After years of conflict between utilities and the developers of distributed energy systems like wind and solar – with state regulators usually caught in the middle – there have been some encouraging developments of late to suggest there is a growing move toward collaboration that gives all sides, including consumers, what they want.
These disputes had centered on claims by utility companies that the growing number of customers with solar systems, which has greatly increased as installation costs have fallen to under $3 per kilowatt, are not paying their fair share of the fixed costs of infrastructure maintenance and other grid supports, increasing the financial burden on non-solar ratepayers. The utilities have been asking regulators to decrease net metering rates (the money paid to residences with solar systems for excess power generated and sent back to the grid, usually at retail rates) and impose high fixed fees to compensate for what the utilities say are lost maintenance costs.
Solar interests say residential installations actually provide a net benefit by reducing the need to construct or purchase more power sources, cutting electricity prices for all by reducing peak demand on the grid and avoided pollution costs. Solar advocates say utilities seeking to end or weaken net metering, or calling for high fixed fees for solar customers, are simply trying to discourage solar installations to maintain their share of the power market.
The ongoing debate could not be better demonstrated than the heated dispute witnessed in Nevada sparked by a vote by the state Public Utilities Commission (PUC) late last year to roll back net metering rates from 11 cents per kilowatt hour (kWh) down to 2.6 cents per kWh by 2020, not only for new solar customers but for existing residential solar systems as well, taking the unprecedented step of denying “grandfather” status to some 32,000 existing solar customers.
The regulatory and legal challenges that have taken place since have, for the most part, been ended by an agreement reached between the utility (NV Energy), SolarCity and PUC staff to allow rooftop solar customers to retain the original retail rate of 11 cents per kWh for net metering.
The settlement coincides with a recommendation from a task force convened by Nevada Gov. Brian Sandoval that state lawmakers adopt legislation reinstating retail rate net metering for solar customers until regulators can approve a comprehensive investigation into a possible Value of Solar tariff, a rate of compensation based on the real value provided by solar installations to the electric system. (Disputed allegations that the PUC acted last year in reaction to overly aggressive advocacy efforts by solar groups have since been eased with Sandoval’s replacement of two members of the PUC, and the exit of the head of a principal solar group, who was replaced by a former state regulator who has experience working for both utilities and clean energy groups.)
The compromise demonstrated by the solar-valuation regulatory decision reached in Nevada is one of several other that have helped to ease net metering disputes in states this year, including similar agreements reached in Arizona and Colorado. But it’s still a sensitive issue to the solar industry, depending on the value assigned to solar (as well as other distributed energy sources, such as small wind farms).
The 25x’25 Alliance believes that solar has proven to provide net benefits across the grid. The Solar Energy Industries Association (SEIA) reports that 16 states have conducted cost benefit analyses (multiple studies in some states), and none have shown solar to increase the financial burden on non-solar customers. In fact, as the Brookings Institution reported in May, net metering frequently benefits all ratepayers when all costs and benefits are accounted for, “which is a finding state public utility commissions, or PUCs, need to take seriously as the fight over net metering rages” (The North Carolina Clean Energy Technology Center says 41 states and the District of Columbia have mandatory net-metering laws).
After the many high-profile battles fought before state regulators in 2015, all players this year are beginning to understand the inevitability of the significant role distributed energy sources will play going forward. Earlier this year, six New York State electric utilities and three of the nation’s leading solar development companies formed a “Solar Progress Partnership” that aims “to encourage more solar development across the state, while ensuring that adequate funding is available to maintain a reliable and resilient grid.” California is nearing approval of a pilot program that would allow regulators to devise a way to bring a rate of return on distributed resources similar to those earned from traditional infrastructure projects like power plants. If the CPUC can incent investor owned utilities to take some of the investment normally made for traditional power sources and place it into distributed sources, that would offer utility shareholders the opportunity to achieve returns of equal or greater value. Like the New York program, the California initiative will be watched by renewable and utility stakeholders around the country.
Tools are being made available to facilitate collaboration. The Smart Electric Power Alliance, for example, has issued briefing books for state regulators, utilities and solar developers under an initiative called The 51st State: Blueprints For Electricity Market Reform Building A Structure For Collaborative Stakeholder Discussions. The project recognizes the longstanding conflicts and provides utilities and distributed technology organizations with plans for working together on new energy market structures.
25x’25 commends the utilities, solar and wind interests, and regulators for taking on the tough job of getting together in a room and coalescing around fair and equitable paths forward. These are the steps that are carrying this country to a clean energy future.