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Legislature Should Rein in Solar Subsidies

Posted on June 1, 2015

In the not-to-distant future, up to 15 percent of your electric bill’s distribution charge could be used to pay for the solar panels on your neighbor’s house.

solarpanels.smallThat’s why a Task Force created by the Massachusetts Legislature is recommending changes to a Bay State solar program that is growing exponentially faster than similar initiatives in other states. Associated Industries of Massachusetts served on the so-called Net Metering Task Force and will today urge lawmakers at a public hearing to use the report as a roadmap for a significant overhaul. 

The outcome of the debate over solar energy subsidies has tremendous implications for the economic future of the commonwealth. The current program, left unchecked, will add an estimated $4 billion between now and 2020 to the electric bills of employers and citizens who already pay some of the highest energy costs in the nation.

While it is understandable that solar energy installers and even some participants want to keep the status quo, virtually all the savings (except for wholesale fuel costs) attributable to solar installations are basically a transfer from non-participating ratepayers to those who have solar, increasing costs for those who may not be able to take advantage of solar programs. The viability of the program depends on this inequity. If everyone took advantage of solar programs, there would be no ratepayers left to pay the cross-subsidy.

Additionally, as solar programs increase, there are fewer customers to pay the cost associated with maintaining the distribution and transmission system, which is still required to be ready willing and able to serve the customer when the sun is not shining. Solar customers also fail to pay their fair share of social costs embedded in distribution rates, causing a massive shift in who pays for programs that serve low-income customers.

Here are some important points from the Task Force report that should serve as a roadmap for any net metering legislation:

  • Reducing the cost of solar programs and electricity should be the priority: Massachusetts ratepayers are not only spending an enormous amount of money for solar power, we are spending at rates double that of any other state, including some nearby. Bring unsustainable costs in line with other state programs.
  • Competition in solar procurement will drive down costs: The current method of purchasing solar does not rely on the competitive market, which drives costs lower and allows ratepayers to take advantage of the declining costs of solar installations. For example, recent land-based wind contracts that were procured competitively under Section 83 of the Green Communities Act have lowered the cost of energy because competition reduced the cost of these projects to below wholesale electric rates. The same can be done in the solar market.
  • Those who are still “Connected” to the grid must pay their fair share of maintaining the grid that they in fact rely upon: The notion that those who use solar power are not using the electric grid is a myth. Even those who use solar for all their electricity needs rely on the electric grid to supply power when the sun isn’t shining. The cost of maintaining the grid, and backup power for the solar users, is not currently paid by the solar user and this cost is basically added to everyone else’s bill. In addition, those who net meter to zero (and those who receive rebates), are not paying any social costs embedded in rates, including low-income reimbursement, energy efficiency, and several other programs.
  • There should be no grandfathering of the current program when a new program is enacted: Any promises made about the sustainability of the current rebates and financial incentives were made by salespeople and not by the legislature or DPU.  There was never any guarantee given to solar users that the current program would continue to be as lucrative forever. Therefore, the current participants should immediately be brought under any new system.
  • The current net metering cap should not be increased until a new solar program is developed that is cost-effective and sustainable: The current cap has been hit in some utility territories. This cap was enacted by the legislature for the simple reason that is was needed to contain costs. Therefore it should not be raised until a new program is enacted. Additionally, contrary to reports of the demise of the solar industry, there is still some room in the caps in some territories and small solar systems are not under any cap. Raising the cap without reform will imbed millions of dollars into the long-term rates of ratepayers and make the situation worse. 

The Net Metering Task Force Report contains clear data that shows the current system is working best for solar developers and investors at the expense of business (and residential customers) trying to build and expand their businesses without the benefit of overly generous cross-subsidies.