Distributed Generation Under Fire (Q1 2016)

Date: 14 Jul 2016 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

placeholderIt all comes down to the money.

Discord over compensation for solar customers and utilities alike bled into the first part of the year, extending a long-running debate over the best ways to integrate solar power and — thanks to a few hard-line policy moves — threatening to hold back growth in the solar marketplace.

See Previous Updates: Q3 2015, Q4 2015

Despite some progress, policy proposals that surfaced during the first quarter of 2016 mirror familiar disagreements that have historically slowed down the solar industry, according to the most recent 50 States of Solar report from the North Carolina Clean Energy Technology Center and Meister Consultants Group.

The quarterly analysis parses solar policy actions nationwide to pinpoint trends, but their map shows that, like prior years, distributed energy remains under fire.

50 States of Solar Q1 2016 Map
Source: NC Clean Energy Technology Center

Net Metering Under Fire

In the first quarter, net metering — a billing mechanism where a utility credits a solar customer for producing energy on their property — held the spotlight. Rulemakers in 22 states tackled nearly three dozen actions tied to net metering during that span. Utilities in several states have sought to erode benefits for solar consumers, flouting studies that show across-the-board upside for rooftop arrays.

One of the starkest regulatory tug-of-wars played out in Nevada, where regulators during the first quarter shot down a push by solar advocates to ease new net metering restrictions. The state’s Public Utilities Commission had agreed to reduce net metering payments, and this year stuck by the most vexing part of the plan — to apply the change to existing solar customers.

The decision cut deep into the financial feasibility of solar for Nevada consumers, effectively stalling what had been one of the nation’s fast-rising solar markets. Citing the new restrictions, the state’s top three solar providers shuttered their Nevada operations. Existing solar customers will be underpaid for the value of their energy, and left with solar installations that may take decades longer to pay back.

California, another distributed energy battleground, earned a nod in the first-quarter report. State regulators approved a successor tariff that will affect new solar customers after investor-owned utilities hit a net metering cap, set at 5 percent of aggregate customer peak demand.

The California policy mostly carries over existing net metering rules, but with a few kinks. For one, it requires new customers to pay an interconnection fee, estimated between $75 and $100, and certain charges for energy consumed from the grid — generally ranging between $0.02 and $0.03 per kWh. The new rules also mandate solar customers transition to time-of-use rates when they become available.

Utilities Seek to Reduce Benefits of Solar, Efficiency

The first quarter also brought eight proposals for new charges, either pending or decided, for residential solar customers in five states. In several states — including Arizona, California, Oklahoma and Texas — the proposals would substantially raise charges, either by adding demand charges or increasing fixed monthly fees.

Hiking up those charges, a knock on solar development, has been a popular tactic for utilities, but seems to be losing stream. The eight first-quarter proposals fall well short of the 16 proposals leveled in 11 states in the fourth quarter of 2015.

‘Substantial Benefits’ in Some New Solar Policies

Meanwhile, some states not traditionally seen as solar leaders, like New Hampshire and Maine, advanced compensation proposals designed to promote solar within their borders.

New Hampshire legislators in the first quarter approved plans to raise the state’s net metering cap from 50 MW to 100 MW to better accommodate strong interest in solar. Governor Maggie Hassan signed off in May.

Maine policymakers outlined a proposal to swap solar customers’ net metering for payments under a long-term contract. Solar advocates lauded that policy for making more room for distributed energy as Maine’s solar industry ramps up. (Update: Maine’s legislature was unable to overcome a veto from Gov. LePage)

Fortunat Mueller, co-founder and partner at New England solar firm ReVision Energy, told Greentech Media earlier this year that Maine’s policy tweaks create a wider opening for residential and small business customers to access solar.

“We think this legislation does that,” he said. “We also know that distributed solar in Maine provides substantial benefits, not just to solar customers, but to all ratepayers.”

Central to the compensation conversation is the true value of solar. There’s no set blueprint for calculating its value and a lack of consistency in market dynamics nationwide prevents a one-size-fits-all approach — a fact that utilities can use to undercut solar customers. But many states are developing their own frameworks to better inform those discussions.

In the first quarter, 11 states plus Washington D.C. took action to study the costs and benefits of net metering or the value of distributed generation. Counting those newcomers, 28 states have launched similar studies since the beginning of 2015 to help shape solar policy.

Emerging Trend, Utilities to Co-Opt Rooftop Solar

Though first-quarter policymaking focused heavily on net metering and rate hikes, the report forecasts a different emerging trend. Going forward, the analysis predicts, utility-led rooftop solar programs could carve out a more prominent place in the overall energy mix.

During the first part of 2016, three utilities pushed related initiatives. Under those plans, the utilities would own or oversee siting and installation of distributed solar projects. It’s a model that others could follow down the line, and in many places represents monopoly utilities muscling in to what has so far been a competitive market.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter or get the Energy Democracy weekly update.

Photo Credit: Kuebi via Creative Commons

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Karlee Weinmann

Karlee Weinmann was a research associate for ILSR’s Energy Democracy initiative. She produced reports that spotlighted best practices in an evolving energy economy.