How can utilities and solar advocates agree on a sustainable solar policy? Is that even possible?
With battles raging around the country over net metering, it’s easy to think the answer is No. With ALEC in on the action, solar advocates have had their hands full trying to protect a policy that many credit with spurring explosive solar growth.
Utilities, being profit-driven and beholden to shareholders, are naturally worried about declining profits — already an issue in a time of stepped-up energy conservation efforts. Distributed solar just adds to the threat. So they haven’t been supportive of net metering.
But maybe there’s a way for utilities to recover their costs while being fair to all customers, including those with solar. And maybe that has a lot to do with a minimum utility bill.
A new strategy for solar
The idea seems to be gaining steam. It’s a key part of an unusual agreement we’ve been watching between utilities and solar advocates in Massachusetts, which could set a precedent for the rest of the country. Though it’s not universally loved, a large number of solar advocates are saying it’s our best chance for a favorable solar policy that will work for everyone.
A new report backs that up. And it says the net metering battles are focusing on the wrong thing.
The report, Rethinking Standby and Fixed Cost Charges, was prepared by analysts from North Carolina State University’s Clean Energy Technology Center and Meister Consultants Group and supported by the U.S. Department of Energy’s SunShot Initiative. The analysts point out: “Predictably, supporters claim that solar PV always results in a net benefit, while the utility industry claims it always results in a net cost to them and their customers.”
To move forward, the report recommends that utilities and regulators adopt a “broader, softer, more holistic strategy.” And the analysts’ specific recommendations align with what’s being considered in Massachusetts.
A minimum bill is one piece of the proposed three-part strategy, which also includes revenue decoupling and time-differentiated rates:
- The first part of the strategy, decoupling, allows a utility to make its required revenues without needing to sell more power. That seems like a positive development at a time when many customers are being more energy-efficient — and we certainly want to encourage that.
- The decoupling itself makes a minimum bill all the more necessary, to enable a utility to recover its costs. Although the minimum bill is imposed on all customers, it would really affect only net-zero energy customers. GTM Research has even shown that the average Massachusetts solar customer would come out ahead with a minimum bill as opposed to an added charge for solar customers.
- The report also advocates gradually phased-in time-of-use pricing. This would tend to favor solar customers, who usually generate the most power at times when power is the most expensive. At the same time, these rates would ensure that solar customers who have unexpected grid energy needs during high-cost times would pay an appropriate price for that power. This would substitute for standby or fixed-cost charges.
The proposed strategy has additional benefits. The analysts say it would help keep the soft costs of financing and customer acquisition on a downward path. These are the two soft costs most likely to increase if net metering is curtailed.
Following the proposed strategy would ensure that solar remains a solid investment that provides customers with the ability to hedge rising utility rates. That’s because solar would remain attractive to larger investors, which would make financing cost reductions more likely. The report also encourages virtual net metering, which by extending the benefits of solar to more customers would help reduce customer acquisition costs.
This all means that the strategy could help solar more quickly become cost-effective without added incentives.
A path forward
In Massachusetts, at least some of this strategy may soon be tested. While the legislation there didn’t pass in its initial form, it does call for a task force to review the impact of a minimum bill. Both that and the review it mandates of the transition from SRECs to a declining block incentive program are core to the common ground arrived at between solar companies and utilities.
The fact that there was even a common-ground agreement is huge. And the fact that this common-ground path is now inserted in the regulatory process sets a major precedent. The Alliance for Solar Choice (TASC) believes that the last-minute inclusion of this provision in the Massachusetts legislation indicates that minimum bills are on a path forward.
The conversation seems to be zeroing in on the minimum bill idea. Could this signal the end of net metering battles? We anxiously await more news as the minimum bill is reviewed in Massachusetts.