The number of customers selling electricity back to the grid in Michigan climbed again in 2016, according to an annual report released by the state last month.
The state’s net-metering program, which lets ratepayers sell surplus power back to the grid at retail prices, added 427 customers and nearly 5 megawatts of capacity, most of it from solar.
While the state’s total solar capacity doubled last year through utility-scale projects, net-metering momentum is at risk after 2018, as the state prepares to replace net metering with a tariff aimed at better reflecting the value of solar and other forms of distributed generation.
The Michigan Public Service Commission spent much of 2017 designing a replacement for the state’s decade-old net metering program, a requirement under the state’s sweeping 2016 energy law. The net-metering debate has revolved around whether customers’ use of solar panels is being subsidized by other ratepayers, or if the systems provide a net benefit to the electric grid.
A draft proposal released in December recommends a tariff based on an “inflow-outflow” model. Customers would pay retail price for electricity from the grid, and any excess electricity they generated would be purchased at an “avoided cost” rate based on Public Utility Regulatory Policies Act (PURPA) contracts. That’d mean about 5 cents less per kilowatt hour compared to the existing net-metering program.
Julie Baldwin, MPSC renewable energy manager, said it’s too soon to predict how the new tariff could affect solar installations. Customers who install projects before mid-2019 will be grandfathered into the existing net-metering rates for another decade, and specific rates under the new tariff will likely be set for each utility in future rate cases.
“Without knowing exactly how the numbers are going to shake out for the new tariff, I don’t have a sense of what will happen to growth when it goes into place,” Baldwin said.
Baldwin and others said they have not noticed a rush into net-metering agreements ahead of the changes, as was the case in Indiana last year as the state begins to phase out its net metering program
Allan O’Shea, president of Michigan-based CBS Solar, said the potential changes are not catastrophic.
“I’m not wallowing around in a bunch of self-pity. We had a banner year (in 2017) and we plan on it again,” O’Shea said. “Many (customers) just don’t care — they’re going to build what they can build.”
Solar advocates contend that it’s not yet clear whether net-metering customers are a net cost to the grid. They want the commission to take more time to answer that key question and keep net metering in place until then.
“I’m very concerned that they’re rushing to do something they haven’t fully thought through the consequences of,” said Becky Stanfield, senior director of western states at Vote Solar, adding that the new tariff proposal is far more complicated and risks undervaluing grid benefits and extending payback times for owners.
Ed Rivet, a member of the Michigan Conservative Energy Forum’s leadership council, said he is “somewhere between surprised and disappointed” that 2017 came and went without some closure on the solar cost-of-service question. Rivet is also a net metering customer who thinks he provides a net benefit to the grid. If he isn’t, Rivet said utilities would likely have been able to prove that by now.
“I think there’s enough information to say net metering is a win-win-win, let’s just roll with it,” he said.
Michigan’s two largest utilities, DTE Energy and Consumers Energy, said they were reviewing the proposal and would issue formal comments later.
“DTE believes any distributed generation tariff should account for the true cost of service for building and maintaining both utility power plants and the distribution grid,” DTE spokeswoman Cynthia Hecht said.
Baldwin said the new tariff is still open for debate, and that the value of net metering customers to the grid “is difficult to quantify.”
“I think there is room to look at other methods to value the outflow,” she said, adding that it could be a “long-term project” to quantify overall grid benefits from distributed generation projects. “One thing we know is we’re not going to get this exactly right the first time.”
Stakeholders have until Wednesday to submit comments on the proposal. A final MPSC staff study on the tariff design is required by April 20.