Stephen Pelton’s EcoSmart Home Services in Berlin, Connecticut, expanded into installing rooftop solar panels about eight years ago, an outgrowth of work making houses more energy efficient. But now that the state is discontinuing one of its solar incentives, he is worried.
A change in the way that utility customers are compensated for the excess energy that they generate is pitting solar advocates against the utilities and drawing the state into a battle that has been playing out across the United States.
Advocates argue solar energy will become less financially attractive just as the state is aiming to use more renewable fuel not less. Utilities, worried about consumers buying less electricity from the electric grid, are trying to put a dent in the solar business, they say. In Connecticut, only 1.5% of the state's electricity comes from solar energy, according to the Solar Energy Industries Association.
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Utilities counter that new billing system will be fairer to all of their customers, an argument being made throughout the country. Without a change solar customers pay less of the cost of the electric grid’s upkeep, they say.
For Pelton, the company’s chief executive officer, the policy shift foreshadows fewer customers for solar installations. If the law takes effect later this year, the company would focus instead on energy efficiency and other home improvements, but EcoSmart Home Services would likely lose four or five people from its staff of about 30, he said.
“Unless the state comes up with a plan and puts something in place for the long term then we're going to have a problem with solar going back to a small niche market,” Pelton said.
Frequent and Longer Power Outages
Customers in Connecticut now sell their unused solar energy to the grid at the retail rate and are billed only for their net energy use, a practice called net metering. The state last year decided to phase out that system in favor of new rates, called tariffs, at which utilities would buy energy and renewable energy credits. Consumers would be offered two options: the “buy-all, sell-all” choice in which they would sell all of the solar power they generate at a rate set by state’s Public Utilities Regulatory Authority and buy back what they need at the retail rate, and a second choice in which the utility would buy unused energy in a time period to be set by the authority.
Existing customers with solar panels would be grandfathered under the net metering compensation until 2039.
But now Connecticut is rethinking last year’s decision. A bill that would delay the change and require a study of the value of solar energy is being considered by the state’s General Assembly.
Clean energy advocates say that neither option will likely be as advantageous to solar customers as the current net metering and that the change will send the state in the wrong direction at a time when the country is grappling with how to respond to threats from climate change. The Fourth National Climate Assessment, a federal government report released last year, warns that unless significant action is taken to curb global warming, climate-related risks will continue to grow, damaging the environment, the economy and Americans’ health. As for the country’s energy system, extreme weather is expected to increasingly disrupt it with more frequent and longer lasting power outages, the report says.
Utility companies and their allies across the country counter that a new compensation system is needed to serve all customers equitably. Without the change, a “cost shift” takes place with those without solar panels paying a disproportionate share of maintaining wires, poles, transformers and other fixed costs associated with a grid, they say.
Utilities have been lobbying for changes that would lessen the economic benefits for residents or businesses to generate their own electricity through solar panels, said Sean Gallagher, the vice president of state affairs for the Solar Energy Industries Association.
“They’re not really sure how this is all going to shake out and so we see these proposals that sort of slow down the revolution that’s coming at them,” he said.
The Edison Energy Institute, an association representing all U.S. investor-owned companies, argues instead that net metering has outlived its purpose.
“The intent of the original net metering policy was to incentivize early adopters, not create huge subsidies from one group of customers to another,” it says in a 2016 statement on its website that it calls Straight Talk About Net Metering. “Now that the cost of solar systems has come down significantly, there is no need for continued large subsidies.”
The utilities have gotten help from the conservative non-profit, the American Legislative Exchange Council, which has been funded in part by the billionaire activist brothers, Charles and David Koch. In 2014, it wrote model legislation on net metering for state policymakers to adopt — a service it offers successfully on a variety of conservative issues. From 2010 through 2018, bills based on its ready-made legislation were introduced nationwide nearly 2,900 times in all 50 states and the U.S. Congress, with more than 600 becoming law, an analysis by USA Today and the Arizona Republic found.
Changing Direction in Maine and Nevada
Thirty-eight states plus Washington, D.C., had net metering rules in place in 2017, according to the North Carolina Clean Energy Technology Center. Arizona, Hawaii, Indiana, Maine, Michigan and Nevada are among the states that eliminated net metering, but Maine and Nevada reversed course and reinstated it, some Indiana lawmakers would like to do the same and Michigan this year substituted a payment scheme different from a utility-proposed one.
Maine’s Gov. Janet Mills said when she signed the new bill last month that the state had lagged behind other states in policies that advanced solar power. Maine ranked 40th nationwide in solar installation in 2018, according to the Solar Energy Industry Association.
Nevada returned to net metering in 2017, and last year saw a 32% increase in clean energy jobs. Its clean energy economy is now dominated by energy efficiency, solar and energy storage, according to a report by E2, a non-partisan business group that supports policies that are good for the environment and the economy.
“The number of solar jobs would have been even higher if the data was collected today, because it would more fully reflect demand increases spurred by the 2017 restoration of net metering,” the report said.
Clean energy advocates in Connecticut are urging officials to avoid mistakes made by other states. Nearly 40 environmental groups, solar companies and others wrote to Connecticut’s General Assembly’s Energy and Technology Committee in February asking it to pause the implementation of the new program, which it said would jeopardize the 2,100 solar jobs in Connecticut.
One organization that signed the letter was the Acadia Center, a non-profit organization focused on developing a clean energy economy. Amy McLean Calls, its Connecticut director and a senior policy advocate, notes that Vermont has installed four times more distributed solar — or rooftop solar — per person than Connecticut. Massachusetts has nearly two times more per person.
“The higher deployment rates in nearby states indicate that Connecticut’s in-state solar industry could expand but it has to be supported by effective solar policies, which is why we’ve been working so hard to make sure that we don’t go backwards and end up killing our solar industry,” she said.
No one is arguing that the system should not be fair everyone, she said.
“But what we are saying is, it doesn’t exist right now, so we need to not kill it,” she said. “We need to ramp it up.”
However the state's consumer counsel, Elin Katz, whose job is to be a watchdog over the utility industry, favors a new approach.
"I feel like net metering is picking a big winner,” Katz told NBC Connecticut. “But the net metering is also benefiting the solar installers at a very high level, too. Why are we picking them over offshore wind or battery storage or energy efficiency? Let's do things in a competitive manner which is how we started to do things in this state and then we can get things at a much more reasonable level.”
Solar advocates challenge the idea that different clean energy technologies are competing against one another. All are needed for the world to move away from fossil fuels.
Studies Back Solar Advocates
Connecticut’s largest utility, Eversource Energy, favors eliminating net metering though it would not oppose delaying the switch. The utilities also need more time to prepare for the change.
“We believe replacing net metering with a tariff-based system would be fairer to all of our customers,” a utility spokesman, Mitchell Gross, said in a statement. “A delay in the phase out will also mean additional time to develop a program that is more transparent than the process currently in place.”
But if utilities argue that the change is necessary for the equal treatment of customers, some studies do not back them.
One 2017 study, by Lawrence Berkeley National Laboratory, concluded that for the vast majority of states and utilities, the effects of rooftop solar on retail electricity will likely remain negligible for the foreseeable future. At the time only Hawaii had utilities with solar penetration rates of 10% of electricity sales, it noted.
“Energy efficiency has had, and is likely to continue to have, a far greater impact on electricity sales than disturbed solar,” it said.
A review of a number of studies, conducted by the Brookings Institution in 2016, found that net metering frequently benefits all customers when all costs and benefits are accounted for, among them reduced capital investment costs, environmental compliance costs, emissions and and energy cost.
“Far from a net cost, net metering is in most cases a net benefit—for the utility and for non-solar rate-payers,” it says.
While these fights over the direction of solar energy have been taking place, climate change has become an urgent political issue, advocated in particular by younger people who are demanding candidates explain how they will curb greenhouse gases. Among Democratic presidential candidates, Washington Gov. Jay Inslee and former Texas Rep. Beto O’Rourke have presented plans to get the United States to a carbon-neutral economy. President Donald Trump, meanwhile, has rolled back many of former President Barack Obama’s environmental policies.
California has taken the lead in the United States as far as future rooftop solar projects and as of next year, it will require all new houses to include solar panels. In 2017, California generated 15.6% of its energy from solar.
A solar industry update in May 2018 by the National Renewable Energy Laboratory found that Hawaii had residential systems on an estimated 31% of households living in single-family homes. In California that figure was 11%, while in Arizona it was 9%.
A New Utility Model
Across the world, solar and wind power are growing rapidly and are expected to become the dominant source of electricity, according to a report released last November by the International Energy Agency. The annual “World Energy Outlook” found that renewable energy could supply 40% of the world’s electricity by 2040, as the electricity sector goes through the most dramatic transformation since its creation more than a century ago. It will require grid investments, improved smart meters and battery storage technologies and new rules for how electricity markets work.
The traditional utility business model needs to be replaced by one that encourages more distributed generation such as that produced by rooftop solar, promotes less energy use and takes into account the costs of climate change, said Karl Rabago, the executive director of the Pace University Law School Energy and Climate Center in White Plains, New York. Utility companies could continue to maintain the wires and grid stability, but customers who are producing solar energy and using energy efficiently are just as effective in meeting demand and at a lower cost, he said.
“We have to confront the question of the fundamental utility architecture,” Rabago said. “Is it capable of embracing this stuff? And what we find is that it’s not very adept at doing that.”
In Connecticut, Pelton of EcoSmart Home Services says it will become harder to sell solar panels if net metering is discontinued. Federal income tax credits are already scheduled to drop and then expire over the next three years and adding solar energy systems will become less attractive to homeowners, he said.
"All of sudden that conversation at the kitchen table doesn't go so well," he said. "We would like to have a little stability."