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Editor’s note: An earlier version of this story incorrectly stated that the IUB had approved the utilities’ pilot projects. The story has been updated with the correct status of the proposals.
A recent ruling by Iowa regulators has the clean-energy community worried that nearly a half-million customers in the state could find solar power to be financially unworkable as a result.
“There is a lot of ambiguity in the order,” said Josh Mandelbaum, an attorney who has been involved in the process that led to the decision. “But our bigger concern is that this is a back-door way potentially to significantly alter net metering.”
On Feb. 3, the Iowa Utilities Board arrived at an important juncture in its long-running review of its policy regarding distributed generation. Three years after launching the study, the board continued to move pilot projects proposed by the state’s two major utilities, MidAmerican Energy and Alliant Energy forward and ordered them to modify the proposals in the form of revised tariffs.
The board had told the utilities in October 2015 to devise experimental tariffs for distributed-generation customers “that will expand renewable (distributed generation) in Iowa.” That order came after the utilities proposed tariff pilots that many observers asserted would actually penalize customers with solar panels.
While several solar-energy advocates are pleased that the tariffs seem to reaffirm the fundamentals that underlie net metering, and are satisfied overall with MidAmerican’s revised pilot tariff, they have concerns about one important aspect of Alliant’s tariff.
The major point of contention in the new pilot projects is the way in which the utilities define a customer’s “load.” MidAmerican defined it as a customer’s total energy use over the course of a year. Alliant defined it as the peak demand on the grid at any given moment over a year.
The meaning of “load” is critical because the policies allow self-generating customers to net meter up to one megawatt or 100 percent of their load, whichever is smaller. Any production in excess of that could be sold back to the local utility for a price far below the retail, or net-metering, rate.
Tim Dwight, a solar developer who is also the president of the Iowa Solar Energy Trade Association, said that defining load as peak demand, rather than as total energy consumption, will result in a much lower number. That will mean that Alliant’s customers will be allowed to offset much less of their total energy use than will MidAmerican customers.
Dwight said it likely would mean that future solar installations will only be allowed to offset roughly 50 percent – and possibly as little as 30 percent – of the energy portion of an electricity bill. Current rules allow solar producers to offset all of the energy portion.
“If I can only offset 30 percent (of my energy bill),” Dwight said, “I’m not going to go to all that trouble.”
The utilities board did not take issue with Alliant’s definition of the term. Nathaniel Baer of the Iowa Environmental Council said it is based on numbers that are not available to customers, and that don’t even relate to the customer.
While electricity bills typically state the number of kilowatt hours of power used, they do not have a peak-demand measurement. Alliant said it will calculate a customer’s demand – and, by extension, net-metering limit – based on averaging demand of large groups of customers.
There’s a “problem with transparency” in that approach, Baer said, “and the fact that it’s not even based on the customer.”
Also, Baer and Mandelbaum said the board’s ruling does not make clear exactly which solar projects would be subject to a new demand-based cap on the size of a system eligible for net metering, which was increased to 1 MW from 500 kW.
Mandelbaum said that, “If the board’s intention was to only apply it to projects in the 500-1,000 kilowatt range, we would have much less concern about it, since that’s part of the expanded net-metering arrangement. But if it applies to systems below 500 kilowatts, that would be dramatically changing net metering, and that was not the intent of the board as articulated in previous orders.”
With the stakes so high, Mandelbaum said he and others involved in the matter will ask the utilities board to clarify its ruling.
Affirming net metering
In addition to the increased net metering cap, both tariffs have features that clean-energy activists applaud as likely to foster more renewable energy.
Both utilities reaffirmed that all customer classes, as well as projects financed by a third party, are eligible to net meter, and will also give self-generation customers the option of doing an annual “cash-out” of excess production in early April instead of early January, the date proposed earlier by the board.
Net-metering customers generally get maximum benefit from their systems by using excess production as a credit against future bills, rather than by selling it back to the utility for a very low “avoided-cost” rate. To that end, they benefit most by starting the net-metering clock when energy production is just beginning to exceed energy consumption – early spring.
“At the end of the day,” Baer said, “it improves the economics of net metering.”
Their generation will be allowed to offset only the energy portion of their bill, which is currently the case. The utilities also will pay an avoided-cost rate for unused kilowatts at that time, and direct at least half of it to a fund for low-income customers. Alliant spokesman Justin Foss pointed out that the payment is an additional benefit to customers.
Dwight, the solar developer, maintained that the load issue means Alliant’s customers will be allowed to offset much less of their total energy use than will MidAmerican customers.
Mandelbaum and Baer said they will pursue the question with the utilities board. With additional and closer inspection, Baer said, “We continue to have very significant concerns about the Alliant approach, including … whether their proposed approach could bring net metered solar projects to a halt.”