Solar panels on a home near Milwaukee. (Photo by mjmonty via Creative Commons)

In Wisconsin, solar ‘new math’ could equal big impacts

For tourists, the “shoulder seasons” in the spring and fall are times to get cheap deals in ski resorts or beach towns that cater to summer and winter crowds.

For people with solar power on their homes, these seasons are when their solar installations are most likely to be producing more energy than the home actually needs. These “shoulder months,” as RENEW Wisconsin Policy and Program Director Michael Vickerman frames it, are at the crux of one of the ways solar power is under attack in Wisconsin.

The Wisconsin Public Service Commission recently approved three controversial rate cases proposed by We Energies, Wisconsin Public Service Corporation (WPS) and Madison Gas & Electric, which all will make it much less favorable or feasible to install solar panels on a home or small business.

We Energies, the most significant case, includes a provision that will change how the utility compensates consumers for sending energy back to the grid, by changing from annual to monthly “true-up” net metering calculations.

This may sound like an arcane modification. But Vickerman and other solar advocates say it means people will be compensated drastically less for the energy they send back to the grid during the spring and fall, and they are likely to build smaller solar installations as a result.

Unless an expected legal challenge to the Public Service Commission decision is successful, the true-up change will take effect in January 2016. WPS has done its calculations on a monthly basis since a 2013 rate case (docket number 6690-UR-122 on the commission’s website).

“It definitely is not reflective of best practices to switch from annual to monthly” true-ups, said Sara Baldwin Auck, regulatory program director of the Interstate Renewable Energy Council (IREC), which publishes an annual report called “Freeing the Grid” scoring states’ net metering policies.

“Net metering policies are a compilation of multiple pieces, they all add up to favorable [or unfavorable] conditions and terms for the customers who are seeking to invest in onsite renewable energy and take more control of their energy future and energy bills. It’s a little tough to say whether the true-up issue is the lynchpin, but I will definitely say that this issue ranks higher than others as far as contributing to the overall best practices.”

The math

Typically, at the end of the year utilities tally up how much energy a customer has used and how much they have sent back to the grid from their solar installations. Then the customers are either charged or compensated for the difference, or the energy they have “banked” may be put toward the coming year’s usage.

When someone produces more energy than they have used, there’s the question of how much to pay them for that energy sent back to the grid. This is where net metering policies defined by different state laws or determined by different utilities can vary significantly.

The customer with solar panels can be compensated at the retail rate – the cost they would have paid for electricity at that time; or the “avoided cost” rate, the amount the utility estimates it saved by not having to provide that amount of power to other consumers on the grid. The rate may also be determined through a formula based on several market factors.

Retail and avoided cost rates are significantly different. Avoided cost rates for Wisconsin utilities are 3 to 4 cents per kWh, while retail rates are around 11 to 14 cents per kWh.

When a solar installation produces less energy than a home uses during the true-up period, the way surplus energy is compensated is irrelevant, since there is none. But when someone is sending significant solar energy to the grid, different rates of compensation can add up.

That’s where the shoulder seasons become important. Most Americans use their highest amounts of electricity in the summer, with air conditioners running. Winter also usually means high electricity use, with more lights on when the sun sets early and electricity sometimes used for heating the home or heating water. In the spring and fall, by contrast, household electricity use tends to be lower. That’s when solar installations are most likely to send more electricity back to the grid than the home uses.

If net electricity consumption and generation is all tallied up at the end of a year, people essentially get to “use” their springtime solar power in the summer or winter when their demand is higher. But if the balances are tallied every month, consumers will often end up getting low avoided cost rate payments for their surplus energy during the shoulder seasons, then buying more electricity at higher retail rates in summer and winter.

We Energies spokesman Brian Manthey said, “Monthly net metering more accurately and more fairly values distributed generation by crediting on-peak use at the on-peak rates and crediting summer generation at typically higher summer-based rates.”

“To set the buyback rate at something higher than avoided cost for customer-generated energy would set an inappropriate price signal and would be unfair to customers without their own generation,” Manthey continued.

How much does it matter?

Vickerman said surplus energy payment and true-up policies are typically figured in when someone decides what size solar installation to put on their home. If they won’t be paid much for unused energy, they may choose a smaller installation…meaning less clean energy on the grid.

Vickerman made these points in testimony before the Wisconsin Public Service Commission in 2013 regarding WPS’s change to monthly true-ups. He noted that companies who advise customers on installing solar use sophisticated “solar math” to decide what size system is most financially efficient, and the true-up period is an important consideration in that equation.

Vickerman gave an example of a 4,500-4,900 kWh system in Green Bay. That would seem a good fit for a home using 5,000 kWh per year. But given typical monthly fluctuations, based on widely accepted models, he estimated that household would have to sell 561 kWh per year back to the utility at the lower avoided cost prices.

That would represent a loss of about $55 under monthly true-ups compared to annual calculations. That would increase by 10 percent the time it would take the solar system to pay for itself in energy savings. Faced with that situation, Vickerman said, a customer might choose a smaller solar array.

“You need to look at all the pieces,” of a net metering policy, said Baldwin Auck. “One element can really have a domino effect on whether that policy is ultimately effective in encouraging people to install these systems.”

The national scene

Baldwin Auck said that 22 states have “some form of annual true-up.” The “ideal scenario” for net metering, she noted, is “indefinite rollover,” where the excess energy someone has sent to the grid is perpetually credited to their account in a situation akin to a meter literally running backwards.

In California, state law says that a customer cannot be required to true-up more frequently than once a year. However some utilities offer customers the option to true-up monthly, saying it helps them avoid “surprise” charges once an annual bill is due.

PG&E in California, for example, calculates net metering on an annual basis, and at that time pays customers an annual rate of 4 cents per kWh for the surplus energy. Southern California Edison allows customers to receive a check for surplus energy at the end of the year or to roll over their credit into the next year’s billing cycle.

California received an A grade for net metering policies in the 2015 Freeing the Grid report. California also has more friendly solar policies on other fronts, for example only solar installations of 20 kW or less typically qualify for net metering in Wisconsin, whereas California utilities accept installations up to 1 MW.

Illinois, Michigan, Iowa, Indiana and Minnesota all got B’s for net metering policies in Freeing the Grid, and Ohio got an A.

“The monthly true-up is much less common, and there is a strong correlation between states that have received an A or B grade on the scorecard, and annual true-ups,” Baldwin Auck said.

The value of electricity

Clean energy groups plan to challenge various aspects of the We Energies rate case. First they must file an administrative challenge with the Public Service Commission. If the commission denies that appeal, they can file a lawsuit in state circuit court.

“We will ask the commission to reconsider, though we have a pretty good idea what the commissioner will say,” said Vickerman. “It’s a process we have to go through.”

The commission’s approval of the MG&E rate case is also likely to be challenged. However the MG&E case does not change the true-up period.

Another utility, Alliant Energy/Wisconsin Power and Light does not have a full rate case pending, but it recently went through a smaller proceeding before the Public Service Commission. Wisconsin Power and Light already trued-up customers with solar monthly. But they paid the retail rate rather than the avoided cost rate, so the monthly calculations raised no concerns. A change which took effect January 1 (docket number 6680-FR-107)) means that now Wisconsin Power and Light pays separate retail and avoided-cost rates.

“They were already doing the net calculations every month, but it didn’t matter when every kilowatt hour got the same credit,” said Vickerman. “Now they’re switching from a one-tier to a two-tier structure, and suddenly it matters.”

Renew Wisconsin challenged the Wisconsin PSC change, and ultimately came to a settlement that allows more customers to continue for a longer time grandfathered in under the old system. The settlement means the utility increased from five to 10 years the time grandfathered-in solar operates under the old system. And the settlement meant solar installed up until December 31, 2014 is grandfathered in, as opposed to the utility’s proposal of July 2014.

“We’re not happy with that, but on the other hand it could be much worse,” said Vickerman of the settlement.

Baldwin Auck said that in the debates over true-up policies and surplus energy rates, she hopes people don’t lose sight of the forest for the trees.

With a solar installation “You’re reducing onsite consumption, and on top of that giving energy back to the grid,” she said. “The credit a customer receives for that energy should be reflective of the full value of that electricity.”

17 thoughts on “In Wisconsin, solar ‘new math’ could equal big impacts

  1. While some balance does need to be figured into cost for each party, the other cost that is not being figured into the owner solar use is the cost savings in pollution not generated. How much did the power company save in pollution credits on the power returned to the grid from solar generation? I guess they forgot to mention that to the commission. My guess is they only used those costs that helped their argument. I could be wrong. Hopefully the author of this article will look into that.

  2. Hey Guys, What are the utility companies going to do when people start dropping off the grid. If the utility is selling gas as well as electricity I suppose they will jack up the gas prices. LENR is coming. Get ready for a New Energy Order.

  3. Do we want to massively scale this now cheap technology to help protect a stable climate? Yes.

    Are monthly true-ups a way to reduce the value proposition of solar and keep the status quo utility model and generation mix? Yes.

    End. Of. Story.

    I don’t care who invests in solar, utility or individual (or both), but this is a clear step backward and equals horrible public policy.

  4. Imagine every single home, office manufacturing school etc. with solar panels. Now imagine each and every home (including elderly and handicap) now responsible for the ability to power their home needs. Now imagine all electric utility are now out of business (long ago). Now imagine overcast day (perhaps for a week or more) and no new energy during the night and dusk times of the day. Now imagine the desperate and constant need for maintenance and will each homeowner always in those times of dire needs have the cast or credit to pay for that maintenance? Imagine this encompassing some 90 million homes, some 25 million schools, businesses, supermarkets, fire stations, hospitals……. OMG.

  5. … now imagine a system where you can just “plug” your house, business, school, fire station, hospital to an outlet.

    That would be a good solution. We have that solution now. Dream all you like about lower costs for electricity and what is required to achieve such. It is NOT independently powered homes it IS the grid.

  6. Unbelieable,Power companies have been ripping us off for years and we will still get screwed trying to go green and produce clean energy.Who the hell approves this stuff.I have a home in Wisconsin and paying approx. 12cents a kilowatt and my house in Illinois I am paying 7 cents.What a ripe off and the power company has no incentives or anything to help. The power companies should pay a lower rate on return on solar because they have the systems .But on the other hand who paid for all the power lines equiptment etc,etc well the people paying ther bills.!!!!!!

  7. Monthly metering and cost avoidance buy-back is the most fair. But the government could and often does make the rules unfair intentionally, to achieve a desired result. By using annual metering and retail buy-back, the government can make solar installations more attractive to consumers, essentially subsidizing them and make distributed grids less attractive, essentially taxing them to pay the subsidy. Such an incentive is likely in the long-term best interest of the State of Wisconsin. It reduces dependence on fossil fuels, which are not produced in large quantities in Wisconsin.

  8. …Now imagine that all of Al Hopfers imaginations are off-target and disingenuous.
    When I imagine “every single home, office manufacturing school etc. with solar panels”, I also imagine nearly all of them being simultaneously equipped with some form of energy storage (Li-ion batteries are just one possibility) – because in the time it will take to achieve such large-scale solar market penetration, storage technologies and options will also be standard fare. Suddenly – poof! – all of Al’s imagined problems disappear.
    Not to mention that the grid may well survive long into the future – supplying less electricity overall due to the massive presence of distributed solar, but there nevertheless … supplied via wind farm and other renewable forms of generation.

  9. The Wisconsin utility model is a monopoly where the utilities control all generation, transmission and even the PSC that “oversees” them. All generation and transmission is paid for by the ratepayers; does that mean that it belongs to them or the utility? Just yesterday the news reports $150M in NOx reduction improvements in the Columbia plant that the ratepayers will have to pay for. I think its time to start talking about municipalization of the utility sector or at least deregulation.

  10. Furthermore, imagine Al’s hand-wringing about “the desperate and constant need for maintenance” on those solar systems – WHAT maintenance?? I have had a solar system on my house for nearly 4 years now, and not a single second of my time has been spent to maintain it. There IS no maintenance required – the system just sits there and quietly and flawlessly delivers free electricity to my house – day after day, week after week, month after month, year after … well, you get the idea.

  11. Thats what you get with Republicans in office, they will ALWAYS side with big business over voters.

  12. I’m surprised I do not hear anything about the fact that the electric monopolies are saving billions because they do not have to build or maintain as many new power stations because of residential and commercial solar systems. If one plant shuts down the grid is in trouble but if one solar system shuts down the grid keeps working because of all the redundant independent systems. In our state the electric companies pay a solar installation the minimum for power they produce, but when the solar systems are producing excess energy on a peak days they do not pay the peak rate they pay other generation.

  13. Yet another reason to go off grid. While there is some maintenance involved, a smart design can be very cost effective and easy to maintain. What it comes down to is that big coal, gas and oil do not like competition.

  14. So Al; 2014, the hottest year in recorded history. Maybe you should invest in some good coal stock, and maybe you could rent some of your back yard to store some of that glowing stuff from a nuc. plant.

  15. Rik is correct about the Wisconsin “regulatory” model. Killing solar is a strategy desperately overpriced IOU monopolies employ to to try to hold off a clean energy future. They’re doomed to fail. Clean energy is inevitable. We’ll either have it from municipals (and coops in Rural WI) or we’ll get it off grid in miniature neighborhood DC grids. We’ll probably have a combination of all three systems, but we’ll have a lot fewer IOUs, and we’ll have no IOUs in S WI. They all committed suicide last year by asking the PSC to double their fiixed charges and penalize solar owners. They are now facing the wrath of their customers, but they don’t yet realize that they’re going to be losing
    their service territories or customers or both.

  16. Size your solar and wind to cover your individual load, charge your battereies, when generation exceeds demand. Stay off the grid, unless you need it. If you need the grid for backup, then expect to pay the true cost to be connected.

    Pretty simple – go green!

  17. As a guy who can’t afford a solar system, I appreciate that the psc is protecting me from having to support those who do. I shouldn’t have to pay for someone else’s incentives.