Solar policy fight is picking up where it left off

The fight over net metering is back.

Anyone who thought legislation passed last year would extinguish controversy over the transition away from that widely used method of compensating solar energy customers for their excess power would have been wrong.

Very wrong.

No fewer than four pieces of legislation – half from Republicans, half from Democrats – have been filed to at least slow down, if not repeal, the process started through Public Act 18-50. That legislation was designed to implement an update to the state’s comprehensive energy strategy and was arguably the most consequential energy legislation since the formation of the Department of Energy and Environmental Protection (DEEP) in 2011.

But the part of it that deals with solar programs has had the solar industry, environmental advocates, legislators, business owners, homeowners and others incensed since changes were first proposed in the summer of 2017 as part of the energy strategy. Those changes, while modified from DEEP’s original proposals, very nearly derailed the entire bill and divided environmental advocates last year, some of whom believed the solar provisions were so objectionable, the full legislation should be rejected despite its many other worthy components.

Vowing to re-examine it, opponents have been organizing for months with informational sessions and outreach to the new leadership of the Energy and Technology Committee, many of whom are first-time legislators. Advocates are emboldened by the aggressive energy policies Gov. Ned Lamont laid out during his campaign and inaugural address, and his avowed laser focus on job creation and improving the state’s economy.

The enacted changes in the solar program are being cast as a counter to all of those. Solar adoption would slow and jobs would be lost, advocates say. And an unusual conglomeration of strange bedfellows that includes solar advocates and the utilities agree that – policy differences aside – the time frame set in the legislation to make all the changes really can’t be met.

“It’s worth taking another stab,” said Sen. Matt Lesser, D-Middletown, who filed one of the repeal bills. After 10 years as a representative he is now in the Senate and back on the energy committee after a break of several years.

‘I’m particularly unhappy with provisions I saw moving us backward with support for residential solar,” said Lesser, who noted as did others that Connecticut had at one time been a leader in solar policy and had fallen behind neighboring states including Massachusetts, Rhode Island and New York.

“The most important thing,” said Rep. Tim Ackert, R-Coventry, “We don’t want to hurt the solar industry.”

But he added, Connecticut shouldn’t overpay to do that. He said part of the reason he supported last year’s legislation was the uncertainty of who the next governor would be. He wanted to get something on the books. Now, he said: “I have no problem with a time out. Let’s reassess this; let’s have a real numbers crunching plan.

“I’m for as much solar as we can do,” Ackert said.

“I’d be willing to listen and look at it,” said Sen. Paul Formica, R-East Lyme, now a ranking member on the committee.

But Rep. David Arconti, D- Danbury, now co-chair of the Energy Committee and in his second term in the legislature, had a caveat.

“I don’t think we can think about a repeal without having something to put in its place,” Arconti said.

Double trouble: policy and timing

Net metering, while nettlesome to some, is a longstanding and widely used energy compensation system that Connecticut has employed for years. Solar customers are paid the retail electric rate for power they sell back to the grid during certain times of the day when they make more than they need. It’s subtracted from the power they buy from the grid when there’s no sunshine – at night or during bad weather.

Nationally, net metering has been fought by utilities for years because they consider it a threat to their business model and bottom line. Most efforts to change it have been beaten back. The most notorious among them – Nevada. That state’s legislature ended net metering retroactively about four years ago, causing major solar companies to pull out of the state and Nevada to lose about one-third of its solar-based jobs before the legislation was reversed two years later.

DEEP in the past has argued, along with the Office of Consumer Counsel, that net metering will push electric rates up and hurt non-solar customers – something often referred to as “cost shift.” Utilities have made that argument as well.

Public Act 18-50 effectively gets rid of net-metering, making Connecticut one of the first blue states to do so, though it would continue for the remainder of the ongoing residential solar incentive program and all existing customers would keep it until 2039.

In place of net-metering consumers would be given two choices, both of which are opposed by environmental advocates. One would be rates – known as tariffs – that would be paid to solar owners for their excess power. The rates, presumably lower than retail rates, and formulas for applying them would be determined by the Public Utilities Regulatory Authority (PURA) — a process that is already underway.

Solar owners could also choose what’s known as a “buy-all/sell-all” system, in which a solar owner would have to sell all of his or her power to the grid at a to-be-determined rate set by PURA, and buy back what he or she needs at the retail rate. Solar owners would wind up paying more in fees than they would have under net metering and it would be difficult, if not impossible, to install battery storage or home-based smart energy systems that help reduce demand.

Complicating all of this is timing.

The Residential Solar Incentive Program (RSIP), developed and run by the Connecticut Green Bank, was designed to run until it produced 300 megawatts of solar power or reached the end of 2022, whichever came first. The program has already installed or approved about 250 megawatts and Bryan Garcia, the Green Bank’s president, estimates it will reach 300 by the end of this October.

But there is basically no way to have new metering approved, let alone implemented by then – even if the various parties weren’t fighting over the program parameters.

The utilities agree.

Because of the complex upgrades needed to physically implement some of the changes PURA is considering, Eversource, which services most of the state, has told PURA it would take “at least 24 months” to complete them. United Illuminating, which is already making changes to its systems, estimates it would take them six to nine months.

The original mandate for RSIP was to lower incentives as it progressed and ensure the sustained orderly development of a local solar industry. Garcia, like others, worries that the RSIP will end in October without a fully fleshed out plan in place and the solar industry, with its 2,000 jobs, could head for the exits.

“If the local industry changes for the worse, then we haven’t effectively implemented the policy,” he said. “The transition from net metering to tariffs needs to ensure local jobs.”

Garcia is not opposed to a tariff, as long as it provides enough of a financial return to make solar systems affordable – especially after the 30 percent federal tax credit on solar projects disappears in 2022. But he said the simplicity of net metering has played a key role in getting people to invest in solar.

“The economic message of what is marketed to homeowners relies on net metering,” he said.

An effort to institute an interim tariff – which would be allowed under the existing legislation – was rejected by PURA in January. Since then, PURA’s chair, Katie Dykes, has left to become DEEP commissioner, leaving only two commissioners and the net metering work incomplete.

Garcia has offered alternatives – supported by both utilities – to PURA. One is to, in essence, continue RSIP after it hits 300 megawatts, but set the incentive level at zero as it only provides about 10 percent of a system’s cost now. But existing net metering would continue until a new plan is in place. The other alternative is to slow down the program by making incentives available only to low income applicants.

“There are too many open questions,” said Ed Davis, director of rates for Eversource. “There are so many moving parts in this legislation.”

But Davis is less keen on starting over since he believes progress has been made.

The legislation also affects the wildly popular commercial solar program, which is run through the utilities. That program is now in its second one-year extension after it was due to run out, which it will now do for a third time later this year.

“Any time you create uncertainty the investment capital goes elsewhere,” said Noel Lafayette, a solar developer who has done several projects in Connecticut, but is beginning to focus more on Massachusetts and New York. “The ongoing issue with Connecticut is we keep doing things for now, keep reacting to whatever politically. There’s no real game plan.”

Now what?

Mary Sotos, DEEP’s deputy commissioner for energy, seemed to back off the department’s earlier insistence in its filings that existing timelines be met and that there was little wiggle room in the goals of the policies passed last year.

She indicated the Lamont administration has been clear about its focus on business opportunity in the sate and wanted to learn more about the issues around the solar compensation dispute. She said that Commissioner-designate Dykes, who once held Sotos’ position, was looking forward to meeting with stakeholders.

“The door’s open,” Sotos said. “We want to understand more specifically their concerns and their visions.”

She did not indicate which, if any, of the various plans to delay or reconsider net metering DEEP would prefer. “We want to make sure we have a sustainable pathway for the solar industry,” she said. “The core framework is still an important starting point to work from.”

And that core – whether net metering should stay or go – still hangs over the question of how the state should proceed. All of which gets back to the issue of cost shifting and whether those without solar actually do subsidize those with it.

A 2017 study by Lawrence Berkeley National Lab that looked at the potential for cost shifting from rooftop solar said if the penetration of such systems is low, any cost shift would be negligible. Penetration of solar in Connecticut is low – about 2 percent.

For regulators, said Galen Barbose, the research scientist who conducted the study, “This is just not going be the most impactful thing to spend their time on if their objective is to keep rates low. There are often other things that are bigger levers to pull.”

Utility capital expenditures, he said, probably have the biggest impact on rates.

He also said that the focus on net metering is “a little bit misplaced. The more fundamental issue in many cases is just the underlying retail rate structure,” he said. “My general sense is that’s a more productive place to focus instead of net metering.

“Thinking about these more fundamental rate design issues is ultimately a more robust way of dealing with cost shifting concerns.”

It’s not clear what, if any, legislative fix will be offered, let alone approved, this session. The Energy Committee meets Tuesday to begin figuring that out.

Solar advocates would like to take the opportunity to start over and craft a policy that takes into account the potential that storage, electrical vehicle charging, and other energy advances will become common and part of any solar configuration.

They would also like to see caps on deployment of other solar programs – such as shared solar – removed. And to put to rest the notion of a cost shift that will raise electric rates, they have long argued that Connecticut needs to conduct what’s called a value of solar study, or at least collect the findings of many studies that have already been done. Those studies assess the benefits of rooftop solar for everyone on the grid: lower greenhouse gas emissions, combating climate change, less wear and tear on the grid’s infrastructure and more.

“Even more clear in the last nine months is that the policy (approved last year) is fatally flawed and this rushed process that it set in motion is also badly flawed. And it’s headed towards badly flawed outcomes,” said Chris Phelps of Environment Connecticut. “Let’s pause that process and urge legislators to come up with a thoughtful policy. There’s no stakeholder who likes this.”

The direction from the Lamont administration has been clear, said Acadia Center Connecticut Director Amy McLean Salls.

“I don’t understand why, in my opinion, we’re regressing back to a place where we are not paying attention to Lamont administration goals,” she said. “We need to be moving forward here and fixing the problem.”