Report: Net metering policies drive solar growth

Solar energy is “on the rise” in the U.S. with 21,300 megawatts of solar capacity installed nationwide by the end of the first quarter of 2015, according to a report released today by Environment America.

And a big reason for the boom is net metering policies that allow people, businesses or other organizations with solar installations to get fair credit for electricity they send back to the grid.

The report depicts net metering as a true win-win situation that makes solar viable for those installing it while also delivering even greater benefits to the grid and society as a whole, according to a review of 11 different financial analyses.

But in the Midwest, many feel like solar is under attack. In states including Iowa, Wisconsin, Ohio and Michigan, utilities are seeking — or state regulators have adopted — policies that impede net metering or solar more generally. Clean-energy advocates lament that these decisions have generally been made without referencing data, hence they hope evidence like that presented in Environment America’s report will help shape future decisions.

“When [utilities] argue about the cost of solar they never use any specifics, they’re generalized arguments that don’t reflect the level of solar penetration and don’t reflect any benefits that solar brings to the grid,” said Brad Klein, senior attorney for the Environmental Law & Policy Center (ELPC).

“And the more systemic issue is those arguments completely fail to recognize the benefits of solar, all the things this report lays out. When you study distributed solar on the grid, you learn there are a whole host of benefits utilities are ignoring when they claim net metering is unfair.”

By the numbers

The report examines studies done in service territories covering parts or all of Massachusetts, New Jersey, Pennsylvania, Utah, Colorado, Maine, Mississippi, Arizona and Texas between 2012 and 2015.

The studies were done by a variety of utilities, nonprofit organizations and state agencies, including the utilities Xcel and Arizona Public Service Company, the Maine Public Utilities Commission and the company Clean Power Research.

Klein said he knows of only one such study done in the Midwest, one in Wisconsin which was commissioned by the utility We Energies and done by Clean Power Research. The study showed solar to be a relatively cost-effective option. But during a highly controversial rate case proceeding last year in which We Energies ultimately obtained policies hostile to solar, the study was never introduced.

The Environment America report notes that net metering is enshrined in law in 44 states, and it has been around for more than three decades in some places. Net metering can basically be seen as “running the meter backward,” crediting solar installations at the retail rate or something akin to it for the electricity they send back to the grid.

The report quantifies both the immediate cost of solar energy and also the larger benefits of distributed solar generation, estimating the dollar value of factors including avoided environmental compliance, grid resiliency, reduced financial risk and avoided capital investments, compared to other forms of generation.

Eight of the 11 studies in Environment America’s report found that solar is actually a better deal for the grid and ratepayers than retail electricity. The three reports that had contrary findings were commissioned by utilities.

The utility studies took a more narrow approach tabulating the “avoided costs” of delivering electricity that resulted from solar being sent onto the grid. Studies that found a higher value of solar energy also included factors like job creation, reduction of greenhouse gas emissions, health benefits and grid resilience.

Depending which factors they included, the studies put a wide range of values on a kilowatt hour of solar energy, from 3.56 cents by the Arizona utility SAIC and 8 cents by the utility Xcel, up to 33.6 cents by the Maine Public Utilities Commission.

In Minnesota, the report notes, the law allows an option where utilities could offer to pay the full calculated “value-of-solar” energy including all the benefits it provides. Set as a long-term fixed rate, this is generally a higher rate than net metering would provide. The methodology Minnesota uses to set the rate was developed by Clean Power Research in Austin, Texas and is one of the studies featured in the report. However, no utilities in Minnesota have adopted this option, the report says.

A sunny outlook

Overall, the report notes, solar provides clean renewable energy, cuts energy losses over long-distance transmission, reduces greenhouse gas emissions and other pollutants by replacing fossil fuel generation, protects consumers from price volatility of natural gas or other fossil fuels and creates jobs in solar manufacturing and installation.

“The bottom line is the report shows solar power’s rewards are greater than its costs and we should be encouraging more distributed solar energy across the U.S., and not penalizing it,” said Environment America solar program coordinator Bret Fanshaw.

Environment America notes that the country is “nowhere near the limit of the solar capacity it can support,” and that if states captured even a tenth of a percent of their solar capacity the country could be getting 10 percent of its energy from the sun by 2030.
It notes that prices of solar installations continue to drop — at a rate of 6 to 8 percent a year — and people are increasingly familiar with and interested in solar. But policies like net metering that make solar viable are crucial to continuing a “boom” in solar.

The report urges public utility commissions to adopt net metering and make sure it is available to a wide range of residents, including through supporting community solar or other installations that allow people without sunny roofs or those in multi-unit buildings to be part of solar installations.

It recommends choosing net metering over other policies that may be more complicated or less beneficial. Federal law mandates that people be paid for the “avoided cost” of electricity they send back to the grid, but this is usually a significantly lower amount than net metering would provide.

The report also notes other ways to bolster solar development, including extending the federal tax credit that is set to expire at the end of 2016, and removing bureaucratic, regulatory or other barriers to solar installation at the municipal and state levels.

Dearth of data

Klein noted that while the Environment America report doesn’t include any case studies in the Midwest, the report may be especially relevant to the Midwest since that’s where attacks on solar by utilities seem to be concentrated.

“The utilities maybe are seeking out states where there is less distributed generation penetration, they think it may be easier to get barriers in place,” said Klein. “You look at the situation in Arizona where there were major fights with a more established solar industry and customers that had solar panels, who felt empowered to stand up and defend solar policy. It’s tougher in some of our states where solar is just getting a foothold. But there is huge potential here, that’s why we’re really concerned when we see utility proposals like in Wisconsin.”

Solar advocates hope that if more studies are done in the Midwest and more attention is given to data like that compiled by Environment America, Midwestern public utility commissions will make decisions more amenable to solar.

“It’s important when considering appropriate rate design going forward, that we’re using a data approach,” Klein said.

The ELPC and Environment America are members of RE-AMP, which publishes Midwest Energy News.

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