,” where power is generated and then fed directly onto the transmission grid and sold to wholesale buyers. Second is community solar, which is sometimes referred to as a solar garden or shared solar. These are smaller than utility-scale projects but still large in size. Community solar has the ability to power whole neighborhoods. These systems are located “behind the meter” and are connected to the grid through distribution lines similar to the ones you might find in your neighborhood. Third, rooftop solar installations can be commercial or residential, are also behind the meter and are located onsite – mounted onto the ground or the roof, as the name suggests.

For the purposes of this article, much of the discussion is focused on rooftop solar. Although Oklahoma boasts considerable solar potential, its current policy decisions and less-than-welcoming laws have hindered the state from capitalizing on its rooftop solar potential, resulting in a lower ranking among states maximizing solar capacity.^[6] In fact, many states have far less solar irradiance than Oklahoma yet are still ranked much higher.^[7] Among its many benefits, solar generates power without greenhouse gas emissions, which are known to contribute to climate change.[8] For power generation, solar is an alternative to and decreases reliance on our fossil fuel resources, which are finite. Furthermore, solar provides power generation at the source, which limits the need to transport fuels such as coal and natural gas across long distances. But this is no anti-fossil fuel article. Oklahoma will undoubtedly maximize its energy resources, such as oil and natural gas, for its many non-power generation uses long into the future. But the state should also recognize the additional benefits solar can offer all Oklahomans, and the laws should reflect how to also maximize another of Oklahoma’s ample and renewable resources – sunlight.

There are many reasons to use more solar power, but there seems to be only one perennial, non-political argument against its increased use: Solar systems are costly. Encouragingly, cost concerns have decreased due to the dramatic decline in the price of solar equipment over the last decade.^[9] Cost aside, before a system can be added to a home or business, one must consider the applicable state law and utility rate options.

The majority of Oklahomans live in monopolistic territories for their retail electricity. There are other types of utilities, however, each with varying abilities to alter rates across the state. Oklahoma’s electric utilities include publicly traded investor-owned utilities (IOUs), electric co-ops and municipally owned electric utilities. IOUs with monopoly territories are subject to the jurisdiction of the Oklahoma Corporation Commission to make changes to rates and tariffs. Municipally owned electric systems garner their oversight from elected bodies of the municipality, typically the mayor and city council or a utility trust authority. Electric cooperatives are run by an elected Board of Directors composed of members within that utility’s territory. Utilities modify rates when they deem changes are necessary. Take net metering for example: Net metering is a billing mechanism that credits and/or compensates solar energy system owners for the electricity they produce and add to the grid against the energy they consume. Net metering rates vary widely by jurisdiction and can be adjusted in different ways depending on the utility. Net metering rates have changed often in the last decade as more people install solar and utilities grapple with how to shift financial losses and address additional power on the grid. According to the North Carolina Clean Energy Technology Center, an advocacy center for a sustainable energy economy, there has been an uptick in new and increased fees and charges, such as grid access fees or solar customer fees.[10] All of these variations in type of utility, oversight and sometimes unexpected changes in rates and fees are a barrier to increased solar in Oklahoma because it can be confusing and frustrating for someone looking to take control of their energy use by installing solar.

SOLAR FINANCING

Rooftop solar companies and their customers rely on a variety of financing options as solar energy develops and endures as an industry. Financing mechanisms available to those installing solar depend on location, such as the state, municipality and utility where the system will be located. Regardless of location, customers installing solar can benefit from a 30% federal tax credit; however, there are no other state, municipal or utility-level credits or rebates currently available in Oklahoma law. In other states where credits, refunds or rebates exist at the state and local levels, there are unsurprisingly higher levels of solar installed, which demonstrates how a lack of these incentives in Oklahoma is another barrier to more solar development. To offer a general example, while an investment in a rooftop solar installation can typically pencil out in around five to 10 years, not everyone interested in this investment has the upfront capital.[11] Therefore, those looking to deploy solar on their roof must have financing options. People with equity in their homes or those with good credit could take advantage of a home equity loan or line of credit, but these options are not available to everyone.

Third-party financing is a commonly used tool for consumers who lack the upfront funds necessary for solar installation. But when a third party finances a solar system, which ultimately provides the customer with electricity, it must be determined under Oklahoma law whether that company is behaving as a utility to be regulated. Third-party financing comes in the form of power purchase agreements (PPAs) or solar leases. PPAs allow companies to install and own rooftop solar equipment, and the customer pays for the output generated by the system. Leases allow a company to install but own the rooftop solar equipment and lease that equipment and the power it produces to the customer on whose roof it is installed. Having more options in the market for financing provides more people of varying income levels an opportunity to finance solar. A shortage of companies providing these financing mechanisms means less competition and higher rates, which serves as an additional barrier to the development of more solar energy in Oklahoma.

One reason fewer companies that provide third-party financing options exist in Oklahoma is a lack of clarity in the law on this topic. Third-party financing companies do not want to be accused of being a “utility” in the eyes of the law. At one time, interpretation of the Retail Electric Supplier Certified Territory Act (RESCTA) varied on this question of whether customers were permitted to enter agreements such as PPAs and leases with an entity other than the utility. This is because RESCTA gives retail electric suppliers exclusive rights to “furnish retail electric service” to customers within a certified territory.[12] By definition, “retail electric supplier” is “any person, firm, corporation, association or cooperative corporation, exclusive of municipal corporations or beneficial trusts thereof, engaged in the furnishing of retail electric service.”[13] The debate was whether a company that offers to lease or sell rooftop solar systems to individuals as described above was “furnishing retail electric service” in violation of state statute. In 2018, the attorney general said ... it depends.[14] AG Opinion 2018-5 distinguished that in incorporated areas, PPAs and leases are both permitted, while in unincorporated areas, PPAs are prohibited, and only leases are permitted. In my experience, this helped to clarify some market confusion, but since the clarity came in the form of an attorney general’s opinion and not through statute, some companies that specialize in these financing mechanisms have been loath to invest in the state for fear of running afoul of RESCTA. A lack of clarity has resulted in fewer options for Oklahomans interested in using financing to install solar.

OBSTACLES TO INCREASED SOLAR IN OKLAHOMA

A number of uncertainties in law and policy serve as obstacles to more solar in the state. Across the country, consumers are learning that their utilities are changing tariffs and fees to mitigate the effects on their bottom lines caused by an increase in rooftop solar deployment.[15] Some of these rate and tariff changes come as a surprise to customers and negatively impact the established pro forma of an installed system. In Oklahoma, a 2014 legislative action seemingly aimed at maintaining parity between distributed generation (solar) customers and regular (non-solar) customers resulted in a bill allowing utilities to levy a usage fee on new solar customers who remained connected to the grid.^[16]

In an attempt to address the presumption that solar customers did not pay their share of grid maintenance and infrastructure costs, the law purports to protect non-solar customers from subsidizing solar customers’ grid expenses.^[17] This parity argument assumed that as solar energy became more popular, eventually, the exclusive burden of paying for grid maintenance would fall to non-solar customers since those with solar might be able to provide enough of their own energy to eliminate their electric bills.^[18] However, at the time of the bill’s passage, one utility official indicated that only 200 to 400 of the 800,000 customers had installed solar or wind.^[19] (The author notes the age of the law and articles referenced here, but there has been no meaningful legal change). Therefore, the argument purportedly in favor of protecting non-solar customers from (eventually) footing the bill of grid fees, while valid, was hardly urgent.^[20] The parity argument also failed to acknowledge the value of power that was placed back onto the grid through the solar customer’s excess production.^[21] Although the adoption of this law received much negative attention nationally, it has yet to have an impact on customers.[22] That is because for the law to be implemented, a utility must submit a tariff to the Oklahoma Corporation Commission (OCC) to analyze whether non-solar customers are somehow subsidizing solar customers. The one time a utility underwent this process, the OCC determined the data used was outdated and did not prove subsidization was occurring.[23] No utility has made a second attempt at establishing fees pursuant to this law. Having this law on the books has made a more confusing market for potential rooftop solar customers in Oklahoma.

OPPORTUNITIES FOR INCREASED SOLAR IN OKLAHOMA

Utilities can look to themselves to be leaders in the ever-changing world of power generation. But where the utilities do not lead the way to find solutions, states are known to step in. In states where renewable energy is flourishing, the developments came, in part, from strong mandates on the power industry to incorporate renewables like solar.^[24] Distributed generation, such as solar, decreases the need for fuel to travel long distances to power plants on the grid, which is expensive to maintain and can be more vulnerable to extreme weather and cyberattacks.^[25] However, even if more Oklahomans took advantage of these benefits by installing solar systems, not all utilities are required to purchase the excess generation produced by the systems from those customers. This is one risk factor in installing a solar system that is mostly out of the consumer’s control. As mentioned, there are three types of electric utilities in the state, all with different requirements – some easier than others – to change tariffs and rates. Each utility also has different net metering rules and rates. Rate consistency is very important for a solar customer since systems are often built using some sort of financing product. If the rates change before the rooftop solar system is paid off, it changes the planned payback time for that system. Utilities have an opportunity to get creative to ensure they can deliver enough power to the grid at prices that are fair for all customers amid changing consumer demands.

The fact is, rates have been changing and will continue to change – sometimes for utility’s economic concerns and sometimes due to outside forces. One such outside force is the influx of electric vehicles into the market. Electric vehicle sales are now 16% of U.S. light-duty auto sales.[26] Rapid growth in EV sales necessitates new considerations for the grid and utility business models. This is because EVs place new, additional load on the grid and provide new income streams for utilities. But EVs could also eventually shift peak demand times since most charge their vehicles at night. Currently, the demand for electricity is lower at night while most of us are asleep, but if suddenly a large number of us were charging our cars at night, EVs could lead to a shift in that peak. Electric car sales exceeded 10 million in 2022, which equated to 14% of all new cars sold according to the Global Electric Vehicle Outlook Report by the International Energy Agency (IEA).[27] Three Million and Counting was IEA’s title of the same report just five years ago.[28] That number is sure to grow, as every major auto manufacturer is offering or will soon offer electric or hybrid models. Utilities have created EV divisions and are examining and forecasting how EVs will influence their delivery of power in the future. Moreover, EV technology continues improving – batteries hold a charge longer and recharge quicker than ever. Therefore, depending on consumer motivation – be it to save the environment, to save money on gas or simply to own the latest in automobile technology – more EVs in the market will equate to a higher demand for electricity, which will become an opportunity for the electric power sector. In the U.S., especially compared to other countries, our reliable power allows us to recharge EVs at home, adding one more benefit – convenience. It is becoming more commonplace for people to use the electricity harnessed during the day via rooftop solar panels to charge their electric vehicles.

CONCLUSION

Oklahoma – which is widely known for its oil, natural gas and wind industries – should maximize all its natural resources, including solar. More Oklahomans could benefit from the clarification and modernization of the laws surrounding solar. Among the many reasons to increase the mix of clean power, which includes solar, are its reduced impact on the environment, the safety provided by power generation at or near the source and consumer demand. As consumers better understand their electric consumption, available technologies and the associated costs and fees, and as they seek more control over both the sources of their energy and rising utility rates, they should not be held captive with their options restricted. Oklahoma should increase its mix of solar energy as it is a good long-term financial investment, it provides security benefits that other sources of power lack and, finally, consumer demand for solar and more sustainable electricity sources will eventually be too great to ignore.[29]

Author’s Note: The author expresses appreciation to attorneys Jim Roth and Peter Wright and OCU School of Law student Chris Contreras for assistance in editing this article.

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ABOUT THE AUTHOR

Lindsey Pever is an attorney at A New Energy, where she helps clients prevent and solve problems related to their legal, regulatory and policy issues. Ms. Pever represents clients from a variety of industries, including developers and landowners of renewable and traditional energy, hydrogen, electric transmission, pipelines, utilities, emerging technologies and telecommunications.

 

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ENDNOTES

[1] James Newton, Uncommon Friends: Life with Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel & Charles Lindbergh. 1987.

[2] Comparison of Solar Power Potential by State, Nebraska Energy Office (March 11, 2010), https://bit.ly/4aL9Jmd.

[3] Zeeshan Hyder, “What is a Peak Sun Hour? What Are Peak Sun Hour Numbers for Your State?” SolarReviews, (Dec. 7, 2023), https://bit.ly/3PXxz5E.

[4] David Biello, “Where Did the Carter White House's Solar Panels Go?” Scientific American (Aug. 6, 2010), https://bit.ly/4atxgYE.

[5] “Distributed Generation of Electricity and its Environmental Impacts,” U.S. Environmental Protection Agency (May 15, 2023), https://bit.ly/49xaf5Q.

[6] Id.

[7] Id.

[8] “Basics of Climate Change,” U.S. Environmental Protection Agency (Nov. 1, 2023), https://bit.ly/3TT1Cwn.

[9] “Documenting a Decade of Cost Declines for PV Systems,” National Renewable Energy Laboratory (Feb. 10, 2021), https://bit.ly/4ax6E8U.

[10] “The 50 States of Solar: States Eye Grid Access Fees, Time-Varying Rates, and Storage in Net Metering Successor Tariff Design During 2021,” North Carolina Clean Energy Technology Center (Jan. 26, 2022), https://bit.ly/3Q0NRKZ.

[11] Note that this is simply an average since every solar installation and underlying financing is different.

[12] 17 O.S. §158.25.

[13] 17 O.S. §158.22 (1).

[14] Oklahoma Office of the Secretary of Energy & Environment. No. 2018-5. Op. Attorney Gen. 4 (2018).

[15] Jason Plautz, “State Rooftop Solar Crackdowns Cloud the Industry’s Future,” E&E News by POLITICO (Oct. 24, 2023), https://bit.ly/3UbmsbQ.

[16] Bobby Magill, “Oklahoma Utilities Hit Homes Using Solar with Extra Fee,” Climate Central (April 22, 2014), https://bit.ly/3VTXzm6.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Katie Sanders, “Rachel Maddow Unleashes on Oklahoma's ‘Sun Tax' but Misses Context,” PolitiFact (April 24, 2014), https://bit.ly/3UbptJd.

[23] Net Metering in Oklahoma, Oklahoma Corporation Commission (April 2, 2021), https://bit.ly/3Jgdgwz.

[24] Joe Wertz, “Why Solar Energy is Growing Slowly in Oklahoma,” State Impact (July 20, 2015), https://bit.ly/4aRtqIA.

[25] Allison Mills, “Installing Solar to Combat National Security Risks in the Power Sector,” Michigan Tech University (May 8, 2017), https://bit.ly/4aNHu5O.

[26] Michael Dwyer, “Electric Vehicles and Hybrids Make up 16% of U.S. Light-Duty Vehicle Sales,” U.S. Energy Information Administration (Sept. 7, 2023), https://bit.ly/4aRKGgE.

[27] Global EV Outlook 2023 (April 2023) IEA, https://bit.ly/4awQBIh.

[28] Global EV Outlook 2018 (May 2018) IEA, https://bit.ly/49OgTEZ.

[29] Anthony Deutsch, “Solar Energy Shines in Global Survey with 68% Support,” Reuters (Sept. 15, 2023),

https://bit.ly/3PYdpIB.