Artwork by Mina Lee
Electrification is a cornerstone of any reasonable climate strategy. So is deploying solar at scale. But there is a squabble brewing between the new electrification vanguard and the solar industry. We cover it in this month’s Gist.
The Ad Hoc Group has four exciting new additions to the team: Maya Kelty as principal, Taylor Murphy as executive assistant, and new senior advisors Melissa Semcer (see her quoted in the WSJ article on Hawaii’s wildfires) and Abbie McBride.
- Jim Kapsis, CEO
The Ad Hoc Group
Solar vs. Electrification
Investment in clean energy technologies is way up since the Inflation Reduction Act (IRA) passed. New incentives for home efficiency and electrification are coming soon. And a bipartisan coalition of 25 governors recently committed to deploying 20 million heat pumps by 2030.
But there’s trouble brewing in clean energy paradise. Enter the emerging battle between the solar industry and electrification evangelists. The source of tension? Electricity prices and the goal of a “just transition.”
The Gist: electrification proponents would love to see electricity rates go down, while solar companies have an incentive for rates to stay high. Cheaper rates make electrification a better value proposition for customers who are thinking about transitioning off fossil fuels for cooking and heating their homes. Solar, on the other hand, benefits from higher electricity rates, which accelerate the payback period for their customers.
The fault line here is around affordability. Policymakers and environmental advocates want to see a just transition where decarbonization of the energy sector doesn’t lead to higher bills for lower income customers. But that is complicated to achieve because lowering costs for one group of customers impacts costs for the rest.
The first salvos were fired in California after a law passed last year requiring utilities to charge customers for electricity based partially on their income. In response, utilities are advancing a new electricity rate model that would reduce the amount customers pay for every kWh of electricity by one-third.
But there’s a catch. This reduction is offset by a monthly fixed charge that increases based on your income. Higher income customers could pay up to $128 per month just for connecting to the grid while lower income customers may still pay up to $24.
The proposal has triggered a firestorm. Environmental and consumer groups are in favor because it would make electric appliances, like heat pumps, more affordable for lower income customers. Solar trade groups are against it because it would raise costs (not rates!) for their customers, because no matter how much power they’re generating from their own solar panels, they’re paying that fixed charge regardless.
California’s debate could be a harbinger of what’s to come as other states push to electrify while addressing concerns over rising energy bills. Solar and electrification are both essential to meeting our climate targets. To strengthen each industry, we need the right mix of rates and incentives, plus new technologies to keep driving costs down.
Startups Tackling Cost
Let’s start with the tech.
Reducing the cost of solar adoption is key to making the solar industry more resistant to rate changes. Companies like Project Solar and Monalee are automating the sales process to reduce non-install costs. And two AHG clients, SPAN and ConnectDER, can eliminate the need for expensive electric service upgrades that often come with a solar install.
We’ve covered electrification technologies in a previous Gist, but a few new companies on our radar include Harvest Thermal (a smart home thermal battery), Altus Thermal (a heat pump water heater still in stealth), and Conduit Tech (a sales tool for HVAC contractors).
Incentives > Infighting
In addition to new tech, we have to get the policy right in three key areas:
First, regulators can offer a special “electric” rate for customers who add heat pumps, EV chargers, or other electric technology. This electric rate essentially gives customers a discount on their electricity bill when they replace fossil fuel-powered systems with electric alternatives. Under Maine’s recently approved pilot electricity rates for households with EVs or heat pumps, the price of electricity is 40% lower, which helps create a clear payback for customers choosing to electrify. This should be a model approach for other states to follow.
Second, policymakers can cut the red tape associated with installing solar. In Australia, for instance, solar is ⅓ the cost compared to the US, and a lot of that is due to regulations. Permitting in Australia can take no more than a day, while that same process can extend up to six months in the US. To address this, the NREL-developed SolarAPP+ automates the plan review and process for issuing permits. Several municipalities in California and Arizona have already adopted SolarAPP+. States should encourage or mandate wide adoption.
Third, to accelerate electrification, states can take a page from the solar industry’s playbook and distill the value proposition down to simple calculations and paybacks. The ideal way to do that is to make it easy for customers to stack incentives from the federal government, state, and utility. Put simply, a customer or installer should be able to fill out one online form and access all available rebates at once. This is one of a series of recommendations made by Advanced Energy United and Rewiring America as state energy offices begin to plan out how to deploy IRA incentives.
With startups working to reduce costs and hassle and states pursuing policies that encourage both solar and electrification to flourish, we can avoid intra-industry food fights and focus on our common objective: rapid and affordable decarbonization.
News from Our Network
From our clients:
- Charm Industrial CEO Peter Reinhardt was named to Time 100, honored for the company’s new way to sequester CO2.
- WSJ highlights how better tech like Pano AI and AiDash can save lives with more devastating wildfires happening; plus, Pano launches in Canada and Texas.
- Infravision raised $23 million to accelerate the buildout of transmission lines using drones.
- SWTCH CEO Carter Li was named to the Clean50, while SWTCH was named to the Globe & Mail’s top growing companies.
- A new law passed in New Jersey making it easier for installation of electric meter socket adapters, like ConnectDER.
- Mitsubishi and SPAN partnered to speed up home electrification.
- PG&E & Uplight reached 100,000 enrollments in the SmartAC Smart Thermostat program.
From friends and colleagues:
- Katie MacDonald announced Tailwind, a new innovation studio focused on accelerating the development and deployment of resilience solutions.
- Molly Turner, my former podcast co-host, wrote an op-ed in The New York Times on why the new “technotopia” happening in California doesn’t bode well for cities.
- Edison International released a white paper, Countdown to 2045, on what it will take to meet California’s ambitious electrification and climate goals, kudos to Sergej Mahnovski and his team for their work on this.
- The Chicagoland Climate Investment Alliance was announced with the aim of making the city a leading hub for climate innovation. James, Ian, and AHG are proud to be part of the growing ecosystem in Chicago and the Midwest.
- Heirloom was featured by Axios for their decision to not accept fossil fuel money.
- Michael Sachse, the former Dandelion CEO, kicked off a new podcast series called It’s My Job.
Jobs in our network:
Send us your job openings in cleantech policy, startups, and utilities, and we'll put them in next month's Gist.
Infravision: SVP of Global Sales & Marketing
ev.energy: Senior Director of Sales
Carbon Removal Alliance: Deputy Director of Policy
Charm Industrial: Agriculture and Forestry Policy Lead
AiDash: Director of Sales and Sales Manager
Rondo: Vice President, People and Culture
Pano AI: Director of Sales, Canada
KrakenFlex: DERMS Business Development Lead
Impulse Labs: Marketing Manager
Uplight: Senior Market Development Manager
Google Nest: Senior Director, Product Management, Smart Home
Breakthrough Energy: Senior Associate, US Policy and Advocacy
Frontier: Diligence Lead
Powerhouse New Dawn:
Oct. 19, San Francisco
– Maya Kelty, Sam Bauer and Myron Lam
Oct. 19, New York, NY
– Katherine Cunningham
Oct. 24-26, San Jose, CA
– Maya Kelty is speaking
National E-Mobility Diversity, Equity and Inclusion Conference 2023:
Oct. 25, Washington, D.C.
– Sabrina de Vega
Carbon Removers Summit:
Nov. 1, Washington, D.C.
– Annie Gilleo
NARUC Annual Meeting:
Nov. 12-15, La Quinta, CA
– James Schulte and Ian Rinehart