What happens when green turns on green?
First Solar—a sector stalwart, S&P 500 component and one of Forbes' 25 fastest-growing tech companies two years ago—has sided with traditional utilities in fighting "net-metering," the policy that gives rooftop solar customers full retail credit for the power they put back on the grid.
First Solar has signed on with Arizona's biggest utility, APS, in its effort to scrap the existing net-metering regime. And on Monday, the Arizona utility commission's own staff called for the rejection of APS' proposal after studying the issue.
"This will mark a moment of truth," said Bryan Miller of Sunrun, a San Francisco-based rooftop solar provider. "Will they side with facts, or the utility monopoly?"
"First Solar doesn't do residential," said Tom Leyden, CEO of Solar Grid Storage, which he said adds storage to commercial solar projects at no additional cost. "So they don't care about that. They do big power plants."
He said: "I don't think it's good policy. I don't think it's good for solar. But I do see the logic of it."
Miller added: "I think it's short-sighted and an act of desperation to pick on net-metering."
APS would not speak for the record, and First Solar declined to comment. However, First Solar's 2012 annual report spells out why the company is sweating rooftop solar.
"We face numerous difficulties ... in competing against competitors who may gain in profitability and financial strength over time by successfully participating in the global rooftop PV solar market, which is a segment we have de-emphasized."
Miller wondered what effect the company's strategy could have on morale. "They have to explain to their employees why they're targeting rooftop solar."
The company's stock is down more than 70 percent from a 2011 peak.
At issue for traditional utilities and their allies is how rooftop solar customers are compensated for their grid contribution. Utilities say they're getting too much, arguing that rooftop solar, which contributes the most during the midday sun, doesn't meet the needs of peak demand—in Arizona, the late-afternoon/early evening hours, when people are back home from work and cooking dinner. Utilities also say net-metering fails to take into account the costs of grid infrastructure and repairs.
Leyden doesn't buy it. "They're not looking at it holistically," he said.
"When an individual or company invests in solar, it reduces peak demand for everyone, and they're actually adding infrastructure. These benefits are not properly considered" in such analyses, he said.
A study by the consultancy Crossborder Energy found that rooftop solar's benefits to the grid exceed its cost by more than 50 percent.
Karin Corfee, managing director at consultancy Navigant Energy, said utilities need to get out of their old ways of thinking and convert the threat of solar into an opportunity.
"Solar is becoming a viable option for everyone," she said. "Utilities have to adapt."
—By CNBC's Matt Twomey. Follow him on Twitter @Matt_Twomey.