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Madison Gas & Electric, like other Wisconsin utilities, has drawn criticism from clean energy groups in recent years because of rate proposals they say make distributed solar generation less financially viable.
Now MG&E is seeking approval from the state’s Public Service Commission for a community solar pilot project that the utility proposed based on market research of customers. Commissioners have raised a number of questions about the utility’s proposal, and clean energy advocates find themselves on the utility’s side hoping that the project gets approved.
“They’re definitely going over this one with a fine-tooth comb,” said Environmental Law & Policy Center senior policy advocate Andy Olsen of the commission’s review. “We have yet to see from commission chair Ellen Nowak any signs of enthusiasm for Wisconsin’s only domestic energy source, which is renewable energy. She seems to be searching for ways to say no.”
MG&E spokesperson Dana Brueck explained that the pilot project will also prepare the grid for more solar to be added, since it includes the installation of “smart inverters” that are very responsive and adaptable to bi-directional flows of energy from distributed sources.
“Getting ahead today also will allow us in the future to accommodate more inverter based load, like solar, without negative impacts to the electric grid,” Brueck said. “By unlocking the smart features of the community solar inverters, we are preparing for the future when we may see more, larger installations that could impact the grid.”
But clean energy campaigners also have concerns that the structure of the community solar project, with members paying a locked-in rate for 25 years, might not result in savings for customers – especially if the utility further increases its monthly fixed charges.
Fixed rates and fixed charges
Under MG&E’s proposal, customers can buy 250-watt chunks of power from the 500 kW solar project, for up to 3 kW or half of total energy use per customer. They pay a one-time fee of $47.25 per chunk, and then pay 12 cents per kilowatt hour (kWh) for that electricity for 25 years.
The up-front cost is significantly lower than most community solar projects, making it potentially accessible to a wider range of customers. But if electricity costs stay lower than 12 cents/kWh, customers won’t be saving any money.
And MG&E, like other Wisconsin utilities, has increased the fixed monthly charges that all customers pay while reducing the cost per kilowatt hour of energy, making any savings from solar less significant.
“Our main concern is that if MG&E raises fixed fees for all their customers, then [community solar participants] see their usage fees drop, that could undermine the entire basis of the calculations they’ve done,” said Mitch Brey, an organizer with the citizens group RePower Madison. “You almost need a commitment from MG&E to use the current rate structure for the next 25 years, otherwise you don’t know what you’re getting into. Customers might buy in for environmental reasons, but on the economic reasons, it’s an unknown.”
In November the utility promised not to seek increased fixed rates in its next rate case, a promise Brueck reiterated. But watchdogs worry fixed rates could still be increased in the future.
“We do not and cannot make any guarantee as to what prices will do in the future,” Brueck said. “This is the same risk that customers take when they install their own solar on their home. Unlike a solar installation at a home, customers can choose to leave this program at any time.”
In its February 19 letter to the commission answering the commission’s questions, MG&E stated:
“Interested customers pay a relatively modest participation fee to purchase their share of the energy generated by the project at a fixed price. In contrast, under the programs the Commission has previously approved, interested customers essentially acquire a slice of a solar installation through a sizable upfront payment and then sell the energy generated by their portion of the project to their utility. By approving this pilot, the Company and the Commission can gain insight regarding these two very different methods and help determine which approach best meets customers’ interests.”
The community solar array would be on the roof of the Middleton Municipal Operations Center, with the space being offered for free. MG&E is also planning to develop a separate 100 kW solar installation on the roof of the police station in Middleton, a town west of Madison on Lake Mendota.
The community solar construction will be funded with $85,000 from MG&E shareholders and with the initial and monthly fees that participants pay. Since the smart inverters help stabilize the grid and improve reliability for the benefit of all customers, the utility is planning to bill all its customers to cover half the cost of the inverters.
Another way this project differs from typical community solar installations is that MG&E will own the array. The utility has said this is crucial since it needs to control the inverters to serve the grid.
“It’s a different model because MG&E would retain ownership of more of the actual equipment,” said Keith Reopelle, senior policy director for the group Clean Wisconsin. “It’s a little bit of an experiment, but one we think is important to get out there, to see how it works.”
MG&E pegs the payback time for the initial investment in community solar at 17 years, which they say is similar to payback time for a residential solar installation. Participants can withdraw from the program at any time, though they don’t get their up-front fee back. The utility can resell shares within three years, and after that any vacated shares become owned by the utility.
In its answers to the commission, MG&E described the community solar plan as a good deal for ratepayers. The array will cost about $1.89 per watt, according to company filings, which cited a 2015 Brattle Group study pegging the typical cost of solar arrays at $2.88 per watt.
And MG&E said its market research shows that finances are not the primary motivation for customers interested in community solar. The three things customers found most appealing about the concept were: “supporting clean energy, reducing dependence on fossil fuel, and supporting solar without requiring locating it on their property.”
Brueck said more than half the customers the company surveyed said they would likely join the project; and 200 to 300 participants are needed to make it financially viable.
Clean energy advocates, including MG&E’s harshest critics on other issues, agreed that the community solar project will be a win for residents even if it doesn’t generate big savings. And they hope the commissioners see it the same way.
“Let’s let it go ahead, and re-evaluate later,” said Brey. “It’s not that anyone is really raising these concerns other than the commissioners. I do think it’s fair for them to ask questions – I don’t want to criticize the commissioners for looking into these issues, because that’s their duty. But I hope they don’t reject a program that could help a lot of people.”