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From new charges and restrictions to buy-all/sell-all models, Northeast states look to upend net metering.
As states in the Northeast reconsider net metering, a patchwork of new solar policies is emerging along with mixed predictions about their potential impact on solar development.
Every New England state plus New York is reassessing retail rate net metering, in which customers are paid for unused solar power at the same rates they pay for electricity from their utility.
States are considering everything from new charges and restrictions to, in the case of Maine and Connecticut, eliminating net metering programs altogether. The debates have pitted legislators against governors and environmental groups against one another as they seek compromises amid unusual alliances.
The reform efforts follow complaints by utilities that net metering shifts costs onto other customers. Several studies, though, have shown the value that solar adds to the grid and may even justify higher-than-retail compensation. One study in Maine found that value to be more than double the retail rate.
Solar advocates point to a cautionary tale from Nevada, where the repeal of net metering in 2015 resulted in a loss of one-third of that state’s solar jobs before it was reinstated a year and a half later. They also note that businesses might be inclined to shift from one Northeast state to another depending on which has more favorable policy support.
“Rooftop solar has grown from a funny little blip to a mainstream industry that employs (nationally) hundreds of thousands of people and generates significant amounts of power,” said Sean Gallagher, vice president of state affairs at the trade group Solar Energy Industries Association. “Utilities have started to become concerned about the impact of rooftop solar on their business models.”
“Obviously we are in the midst of change,” said Ed Davis, director of rates for New England’s powerhouse utility Eversource, which operates in Massachusetts, Connecticut and New Hampshire.
What states are doing
The most recent battleground is Connecticut — an early leader in clean energy. In an update to the state’s energy strategy this year, its Department of Energy and Environmental Protection recommended ending net metering, grandfathering existing systems for a time, and instituting a so-called buy-all/sell-all model for new systems.
Buy-all/sell-all essentially is a two-meter system in which solar owners sell all their system’s power to the grid at a rate lower than retail. Then the customer buys back— at full retail cost — all the power it uses from the grid. The upshot is a system that not only increases rates and fees but also makes on-site energy storage less economical.
Pushback was fierce. Even a compromise that forced the Department to keep net metering in place with buy-all/sell-all as an option split environmentalists. Its exact parameters are yet to be determined by the state’s regulatory authority.
Residential solar giant Sunrun, which pulled its operations out of Nevada when that state repealed net metering, strongly opposed the Connecticut compromise.
“What we really push back against and find to be backward looking are rate designs that choose not to value distributed generation appropriately and are punitive to consumers,” said Evan Dube, Sunrun’s senior director for public policy. “What we need is for distributed generation to be valued and compensated fairly.”
Maine’s regulatory authority already put a buy-all/sell-all system in place, but a court challenge filed in the second half of 2017 has yet to be decided. Since then, the legislature has twice approved legislation to undo it. Both times Republican Gov. Paul LePage vetoed it with the legislature falling just short of enough votes for an override.
In 2015, Rhode Island began a compensation program called Renewable Energy Growth, or REG, as an alternative to retail rate net metering. It uses a fixed price tariff that is higher than the retail rate. But those who choose it can’t use the state’s solar grant program or the various tax breaks available to solar owners.
Massachusetts has had some form of retail rate net metering in place since the early 1980s. It has undergone changes in recent years and is poised for another one. Certain larger systems have had the compensation rate lowered to 60 percent of retail. They are also capped — with the caps having been repeatedly met and raised. Efforts to eliminate caps have been unsuccessful.
Residential systems generally are exempt from the caps and still get full retail rate net metering. However a new incentive program called Solar Massachusetts Renewable Target, or SMART, is designed to balance net metering with incentives. The more net metering compensation you get, the lower the incentive.
The program also includes a demand charge, which advocates say is a disincentive to getting solar.
Solar advocates view New Hampshire’s gradual approach as the best example of a net metering update. The state’s cap on net-metered systems was raised and then eliminated. But part of the compromise was that for certain size system compensation rates would be reduced.
Notably, the state’s public utilities commission determined that cost shifting was not occurring at the low penetration rate. And it ordered a value of solar study to determine further actions.
In the meantime the new Republican governor, Chris Sununu, recently vetoed bipartisan legislation that would have raised the size of systems eligible for compensation from one megawatt to five.
His Democratic predecessor, Maggie Hassan, who is now the state’s junior U.S. senator and under whom much of the net metering reassessment began, in April introduced the National Evaluation of Techniques for Making Energy Technologies more Effective and Resilient (NET METER) Act to create a national study on net metering to guide states interested in starting a net metering program or expanding an existing program.
‘A tough time for utilities’
Utilities’ cost-shifting argument is a “big lie,” said Karl Rabago, executive director of Pace University Energy and Climate Center and a former utility executive and regulator who has also worked with many northeastern states on energy policy. “It’s just that fundamental assertion that a reduction in use creates a cost.”
Utilities, he said, “position self-generation as a zero-sum game, us versus them, and they’ve been successful in convincing the policymakers.”
“Of course there’s still a cost shift,” said Eversource’s Davis. “There’s still a cost to be recovered for that service,” he said, for solar customers who use the company’s wires and poles, even if it’s just for part of the day. “If that customer doesn’t pay for it somebody pays for it.”
But Dave Ismay, a senior attorney with the clean energy and climate change group at the regional Conservation Law Foundation counters that no one makes the same argument for vacation homes on Cape Cod hooked to the grid all year but only using electricity for part of it.
“The rest of the year, guess what they’re paying? Nothing,” he said. “If I lower my own usage by energy efficiency I don’t pay anything either. If I turn off the lights and don’t run the A/C, I don’t pay it either. But suddenly when you’re putting solar on your roof you’re being unfair. So it’s just really nonsense.”
Advocates also argue that cost shifts are unlikely with solar penetration rates still low in the Northeast — about 5 percent in Massachusetts but not even cracking 1 percent in others.
“It’s a tough time for utilities trying to figure out how they move forward in this world,” said Janet Gail Besser, executive vice president of the Northeast Clean Energy Council (NECEC), who hopes they use it as an opportunity to revamp their models. “The technology isn’t going to stop changing because people don’t want to change an old framework.”
Utilities have to keep in mind that solar is popular with customers, said SEIA’s Gallagher. “Utilities in the long run I think are going to have to find a way to give customers what they want and the industry has to find a way to work with utilities to insure utilities remain viable,” he said.
Besser points out that net metering has been successful in helping states adopt solar and that in turn helps create new industries and jobs.
“I think the states that are implementing these drastic changes are going to be very disappointed when they see development slow or stop,” said Besser, who is among advocates who admit that the solar industry is maturing and warrants re-evaluation. “The way you address it is to adjust the net metering credit; it is not to end net metering.”
The question is at what point does it need to be re-evaluated.
“I’m willing to say it’s OK if you get out in front of it a little bit. It’s not the end of the world,” said Mark LeBel, a staff attorney with the regional environmental advocacy group Acadia Center. But self-consumption of electricity — owning, storing and using your own generation — needs to be protected. “That’s the future,” LeBel said.