DEEP taking heat on its proposed changes to solar policy
When James Schwartz took a look at the solar energy provisions in the new Comprehensive Energy Strategy (CES) draft released in July by the Department of Energy and Environmental Protection, he was pretty sure what it would mean for his 10-employee company, Independence Solar.
“We’d be out of business,” said Schwartz, who relocated Independence from Boston to Essex, Conn., because of the groundbreaking commercial solar program launched here in 2011. “There’s no business to be had based on the levels in there.”
He was talking about recommendations in the CES that the kind of solar power known as distributed generation – that’s what people and businesses put on their roofs – be capped under a formula that would hold it to about 20 megawatts a year. Last year Connecticut added about 90 megawatts.
Concerning, but less alarming to solar proponents, was another provision that would change the way residential solar customers in particular are compensated for the excess power they make. Under a concept called “net metering,” residential solar customers in Connecticut now are paid the retail electric rate for their excess power. Net metering broadly has been viewed as essential to solar energy adoption, especially when systems cost more than they do now.
The provision in the CES, while not specific, could eventually eliminate net metering and also probably mean that people who install solar would have to pay extra fees to help maintain the electric grid and other utility services.
The utility industry nationwide, not just in Connecticut, has long argued that because of the revenue they lose from solar customers who only use the grid part of the time — chiefly at night — they have to charge non-solar customers more to maintain the grid. That belief, commonly called cost-shifting, has just as long been discounted by the environmental movement, which says that solar power actually helps utilities spend less because it lessens the need for grid maintenance, so solar customers should be rewarded, not penalized.
DEEP is “missing the point big time,” said Schwartz, who’s done about 15 projects in Connecticut ranging in size from 100 to 700 kilowatts. “All they were looking at is cost. They’re not looking at the value” — like the money companies could save with solar power and then plow back into their business to grow, hire more people and add to the state’s economy.
“It’s very short-sighted,” he said.
Both the cap and net-metering provisions have spawned outrage throughout the state’s solar industry and those who support it. They say the state, once a clean-energy leader with some of those most innovative solar programs in the country, will not only lose that edge but also its solar industry, jobs and environmental vision if the proposals stand.
Timothy Schneider, owner of the energy efficiency and solar company Earthlight Technologies, said his company will cut about two-thirds of its 55 employees in the state if the proposals go through.
“It’s going to basically rip the heart out of the solar industry,” he said.
Mike Trahan, executive director of Solar Connecticut, the state’s solar industry trade group, called the solar cap a “draconian, unsubstantiated, ill-conceived knife in the heart of solar.”
“It seems clear DEEP is not concerned about the solar industry and the jobs that go with it,” he said.
“The provisions that they’ve included – really risk stalling deployment in the state,” Kerry Schlichting, a policy advocate with Acadia Center said. “And if that is not their intention, then some of these really need to be re-visited.”
That message has been getting through. After more than a half-dozen packed public hearings, plus some 1,500 written comments, many if not most addressing the solar provisions in the CES, DEEP is backing off a bit. Lately they are reminding critics that the document was a draft and hinting the final version, expected by the end of the year, will make changes to the solar provisions.
But many wonder how DEEP arrived at such a dramatic change on solar policy. “This looks a lot like the playbook run in the state of Nevada two years ago where the utility industry and the state got together to kill off rooftop solar,” said Trahan, echoing an opinion widely expressed among solar proponents.
Nevada’s legislature ended net metering abruptly and retroactively, causing major solar companies to pull out of the state and a loss of about one-third of solar-based jobs. The legislation was largely reversed this summer
“It wasn’t written by utility companies,” said DEEP Commissioner Rob Klee, responding to accusations that the solar policies in the CES were dictated by the utility companies.
Their rationale is that rooftop solar costs the state and ratepayers more per kilowatt through the various solar-power incentive programs than grid-scale solar does, so the latter should be the state’s focus.
Connecticut’s existing solar policies date to legislation in 2011 that combined responsibility for energy and environmental policy under DEEP and created or reinvented many programs to jump-start and perpetuate clean energy use. Solar for commercial operations, such as box stores and other companies, moved to a competitive model that awarded incentives based on low cost – a kind of reverse auction administered by the state’s two utilities.
Since the program began in 2012, Eversource has contracted for about 212 megawatts, that’s about 35 megawatts a year. Avangrid said it has about 17 megawatts in service. The CES states that through late 2016, 295 megawatts of commercial solar have come through the program.
Residential solar became the domain of the newly configured Connecticut Green Bank, which was tasked with creating ways to constantly replenish the ratepayer funding it receives and attain 300 megawatts of residential solar by 2022. Since the program began in earnest in 2012, it has averaged 35-45 megawatts of residential solar a year.
Part of the residential solar mission is to foster the sustained, orderly development of a solar industry in the state, said Bryan Garcia, president of the Green Bank.
“When we hit 300 megawatts, it’s not enough for us to say ‘OK, we’re done.’ If we stop – we’ve built an industry that just disappeared,” he said. “If it stagnates at 300 megawatts then we’ve failed the economic part of this policy.”
He estimates there’s potential for three gigawatts of residential solar in the state, 10 times the policy goal.
Garcia, whose opinion carries a lot of weight among state officials as well as environmentalists, not to mention clean energy interests worldwide, made his concerns known in nearly 40 pages of comments on the CES broadly and the solar proposals specifically. Among them were that DEEP had not adequately considered intermittent renewables like solar paired with storage, when it becomes better and more affordable, as an energy model for the future.
And he argued, as many solar proponents do, that DEEP failed to consider what’s known as the “value of solar.” It’s a concept that weighs what solar or any other clean energy costs against the avoided costs and non-financial benefits of that power. The proponents would assign a value to things such as cleaner air that can result in fewer health problems, or savings from less wear and tear on the wires and poles in the electric grid, and the moderating effect renewable energy has on climate change.
“They also have to look at benefits – where all costs or all benefits are truly valued in a marketplace,” Garcia said. “They missed that.”
Garcia also argues that limits on solar deployment or the incentives that go with them could have an outsized impact on the low- to moderate-income group that the Green Bank has taken pains to bring into the solar fold in the belief that they can benefit most from lower energy bills.
Since the Bank initiated its low-income efforts in fiscal year 2014, the installed capacity for low-income solar has gone from 8 percent of total yearly added capacity to more than 25 percent. Cumulatively, low- to moderate-income homes account for 16 percent of all residential solar installed capacity.
DEEP argues that what it wants is more renewable energy deployed at lower cost than it has been, and therefore the emphasis should be on grid-scale solar installations, which are cheaper to do per kilowatt than individual ones, often also referred to as behind-the-meter.
“Our goal was not to have a hard stop, a complete upending,” Klee said of the solar proposals. “Our goal was to highlight what we’ve seen in the difference in cost between grid-scale and behind-the-meter. How do we drive the existing market to get more towards grid parity.”
Critics of the shift have argued that large quantities of grid-scale power are impractical in space-starved Connecticut, where fights already are raging over the use of open space and farmland for acres of panels. Other arguments are that the rights of homeowners to determine their own power source is being usurped and that the values DEEP used to determine the difference in cost between grid-scale and distributed solar are faulty and that the costs are much closer.
“I wouldn’t cap anything,” said Dan Esty, DEEP’s first commissioner who created the framework for the existing solar policies. “I would allow the marketplace to determine where the flow of resources should go as we move to build out clean energy options.
“Caps are a 20th century policy tool. It doesn’t make sense.”
Rep. Lonnie Reed, co-chair of the Energy and Technology Committee, said without a value-of-solar determination, a 20-megawatt cap was putting the cart before the horse.
“I like to really dive into this and examine it so I don’t have this knee-jerk, ‘ok, no, no, no,” she said of dismissing a cap out of hand. “I’m ‘OK , let me listen, give me some data, show me.’ But I don’t see any models where that’s working,” she added. “It feels like a panic move.”
Reactions to net metering changes are more nuanced. Nationally net metering is under assault and has been for many years, with utilities repeatedly referring to its effects as “cost shifting.” People without solar, they say, wind up subsidizing those with it by having to pay extra to maintain wires, poles and other elements of the distribution system to make up for the lower electric bills paid by those with solar. The utilities also argue that lower-income people who can’t afford solar will pay disproportionately for wealthier people who can.
There is recognition that retail-rate net metering was needed to help bring solar online several years ago when systems were far more expensive. But as costs have dropped dramatically and installing solar has become more popular, many industry diehards admit some re-examination of net metering – especially models like Connecticut’s that pay at retail electric rates – is warranted.
But those same people tend to believe the decisions should be propelled by a full value-of-solar analysis. And some believe that analysis will show that the benefits of solar to the environment and the resiliency of the grid are so profound that solar owners should receive rates even higher than retail to compensate for their investments.
“I think the value of something is not necessarily the same as what you can pay for it,” said Mary Sotos, the new head of DEEP’s energy division. “If someone asks you, ‘What’s the value of water?’ Well it’s infinite. We need water to live. Does that mean you’d be willing to pay any amount to get a resource you know can be provided or procured at some lower cost? You’d say no.”
Sotos said while she stands by the need to reform net metering, she’s open to suggestions on how to accomplish that.
“Should we blindly go and say it should be retail rate? No,” admitted Solar Connecticut’s Trahan. “I don’t think anybody in the solar industry would argue that some costs haven’t shifted. The question is, do the benefits outweigh the costs?”
DEEP is getting strong support from both state utilities, Eversource and Avangrid, which have made the cost-shift argument for years and did so again in their CES filings.
“It’s a matter of striking the right balance,” said Tim Honan, Eversource’s manager of wholesale power contracts.
State consumer counsel Elin Katz, who has relentlessly focused on electric rates, also is arguing on DEEP’s behalf.
“Net-metering is essentially a cost shift in my view,” she said. She supports a greater emphasis on grid scale solar instead of rooftop, saying: “We need to get the most amount of clean energy for every dollar.”
“I’m not going to fall on my sword for whether 20 is the right level,” she said of the 20-megawatt solar cap. “Honestly – we have the highest electric rates in the country. We need to be very, very careful about every dollar we add.”
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