By RYAN TRACY
Disputes over the use of small-scale solar power are flaring across the nation, with utilities squaring off against solar-energy marketers over rules for the growing technology.
Until now, the fights have been mainly before state regulators. In California, Louisiana and Virginia, utilities have sought to cut what they claim are unfairly high payments they are required to make to owners of homes or larger buildings with solar systems.
At issue in an Iowa lawsuit is whether solar-system marketers can sell electricity in territories where local utilities have exclusive rights to customers. Such an arrangement isn't allowed or is under dispute in many states, limiting solar firms to sales of panels to homeowners and businesses.
But if they win in Iowa, it could pave the way for fledgling solar industries to expand in other states. The case is being watched closely elsewhere in the Midwest, where policies granting utilities a monopoly on electricity service are one reason a solar-construction boom hasn't occurred, unlike in states such as California and New Jersey.
Utilities "are proponents of renewable energy," said Barry Shear, president of Iowa's Eagle Point Solar LLC, but only "if they own the energy assets and the electrons flow through their grid and they can bill you."
In March, an Iowa District Court judge said Mr. Shear's 18-employee company could sign power-purchase contracts in the Dubuque territory of Alliant Energy Corp.,LNT +1.16% one of the state's largest utilities. Under the disputed deal, Eagle Point would own solar panels on the roof of a Dubuque municipal building and sell power to the city at a rate similar to Alliant's.
The disputed Dubuque deal employed a "third party" ownership arrangement, in which a rooftop solar system is owned by someone other than the property owner. Solar deals using that structure are growing in popularity—for both residential and commercial properties—because they allow building landlords or homeowners to tap into solar power without a significant upfront investment.
Judge Carla T. Schemmel, overturning an Iowa Utilities Board decision, said Eagle Point could sell solar electricity to the city without encroaching on a utility's lawful turf. She noted that the city would still need to buy electricity from Alliant when the sun isn't shining. "Eagle Point is neither attempting to replace [the utility nor] sever the link between [the utility] and the city," she wrote. "It is simply allowing the city to decrease its demand for electricity from the grid."
Alliant says the ruling contradicts Iowa's policy of not allowing competition for electricity service. "They were going to be selling energy to one of our customers," said Kim King, manager of the renewable-energy program at Alliant, in an interview.
The ruling was a defeat for Berkshire Hathaway Inc.'s BRKB +0.87% MidAmerican Energy Co. unit as well. MidAmerican, another Iowa utility that had sided with Alliant in the case, told the judge in January that if the utilities lost, it could lead to "a proliferation of solar installation in the state."
Alliant and MidAmerican are appealing to the state Supreme Court. They say their problem isn't with solar plants—each utility already connects to about 100 small-scale renewable-energy systems. Instead, they say they have a problem with the way the deal between Eagle Point and Dubuque was arranged. "This is not a dispute about solar energy. This is about a disagreement in the requirements under Iowa law," said Tina Potthoff, a MidAmerican spokeswoman, in an email.
MidAmerican said in May that it may be capable of generating about 39% of its electricity from wind farms by 2016, making it one of several utilities with large renewable-energy portfolios.
But many of those same utilities have objected to policies they say are too friendly to small-scale renewable-energy generation. NextEra Energy Inc. NEE +1.29% says it generates more electricity from the wind and sun than any other U.S. company. But its Florida Power & Light unit opposes allowing solar-system marketers to sell electricity to the unit's Florida customers. An spokesman for FP&L said the utility doesn't oppose solar, but Florida law doesn't allow "third party" sales.
Meanwhile, third-party arrangements such as the one used in Dubuque, are especially appealing to cities, universities and other institutions that don't have tax bills, and therefore can't claim a federal tax credit available to the owners of a solar system. At least 22 states allow third-party solar contracts that are tied to electricity rates, according to the U.S. Department of Energy.
In Wisconsin, the question of whether solar-panel marketers can sell power in another utility's service territory is likely to be tested this year, said Michael Vickerman, program and policy director for Renew Wisconsin, a group with solar-industry members that advocates use of solar power in that state. "If the utility objects, we may go down the same route that we saw in Iowa," he said.
Disputes over the use of small-scale solar power are flaring across the nation, with utilities squaring off against solar-energy marketers over rules for the growing technology.
Until now, the fights have been mainly before state regulators. In California, Louisiana and Virginia, utilities have sought to cut what they claim are unfairly high payments they are required to make to owners of homes or larger buildings with solar systems.
At issue in an Iowa lawsuit is whether solar-system marketers can sell electricity in territories where local utilities have exclusive rights to customers. Such an arrangement isn't allowed or is under dispute in many states, limiting solar firms to sales of panels to homeowners and businesses.
But if they win in Iowa, it could pave the way for fledgling solar industries to expand in other states. The case is being watched closely elsewhere in the Midwest, where policies granting utilities a monopoly on electricity service are one reason a solar-construction boom hasn't occurred, unlike in states such as California and New Jersey.
Utilities "are proponents of renewable energy," said Barry Shear, president of Iowa's Eagle Point Solar LLC, but only "if they own the energy assets and the electrons flow through their grid and they can bill you."
In March, an Iowa District Court judge said Mr. Shear's 18-employee company could sign power-purchase contracts in the Dubuque territory of Alliant Energy Corp.,LNT +1.16% one of the state's largest utilities. Under the disputed deal, Eagle Point would own solar panels on the roof of a Dubuque municipal building and sell power to the city at a rate similar to Alliant's.
The disputed Dubuque deal employed a "third party" ownership arrangement, in which a rooftop solar system is owned by someone other than the property owner. Solar deals using that structure are growing in popularity—for both residential and commercial properties—because they allow building landlords or homeowners to tap into solar power without a significant upfront investment.
Judge Carla T. Schemmel, overturning an Iowa Utilities Board decision, said Eagle Point could sell solar electricity to the city without encroaching on a utility's lawful turf. She noted that the city would still need to buy electricity from Alliant when the sun isn't shining. "Eagle Point is neither attempting to replace [the utility nor] sever the link between [the utility] and the city," she wrote. "It is simply allowing the city to decrease its demand for electricity from the grid."
Alliant says the ruling contradicts Iowa's policy of not allowing competition for electricity service. "They were going to be selling energy to one of our customers," said Kim King, manager of the renewable-energy program at Alliant, in an interview.
The ruling was a defeat for Berkshire Hathaway Inc.'s BRKB +0.87% MidAmerican Energy Co. unit as well. MidAmerican, another Iowa utility that had sided with Alliant in the case, told the judge in January that if the utilities lost, it could lead to "a proliferation of solar installation in the state."
Alliant and MidAmerican are appealing to the state Supreme Court. They say their problem isn't with solar plants—each utility already connects to about 100 small-scale renewable-energy systems. Instead, they say they have a problem with the way the deal between Eagle Point and Dubuque was arranged. "This is not a dispute about solar energy. This is about a disagreement in the requirements under Iowa law," said Tina Potthoff, a MidAmerican spokeswoman, in an email.
MidAmerican said in May that it may be capable of generating about 39% of its electricity from wind farms by 2016, making it one of several utilities with large renewable-energy portfolios.
But many of those same utilities have objected to policies they say are too friendly to small-scale renewable-energy generation. NextEra Energy Inc. NEE +1.29% says it generates more electricity from the wind and sun than any other U.S. company. But its Florida Power & Light unit opposes allowing solar-system marketers to sell electricity to the unit's Florida customers. An spokesman for FP&L said the utility doesn't oppose solar, but Florida law doesn't allow "third party" sales.
Meanwhile, third-party arrangements such as the one used in Dubuque, are especially appealing to cities, universities and other institutions that don't have tax bills, and therefore can't claim a federal tax credit available to the owners of a solar system. At least 22 states allow third-party solar contracts that are tied to electricity rates, according to the U.S. Department of Energy.
In Wisconsin, the question of whether solar-panel marketers can sell power in another utility's service territory is likely to be tested this year, said Michael Vickerman, program and policy director for Renew Wisconsin, a group with solar-industry members that advocates use of solar power in that state. "If the utility objects, we may go down the same route that we saw in Iowa," he said.
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