South Carolina Legislature Considers Step Backwards in Effort to Reform Solar Subsidy Scheme

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Posted by Paul Blair on Wednesday, March 21st, 2018, 1:17 PM PERMALINK

In 2014, the South Carolina legislature unanimously passed Act 236, a bill that phased out some of the market-distorting solar subsidies in the state. On top of very generous federal tax credits (30 percent, dollar-for-dollar reduction in income tax liability) available to rooftop solar consumers, many states require utility companies to buy the excess power generated by solar panels at an artificially high cost through a process called net-metering. In many cases, solar is simply a subsidy-based business model. Act 236 partially addressed this issue and was signed into law without a single no vote. A bill filed this year, however, would take a significant step backwards for that reform and should be rejected by the legislature.

The retail electricity rate charged by utilities includes their costs of maintaining and building the grid through investments in poles, wires, meters, and other infrastructure that make the electric grid reliable. When private rooftop solar consumers are credited at the full retail rate of electricity, however, these consumers avoid paying for their cost of grid maintenance and use.  At a retail rate of payment, solar consumers are paid as if they’ve either invested in the grid or aren’t using it, which simply isn’t the case. The result of a retail rate payment scheme is an inevitable cost shift to those consumers without private rooftop solar.

House Bill 4421 would lift the cap on net metering and mandate a retail rate of compensation. In a letter sent to lawmakers this week, ATR President Grover Norquist explained: 

“HB 4421 reverts to an unfortunate time where the cost shifting inherent with the net metering payment scheme was the status quo. This bill penalizes retail electric suppliers, by preventing cost recovery through the ratemaking process, all in an effort to further subsidize solar in South Carolina.

The electricity market is complicated. What’s simple, however, is the importance of protecting electricity consumers from the cost shifting which occurs when some favored consumers who use rooftop solar for electricity generation are paid a high rate for their electricity generation which does not factor in their use of the grid or the maintenance costs that go into ensuring their use of the grid is possible.

ATR opposes HB 4421 because it takes a big step backwards for a favored electricity source and forces most of the rest of the market to subsidize solar use.”

The full letter can be read here. 

Photo Credit: Flickr

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