The Legal Impediments of Advancing Solar Energy Solutions

I’m here with Gary Nissenbaum of the Nissenbaum Law Group, and we’re discussing the legal aspects of implementing solar energy solutions. What have you found to be the legal impediments for businesses to move forward with solar energy solutions?

One of the main problems has been the coupling of energy use and revenues to the utilities, meaning that the utilities have a financial interest in promoting the use of energy, to some extent, promoting the use of energy that they generate. Now I realize that there has been a move away from that model and that has been very helpful to the industry. This all began in the late 1980s, early 1990s, when we had the Energy Policy Act of 1992, which really began the whole process in earnest of allowing for these distributed energy resources—the DERs—which would generate energy from other sources, such as solar, wind and so forth, but again the process of decoupling the incentives for the utility to amass all of that and make money from generating power on its own is a process that has not been completed and is still ongoing.

The Attorney’s Role in Making Solar Energy Profitable for Commercial Clients

Are there any unique legal issues that relate to preparing agreements with the end-users of solar energy solutions?

There are. The end-user may be a consumer or may be a business, and the issue there is to what extent we are going to have a revenue model for a client, let’s say a client who’s implementing a solar energy solution, a wind power solution, or something like that, in which the revenue comes from installing and commencing the solution? There’s a profit to that because the client is charging a customer to do the construction, the testing, making sure that the electrical works and that the interaction with the utility is correct so that the payment for electricity goes—obviously—down.

But that’s only one revenue stream. There has to be a second revenue stream, which is something that lawyers would term an “annuitization” of the revenue stream. Sort of like an annuity. The concept being that their customer has to be coming back.

The client has to be, not only fixing mistakes or problems that occur that the client may not have had anything to do with, inspecting the system to be sure that it’s working properly, but also have some ongoing role with their end-users so that there’s a continuing revenue stream beyond that initial payment. That, I think, is the challenge for business lawyers: To find ways to make this profitable for the client on an ongoing basis, not just at the inception.

And what has been the reaction of the large electrical utilities to the incursion, however limited, of solar energy companies into the provision of electricity to consumers?

The model that has always existed of net generation and load being the main source of revenue… it just has to change. Those changes have been happening quickly in certain states, not so quickly in other states. The main problem, the main thing that has to change is there has to be a uniformity of regulation, a uniformity of legal restrictions and implementation.

Investment in Solar Energy Requires Predictability of Regulations and Infrastructure

And this is really for two reasons, among maybe a dozen others. But the two that really come to mind are, number one: there’s no way that investors are going to get into the space in the ways we need them to—with the kind of capital investment we need—if there’s no sense of predictability. If every time there’s a change in the party in power, the entire regulatory framework is up for grabs, that’s not a conducive model for large-scale capital investment. So that’s one thing that is absolutely essential.

And the second thing is that there has to be an infrastructure that is going to be implemented, some of which is going to be paid for by the consumer in their home, or businesses when they are building or renovating an office building. They have to know that they can amortize this expense over a number of years, using a model of energy generation where they are going to save money, where there aren’t going to be any kind of curveballs coming their way in terms of how much they need to pay or what they need to do to continue to implement this solution.

So again, predictability is one of the most important things in this space. And it’s something that attorneys are in a unique position to help to create in terms of not just contracting, but also in terms of understanding and working within the regulatory and legal structure.

Future Legal Challenges for Solar Energy

What do you think are the future legal challenges confronting the solar energy industry?

There are a few of them. One of them, obviously, is hardening security. The utilities have been the target of foreign actors who have tried to infiltrate them with malware. That sounds like it’s a national security issue alone, and of course it’s a major national security issue. But it’s also an issue of investment, it’s an issue of whether the industry is going to survive. If there’s a sense that millions and millions of dollars are going to be put into a solution which is then going to come crashing to the ground because there’s malware all over the place, it’s going to be very difficult to generate the kind of capital necessary to have this happen on a nationwide scale.

So I would say that this predictability is wedded to the issue of security.

Thank you very much.

Thank you.

Legal disclaimer: The information contained in this interview does not constitute legal advice, nor a legal opinion. It should not be relied upon in any specific situation. The reader is urged to consult an attorney of their choosing with respect to any legal question they may have.