In 2015, the Maine legislature passed a bill that required the development of an alternative pricing model for solar customers in the state by the end of 2016. Legislators have been working with the private sector over the past year to meet that mandate. At the crux of this debate is a policy and problem in the energy market know as net metering.
In a November 2013 article entitled “Cautionary Tale About Solar Energy” for the Maine Wire, I explained:
“When a solar customer generates more power than they immediately need, utilities pay the customer for the power that is sent back onto the energy grid. A customer’s electricity meter spins backwards and the customer’s power bill is credited.
When the sun goes down, however, solar customers need energy to keep the lights on and thanks to a well maintained power grid and power generation stations, energy flows back to homes with solar units. The utility pays a higher retail rate for the energy they get from homeowners, creating a system where solar customers aren’t paying their fair share for energy use.
The result of net metering is that traditional energy consumers end up subsidizing the use of solar power by their neighbors, as those costs are shifted to non-solar consumers. This is a problem.
The Associated Press recently reported that “Grover Norquist Supports Maine Solar Bill” without providing the whole story. ATR did weigh in on the effort to address net metering in Maine, in a letter to lawmakers on the Maine Committee on Energy, Utilities, and Technology.
ATR did not endorse a specific piece of legislation. In fact, we noted,
“The proposal to increase the cap on solar power generation in Maine over the next 5 years without substantially changing the inherent cost shifting for current customers is somewhat concerning. “
We did, however, outline our support for ending or preventing the cost-shifting inherent in net metering, which the current legislative compromise does for future consumers.
ATR’s support for specific reforms contained within a compromise (like ending any sort of net metering for customers after a specific date) does not equate to supporting every element of that compromise. This important distinction was ignored by the Associated Press.
Chris Rauscher, the director of public policy for Sunrun Inc., a massive solar company that pushes for the crony capitalism inherent in state solar energy market policies has expressed concerns with the compromise for the very reasons ATR supports elements of it. It puts in place an end to net metering, despite not doing so soon enough.
He recently explained that his company would, “continue to fight for net metering as an option in the bill. He said net metering is the best way to ensure that solar customers receive a return on their investment.”
I write today in support of efforts to address the consumer cost shifting inherent with net metering policies for solar power customers in Maine. Without this important reform – in the long term – traditional energy consumers will continue to subsidize the use of solar power by Maine customers who are not paying for their use of the energy grid.
Generous state and federal tax credits and subsidies have resulted in a large number of electric utility customers installing rooftop solar and other distributed generation (DG) power sources on their homes and businesses. Because on-site power storage remains to be cost-prohibitive, these customers rely heavily on the energy grid for power in inclement weather, at night, and when they generate excess power, which is sent back onto the grid.
Utilities are required to compensate these customers at the retail rate of power when this power is sent to the grid. As a result, rooftop solar and DG customers have their power meter rolled backwards (net metering) and utility companies are forced to pay customers at a much higher rate than it cost them to produce that energy by traditional means. The retail rate of electricity paid by traditional consumers includes the cost of building and maintaining the electric grid. In Maine, solar and DG customers are therefore not paying for their use or the maintenance of the grid.
The legislative compromise to address this problem isn’t perfect but it takes a step in the right direction.
The proposal to increase the cap on solar power generation in Maine over the next 5 years without substantially changing the inherent cost shifting for current customers is somewhat concerning. On the plus side, as new customers sign up, the contract price set by the Public Utilities Commission paid would decrease as the level of installation grows and the cost of solar installation declines. This introduces somewhat of an equitable and free market-oriented ratchet down compared to net metering policies.
The greatest benefit of the current compromise before the legislature is that if the new program is successful, net metering will not present the cost-shifting problem to the energy market for future solar customers, as it will not be available when certain benchmarks for capacity generation are met. The result is less volatility in the state solar and Maine’s overall energy market.
Americans for Tax Reform applauds efforts by the legislature to address the problems solar power generation presents to Maine energy consumers.
President, Americans for Tax Reform