Legislatures and utility commissions across the country are discussing reforms to existing solar policies prompted by strong solar market growth.
Legislatures and utility commissions across the country are actively discussing changes to existing solar policies. The declining installed costs of solar have led to significant market growth and prompted conversations about altering existing incentive programs. Net metering policies have been a central focus of these debates.
Why debate these policies now?
In general, net metering customers are able to apply credits for excess generation to their utility bills, which reduces the volumetric or variable portion of their bills. Traditionally, volumetric rates are used to recover volumetric costs (e.g. electricity supply) as well as portion of a utility’s fixed costs (e.g. transmission assets). Of the utilities surveyed by Utility Dive, 68% indicate stagnant load growth. As the number of solar net metering customers increases, the debate has centered around how to balance the benefits these customer provide and costs these customers incur.
For a more detailed discussion of these issues, please reference our report co-authored with the North Carolina Clean Technology Center for the Solar Outreach Partnership entitled: Rethinking Standby and Fixed Cost Charges: Regulatory & Rate Design Pathways to Deeper Solar PV Cost Reductions.
How are states addressing this issue?
Utilities and public utilities commissions are just beginning this conversation in many states. A holistic solution to address declining usage across customer classes and the benefits of distributed resources and efficiency programs will require comprehensive reforms.
Currently, each state is approaching this issue differently, in part due to their differing stages of solar market development. As a follow-up to the Solar Outreach Partnership report on fixed charges, Meister Consultants Group contributed to a new quarterly update series entitled The 50 States of Solar, which was released this month by our partners at the North Carolina Clean Technology Center. This report showcases the diversity of discussions around the country during Q1 2015, and provides a high-level overview of the evolving debates concerning distributed solar. We intend to continue to provide updates and briefings on the state of solar policy in the United States to remain engaged with these dialogues as they evolve throughout the country.
The Top Five Distributed Solar Policy Developments of 2015
- Net Metering and DG Compensation Policies in the Spotlight, from Hawaii to Maine
In the final quarter of 2015, regulators in both Hawaii and Nevada became the first two states to end net metering as it is commonly defined. Instead, customers will be compensated for grid exports at the avoided cost rate, a type of policy known as “net billing.” In contrast, California regulators upheld retail rate net metering until at least 2019, and after lengthy investigations, regulators in both Colorado and Iowa decided to keep existing net metering policies without changes. South Carolina implemented net metering rules for the first time, whereas Mississippi regulators enacted a net billing policy after years of deliberation. Maine, Louisiana, and a number of other states are considering alternative policies to replace net metering.
- Utilities Request Substantial Increases in Fixed Charges, New Solar Charges
Sixty-one utilities in 30 states proposed increasing fixed charges levied on all residential customers, making it the most frequent policy proposal impacting distributed solar in 2015. Since fixed charges generally cannot be offset with net metering credits, higher fixed charge components in a utility’s rate design can significantly reducing the financial value of going solar. There were 21 examples in 13 states of utilities proposing extra charges or fees on solar, distributed generation, or net metering customers, but few were approved.
- New York, Arizona, and Utah Among States Studying Costs and Benefits of Solar
The Arizona Corporation Commission and the Utah Public Service Commission are reviewing the costs and benefits of net metering for utility customers in those states. The value of distributed generation is also being studied as part of grid modernization efforts such as the Reforming the Energy Vision proceeding in New York. The results of these studies will influence future net metering policy development and any successor tariffs.
- Minnesota Unlocks Solar Boom with Community Solar Program
Xcel Energy’s community solar gardens program has catalyzed development activity in Minnesota. The program remains one of the most ambitious community solar solicitations in the country. As of January 2016, only one project had been developed with over 1,500 additional applications in the queue, totaling more than 1,400 MW.
- Georgia Clears Path for Third-Party PPAs, as Florida Ballot Initiative Sputters
Third-party ownership (TPO), in the form of solar leases or power purchase agreements (PPAs), is a financing mechanism that has fostered the growth of solar markets throughout the U.S. In 2015, the Georgia legislature passed House Bill 57, which enabled third-party ownership. A Florida ballot initiative to legalize third-party PPAs was postponed until the 2018 election.