Solar advocates tell lawmakers inaction clouds future of sector

By John Laidler | Globe Correspondent

ACTON — A group of local solar power developers and advocates urged the state Monday to promptly extend programs that have nurtured solar power in Massachusetts, warning that continued uncertainty over the rules could stall the industry’s momentum.

At a forum in Acton, solar supporters sounded a note of urgency about the need for the state to expand net metering credits and solar renewable energy certificates, both of which are at or facing state caps.

“As an employer, nothing scares me more — I have 35 people that I may have to put out on the street,” said Mark Durrenberger, president of Hudson-based New England Clean Energy and one of about 50 people who turned out for the forum at the Acton Public Safety Center.

Democratic state Representatives Cory Atkins of Concord and Jennifer Benson of Lunenburg jointly organized the event to hear from residents about how the state should advance the future of solar energy. 

Debate over the future of the two programs has made solar energy a front burner subject on Beacon Hill.

Net metering allows residents and businesses to sell excess solar power to utilities at about the retail price. Much of the state has reached the cap on how much of that power utilities have to buy. The House and Senate passed bills lifting the cap but disagree on the details.

Utilities purchase solar renewable energy certificates from solar panel owners to meet minimum state requirements on how much of that power they must offer. The program is also nearing its cap and there is no defined plan on either extending it or establishing a new program.

The net metering cap in most cases applies only to projects over 10 kilowatts, according to the state Executive Office of Energy and Environmental Affairs. So it does not affect homeowners who have existing solar panels or want to install them — they remain eligible to sell their excess power to utilities at current net metering rates. Existing large-scale projects are also not affected, but the cap makes it difficult for new ones to be built.

Homeowners with projects that are already qualified for renewable energy certificates would similarly continue to receive income from utilities for the 10-year duration of the certificates even if that cap is reached, state energy officials said. For residents installing new panels, there are still certificates available. But once the cap is hit, no more will be given under the current program.

Residents could also be affected by other possible changes being discussed to the net metering program, including pricing adjustments and setting a minimum electric bill. 

Atkins and Benson said they were not satisfied with the House solar bill approved in November but voted for it in hopes of keeping the industry going while a more comprehensive bill was crafted. But with the incentives now in limbo, some in the audience said net metering needs to be addressed now so planned projects can proceed.

Durrenberger warned that until the net metering issue is resolved, the state Department of Energy Resources will not extend the solar renewable energy certificate program. And if the process were to drag on another month, “the solar industry will effectively collapse in Massachusetts.” 

Haskell Werlin, from Solar Design Associates of Harvard, urged lawmakers to ensure that the energy certificate program can continue as plans for its update are worked out.

“Once companies are spooked, you are going to create a lack of confidence in the marketplace,” he said. “It’s going to say Massachusetts is not solar-business friendly. . . . The industry right now is looking at New York, Vermont, and elsewhere to work because we can’t do work in our own state. It’s not right when we have 15,000 jobs.”

Mark Sandeen, a solar developer from Lexington, said he is working with a company whose efforts to build a rooftop solar project in Acton have been stalled by delays in securing an agreement to tie in to utilities and, more recently, by the energy certificate cap. “You can’t do business with this much uncertainty,’’ he said. “This is where we are for the solar industry; we don’t have certainty.’’ 

Others at the forum urged the two lawmakers to press for a state study examining the true costs of solar relative to fossil fuels. Benson said she and Atkins ran out of time trying to amend the House bill to provide for a study, and planned to push for it again when the next bill comes forward. 

“We are at the tipping point on changing the energy paradigm on energy,” Atkins said later, a reason she said a true independent study was vital. 

“The biggest issue is clarifying the market so that projects can move forward,” Benson said after the meeting. In addition to extending the two solar programs, she said that meant having the Department of Utilities require utilities to modernize their infrastructure to better accommodate solar.

Source: www.bostonglobe.com/metro/regionals/west/2016/02/26/solar-advocates-press-for-state-action-incentives/tBkL8VaqKN2MDSY1XLhvBJ/story.html

Empowerment over protection: How solar and DERs can help the disadvantaged

Policymakers should 'seek ways to accelerate adoption of DERs for everyone, including the poor'

By James Tong and Jon Wellinghoff

The boom in rooftop solar has sparked concerns about a “green divide” and even undertones of class warfare. (See here, here, and here.) And it’s true that solar customers to date have tended to be more affluent than average households. Although recent data suggest that solar is now expanding into neighborhoods of more modest incomes, fear persists that solar policies will continually favor the wealthy at the expense of everyone else, particularly the most vulnerable. Critics thus demand reforms and fees for solar customers. What they overlook, however, is how policies designed to protect the poor can actually make them worse off.

For a long time, policymakers have used electric rates as a means to help the poor, redistributing wealth through subsidized electric rates. The practice is highly questionable, because many more cost-effective policy tools exist to help lower-income populations. [1] More importantly, the inevitable proliferation of distributed energy resources (DERs) – including batteries, smart appliances, LEDs, rooftop solar, and others – will make subsidized rates outdated and unsustainable.

Artificially low electric prices obscure costs. This not only encourages wasteful consumption, but also discourages adoption of DERs that can enable consumers to reduce those costs. In other words, subsidizing rates will actually contribute to the feared green divide by discouraging people who could benefit from DERs the most from adopting them.

Furthermore, inefficient consumption leads to inefficient investment by utilities to accommodate such consumption. This creates more fixed costs for all, including the poor. With escalating tensions over who is going to cover fixed-cost obligations, it is more important than ever for utilities to avoid making investments that could be addressed more cost-effectively with more efficient consumption.

Subsidizing rates also means others will have to pay for them. This is of little concern when subsidies are small and of even less concern when there’s no option but to pay for them. Historically, residential electricity customers have been captive price takers; there was little recourse when policymakers stuck them with high rates. We all need electricity, so we have all paid whatever we’re told. Regulators thus have had significant leeway in designing rates according to who was the easiest target and not according to who incurred the costs, as regulatory principles demand.  

Unsurprisingly, cross-subsidization among customer classes has been the norm (and perhaps the goal), not the exception. More affluent and urban customers regularly subsidize grid costs for rural and lower income households, for instance. The growth of DERs will disrupt this arrangement.

DERs present a conundrum for policymakers. On the one hand, customers empowered with DERs will be able to efficiently manage their own energy consumption, and the most empowered ones can become suppliers to the grid. Having more empowered customers consuming less and sharing their energy resources with one another will lead to a far cleaner, more robust, and lower-cost grid for everyone.

On the other hand, empowered consumers will leave little wiggle room for inefficient policies and cross-subsidizations. If regulators push too much cost on certain customers, those customers will use DERs to push cost elsewhere.

A 2013 study published by the California Public Utilities Commission (CPUC)is telling. It projected that solar customers would shift $1.1 billion of cost per year to non-solar customers by 2020. Critics of rooftop solar jumped on this study and haven’t stopped (see here, here, and here, for instance). Overlooked, however, is the inconvenient finding that these solar customers had been paying on average 133% of their full cost of service – residential customers alone had paid on average 154%. After going solar, they were paying 103% of their costs. In other words, these customers were using solar to reverse the subsidies they had traditionally paid.

Net energy metering (NEM) for solar customers has been controversial in large part because it has exposed how poorly electric rates have reflected costs (see chart below). Claims that NEM customers unfairly shift costs are misguided, if not disingenuous. If rooftop solar didn’t exist, customers would likely adopt other DERs to shift the cross-subsidies elsewhere. In fact, LED light bulbs can impact who pays for the grid as much as, if not more so, than rooftop solar.

Yet critics of NEM would have us believe that simply increasing fixed customer charges would protect the poor and restore equity. [2] Such equity, if it ever existed at all, was built on a shaky system of cross-subsidies – one that is unraveling due to long-term economic forces and new technologies, not solar policies. More fixed charges will simply hurt the poor by worsening the dysfunctions in the power industry, leading to more wasteful consumption and wasteful investments, and ultimately more costs for all, including the poor.

We must acknowledge the systemic deficiencies in today’s electric pricing mechanisms (rather than narrowly focusing on pricing for rooftop solar), or tensions over cost-shifting and the green divide will only proliferate as other DERs mature and multiply. This will be true for electric vehicles, batteries, smart thermostats, or LEDs. The growth of DERs need not hurt the poor; on the contrary, DERs can benefit all customers, especially the poor.

But we must implement smarter policies that go beyond protecting customers to empowering them.

Traditionally, protecting the needy has meant protecting them from high electric prices. That is why we subsidize rates. But ultimately consumers care about the bills they pay, not the rates. Subsidized rates do not necessarily lower bills. In fact, they can do the opposite by encouraging overconsumption, as well as uneconomic utility investments into the grid, for which all ratepayers are on the hook.

The growth of DERs offers vast opportunities to empower customers to optimize their energy consumption. Rather than hide costs through rate subsidies, a better approach would be to reveal those costs, but provide the means to ratepayers, especially the needy, to lower their bills.

The Interstate Renewable Energy Council (IREC) has offered an innovative example of how this can be done. Its CleanCARE proposal (which is still pending) seeks to expand access to distributed solar and other DERs to lower-income households, using a portion of the funding allocated to the California Alternate Rates for Energy (CARE) program. Currently, over 3 million customers (or roughly 30% of the California’s investor-owned utilities’ customer base) receive discounted rates through CARE. Under CleanCARE, low-incomes households could elect to use CARE funds to invest in a package of community solar, energy efficiency measures, storage, and demand response. In other words, these customers would be able to opt out of receiving rate discounts in exchange for tools that would give them bill discounts – and bill discounts are what affect customers’ wallets.

Policymakers and consumer advocates should support IREC’s proposal and encourage others like it. Because of their smaller-scale and ability to mix and match, DERs can provide far more targeted and cost-effective solutions to lower energy bills than rate subsidies, which are blunt and can lead to the various unintended consequences discussed above. DERs’ flexibility opens myriad opportunities to help disadvantaged communities: Deployment of DERs can create new jobs in sales, installations, and customer service; those hosting DERs can potentially earn extra compensation through emerging peer-to-peer sharing models akin to Airbnb and Uber. DERs could even replace fossil fuel plants and improve air quality, which studies have shown is disproportionately worse for minority communities. The NAACP finds that 78% of African Americans live within 30 miles of coal plants, where asthma and respiratory illness rates are higher than average.

The possibilities of DERs are endless. Where we go will depend on how well we leverage our collective creativity. We must therefore get pricing mechanisms right so that individual incentives are better aligned with public goals. We must tap the innovation of a multitude of providers, and not simply default to a monopoly supplier, as many will argue. Above all, we must transition from protecting the poor to empowering them.

We are not advocating gutting programs for the poor. Current economic forces and technological trends will already do that, unless we take action now. For this reason and others, we published along with other authors a set of principles we called grid neutrality, to steer policy discussion so that everyone would benefit from the 21st century grid. Our first tenet is: “Empower the consumer while maintaining universal access to safe, reliable electricity at reasonable cost.”

The proliferation of DERs cannot be stopped, nor should it be. Rather than put up roadblocks, we should seek ways to accelerate adoption of DERs for everyone, including the poor. 

---

[1] Wealth redistribution should be the domain of politicians, who have a much wider array of tools including: progressive taxation, public education, job training, and subsidized health insurance, to name a few. We suggest reading Scott Hempling’s essay on why wealth redistribution through utility regulation is bad policy.

[2] Utilities in 25 states are seeking increases in fixed charges. These are monthly lump sum fees that ratepayers cannot avoid. Typical bills mostly consist of volumetric charges – charges that vary directly with the amount of energy consumed. In addition to pushing for fixed charges, some utilities are seeking demand charges for residential customers – charges that correspond to the maximum power used in a certain time interval. For an in-depth discussion, please see a recent report by the Regulatory Assistance Project.

Source: www.utilitydive.com/news/empowerment-over-protection-how-solar-and-ders-can-help-the-disadvantaged/414273/

California Votes to Retain System That Pays Solar Users Retail Rate for Excess Power

By Diane Cardwell, The New York Times

Regulators in California, home to more residential solar customers than any other state, agreed on Thursday to retain a system that compensates users of rooftop solar panels for their excess electricity.

The decision was closely watched by energy officials and executives across the country, who are grappling with huge shifts in the power industry stemming from the spread of renewable energy.

“States pay close attention to leading markets, and they pay close attention to how changes to policy impacts markets,” jobs, consumer satisfaction and investment, said Sara Baldwin Auck, regulatory director at the Interstate Renewable Energy Council, a nonprofit policy group that supports clean energy.

Ms. Auck added, “This decision creates certainty for consumers, it creates certainty for clean energy providers, it creates certainty for investors and it upholds California’s strong tradition of clean energy leadership.”

At least 20 states are re-examining their policies, she said. At issue in all of them is how to value electricity when it flows from customers to utilities, rather than the other way around.

Under so-called net metering, customers receive credits on their bills for the unused energy their panels produce. Most states have such policies, but the amounts vary, with some offering credits near wholesale energy prices and others, like California, offering the retail rate.

Solar advocates and installers say customers should receive the retail rate because the power they generate helps the electrical infrastructure, by lowering strain on the grid or helping reduce the need to buy power at expensive prices in times of high demand.

But some ratepayer advocates and the utilities, which lose out on electricity sales and some of the infrastructure costs that are bundled into retail rates, say that solar customers put an undue burden on nonsolar customers, who must make up that shortfall.

In California, regulators sided mainly with the solar industry and its proponents and generally rejected proposals to reduce the net-metering credit and add a slate of new charges, though it added some new rates and fees.

The net-metering program, narrowly approved by a vote of 3-2 by the California Public Utilities Commission, will require that new solar customers pay a one-time interconnection fee, estimated between $75 and $150, and begin paying fees of a few cents a kilowatt-hour that most other customers already pay. Those charges fund low-income and energy efficiency programs.

Solar customers will also be compensated at different rates depending on when they send their excess power to the grid, a change that will alter the economics of the system but not undo its appeal, experts said.

The changes do not affect customers who already have solar panels or who install them before the utilities in their area reach certain levels of rooftop use in their service territories, which the California Solar Energy Industries Association, a trade group, estimates will happen by early next year. And regulators, who are to re-examine net metering again in 2019, left open the possibility that they could revise or add charges.

“Our course is not for the rooftop solar industry or for the utilities or the community clean energy aggregators,” Michael Picker, the utility commission president, said in a prepared statement. “Our decision today is another big step toward giving California consumers more choice, more control and more responsibility over energy and climate change issues.”

Bernadette Del Chiaro, executive director of the California Solar Energy Industries Association, said the decision was an important statement that California would continue to develop microgrids and decentralize energy production.

“It’s a more 21st-century way of generating our electricity,” Ms. Del Chiaro said. “It’s not just net-metering 2.0, it’s grid 2.0 that this decision essentially ushers in.” ...

Source: www.nytimes.com/2016/01/29/business/energy-environment/california-narrowly-votes-to-retain-system-that-pays-solar-users-for-excess-power.html?_r=0

California regulators: Rooftop solar customers keep credit

 By Scott Smith , Associated Press

California homeowners and businesses installing rooftop solar panels can keep offsetting their energy bills by sending surplus power back to the grid, regulators said Thursday in a decision celebrated by the solar industry.

New guidelines narrowly approved by the California Public Utilities Commission add fees to future solar users, but they fall short of what utility companies sought to charge customers for their use of the grid.

Solar customers will pay up to $150 in a onetime fee for connecting to the grid and up to $10 each month. Existing solar customers aren’t affected by the changes approved by the commission in a 3-2 vote.

Bernadette Del Chiaro, executive director of the California Solar Energy Industries Association, said that the ever-dropping costs of solar equipment should offset the new fees.

“At the end of the day, going solar in California will remain a very good economic investment,” Del Chiaro said, adding that Nevada and other states have raised fees on customers, pushing the solar industry out of the market.

“This has been a clear signal that California is building our grid in a different way,” she said. ...

Source: www.washingtonpost.com/national/regulators-rooftop-solar-customers-keep-credit/2016/01/28/fd99d2c2-c620-11e5-b933-31c93021392a_story.html