Late in 2015, SolarCity (NASDAQ:SCTY), Sunrun (NASDAQ:RUN), and Vivint Solar (NYSE:VSLR) were essentially shut out of the solar market in Nevada after the Public Utilities Commission (PUC) eliminated net metering for solar customers. In an unexpected ruling, the regulator said that customers exporting excess energy to the grid would only be paid the wholesale rate for electricity, not their net rate as was previously the case. Worse yet, customers who installed solar before the new rule was put in place weren't grandfathered in, a shock to everyone involved. Energy savings that solar companies promised customers would vanish.
Since then, solar companies have been battling to get the PUC to reconsider the 2015 ruling of not grandfathering solar customers into net metering, which could put already-installed solar systems underwater. And they would also like a fairer rate structure in place for new solar projects so the rooftop solar industry doesn't die in Nevada. On at least one count, NV Energy, Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) subsidiary, may actually be on the solar industry's side right now.
NV Energy finally sides with solar
In an agreement announced earlier this week, NV Energy sided with solar companies in saying the PUC should allow solar systems installed before 2016 to be grandfathered into net metering. If the proposal passes, it would mean that customers and solar companies wouldn't have to make a decision about who takes the loss from underwater solar systems. That's the good news.
The bad news is that this does little to solve Nevada's rooftop solar challenge in the future. Increased fixed charges and low export rates for energy still mean it's very difficult to justify rooftop solar in the state. So, SolarCity and Sunrun, which were growing rapidly in the state, won't have to write down old solar systems, but they're not running out to install new ones either.
Nevada's fight for solar isn't over yet
The lack of traditional net metering in Nevada looks like it won't change anytime soon, but it's not all bad for solar companies. I think we'll see Nevada be a leader in energy storage if the current rules remain in place. Instead of sending electricity to the grid for a low rate, customers will store the energy and use it in evening hours or at night.
For that to happen, we need to see battery costs come down, something that's already happening across the industry. And solar companies need to come up with an elegant plug-and-play solution for controlling solar and energy storage systems.
As a sunny state, Nevada is a key market for the solar industry, but it comes with a very challenging political environment. There's support for utility-scale solar projects, where the utility buys energy, but policies haven't been supportive of rooftop solar.
This week's agreement between SolarCity and NV Energy looks like a step in the right direction for solar in the state, but it's patching a problem instead of building a growth platform for the future. There's a lot more work to do if rooftop solar growth is going to take place in the state.
Travis Hoium owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.