Solar Wars: The Revenge of the Subsidies | Citizens Against Government Waste

Solar Wars: The Revenge of the Subsidies

The WasteWatcher

Those who have followed the solar energy debate may be the only ones aware of “net metering.” For everyone else, it is worth understanding what it means and how it works.

Under the vast majority of net metering polices around the country, utility companies are required to buy the excess power of a rooftop solar customer at the (higher) full retail rate, rather than the (lower) wholesale rate – even though it would cost the utility companies less to produce the electricity themselves. Current net metering polices help rooftop solar customers avoid paying for many of the fixed costs of the electric grid that they rely on for electricity day and night. As a consequence, there is a considerable cost shift to non-solar customers in order to subsidize solar customers for utilizing the grid.

Net metering was first introduced back when solar technology was still very expensive and unaffordable for the average consumer. The entire premise behind net metering was to incentivize customers into purchasing residential rooftop solar systems when they were first brought to the market. However, as the cost of solar technology continues to decline, it is time for the policymakers around the country to revisit and update current net metering policies.

As Tom Dalzell of the International Brotherhood of Electrical Workers Local 1245 said, “This accounting method creates a false sense of being ‘off the grid’ for many – but they still use and rely on the grid, and shouldn’t force regular users to bear that cost for them.” Mr. Dalzell pointed out that, “A fixed fee is only fair – if you truly don’t use the grid, you are free to disconnect. But forcing lower-income people and renters who could never afford to install solar panels to make up the difference lets wealthy program participants off the hook.” Mr. Dalzell’s analysis describes exactly what is wrong with the current net metering policies.  

As noted in CAGW’s January 2016 WasteWatcher “Solar Socialism 2.0: The Subsidy Sage Continues,” as well as CAGW’s report, the October 2013 study on the cost effectiveness of net metering by the California Public Utilities Commission Energy Division concluded that residential rooftop solar “customers installing net metering systems since 1999 have an average income in California of $91,210, compared to the median income in California of $54,283…” Essentially, the California Public Utilities Commission Energy Division’s findings conclude that the median household income of rooftop solar customers was 68 percent higher than the median household income in California.

In other words, net metering shifts the utility costs to non-solar customers, creating an uneven playing field between wealthy solar customers being subsidized by lower-income homeowners and renters that rely on conventional forms of electricity.

Recognizing the unfairness of this situation, Nevada and Arizona have begun taking action on their net metering policies to even out the playing field for both solar and non-solar customers.

In May 2015, the Nevada State Legislature passed a bill that gave the Public Utilities Commission of Nevada (PUCN) the regulatory power to levy new fees on net metering customers after the net metering cap, which was kept the same as the prior year, is reached. The PUCN voted 3-0 back in December, 2015 to slash net metering payments by roughly half – paying solar customers the (lower) wholesale rate for surplus electricity rather than the (higher) retail rate – along with raising fixed fees on solar customers by nearly 40 percent. This move was not taken lightly by SolarCity, Sunrun, and Vivint – the top three solar companies in the country, which plan to cease their solar operations in the state.

In the summer of 2014, Arizona’s two largest utility companies, Arizona Public Service (APS) and Tucson Electric Power (TEP), shocked the energy sector when they asked regulators for approval to begin installing rooftop solar panels on their own, rather than delegating it to a third-party provider.

APS, Arizona’s largest energy utility provider with about 1.2 million electricity customers, has proposed to install rooftop solar panels across its service territory, while also crediting building owners for their roof space or a “roof rental payment.”

TEP, on the other hand, is a much smaller company than APS – with little more than 400,000 electricity customers. TEP is offering a similar option to what is already available through a third-party provider such as SolarCity, including contracts that lock consumers into lower electricity rates based on the output of their solar systems.

TEP CEO David Hutchens said that the current rate structuring is unfair for the non-solar consumer and for the utility companies at large. Solar customers are able to significantly reduce their electricity bills with the current net metering credits, while also paying less back into the system for the grid’s maintenance. “We want to make sure that all of our customers get a fair shake,” said Hutchens, “and that is against some people’s business models, which makes it a little bit of a tough conversation, but I think it’s the right thing to do.”

Mr. Hutchens analogized restructuring the net metering rates to the cable industry. “We provide basic cable, and that’s the cost of service, but things that cost more – we don’t want other people paying for them,” said Hutchens. “We want you to pay for them because you find value in those products.”

“You don’t get to watch HBO if your neighbors paid for it, unless of course you splice into their line, but that’s the kind of model we want to see going forward,” Hutchens added. “Basic cable for everybody, keep that as low as we can, because we got a lot of people who can’t afford extras and that’s really bothersome if we can’t control the rates to those who are most at-risk in our community.”

It is imperative that net metering policies and rate structures around the country be updated so that everyone who utilizes the grid is on an even playing field, which will help maintain, and keep it fully operational. In so doing, solar and non-solar customers would have access to safer, reliable electricity, at prices that are fair and affordable for all electrical consumers.

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