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Legislature Should Rein in Solar Subsidies

Posted by Robert Rio on Jun 1, 2015 3:08:08 PM

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.

 

Topics: Energy, Subsidy

Scrap the Back-Room Solar Subsidy

Posted by Bob Rio on Jun 23, 2014 6:30:00 AM

How did your neighbor afford to install the array of solar panels now sitting on his roof?

solarpanels.smallSimple - you paid for some of it.

And you may soon pay more for it because of a back-room deal hatched by solar panel providers and other special interests on Beacon Hill.

The House Ways and Means Committee is debating a proposed revamp of the state’s expensive solar subsidy program that would add an estimated $1.5 billion to the electric bills of employers and consumers during the next 15 years.

The bill was developed behind closed doors by state officials and organizations with a vested interest in keeping the program as lucrative as possible, including solar and clean-energy lobbyists and at least one solar installation company. Associated Industries of Massachusetts (AIM) and other advocates for electric ratepayers were excluded.

AIM enthusiastically supports the use of solar power in the Bay State, but opposes the current proposal to lift the existing cap on the subsidy, or net metering, program in specific utility territories. The rate shock caused by the measure will place a damper on the economy by increasing costs for the commercial and industrial ratepayers who currently foot 40 percent of all electricity costs in Massachusetts.

The association, in a letter sent last week to the Ways and Means Committee, urges the panel to direct the Massachusetts Department of Energy Resources (DOER) to initiate a new and transparent discussion of solar net metering with realistic timelines, realistic goals and a multitude of options, including a cap on the yearly cost of the program. The objective should be to advance renewable power while simultaneously reducing overly generous subsidies to this industry.

Net metering allows customers to receive credits to their electric bill for generating solar power.

“Net metering benefits only those who are able to install solar panels on their roofs or have some access to community solar programs. It largely excludes low-income people, renters and small businesses that do not have the appropriate land area for solar,” said John Regan, Executive Vice President of Government Affairs at AIM.

“The result is that the ‘have-nots’ will subsidize those who have the means to install these panels, a wealth transfer amounting to billions of dollars. As the program gets larger, the subsidies get larger, creating a never-ending escalation of costs to those left on the system still paying the bill

The bill would also replace a second subsidy program that establishes a market for solar energy certificates sold to utilities so they meet their renewable energy mandates, with an electricity tariff program designed to get as much as 1,600 megawatts of solar developments built in the state.

AIM’s objections to the current bill include:

  1. The troubling, non-collaborative approach that deliberately excluded interested parties from the development of the new draft.
  2. Lack of disclosure concerning the cost of the program to ratepayers.
  3. Language that eliminates oversight by the Legislature.
  4. Unclear need for the legislation.

The secretive negotiations that produced the current bill have made it nearly impossible for AIM and other organizations representing the interests of ratepayers to estimate the final cost of the expanded subsidy program. Negotiators refused to discuss the cost of the program at an informational meeting on June 11 in Boston and dismissed a question from the audience on this topic as irrelevant.

And financial data is not the only evidence missing from the proposal. The solar subsidy has often been touted as necessary to reach greenhouse gas-reduction goals, but there was no indication at the informational meeting or in the supporting documents as to the amount of greenhouse gases that would be reduced by this program or the cost per ton of greenhouse gases reduced.

“A rush to pass this legislation will touch off a firestorm of criticism from a business community forced to pick up the tab for a poorly conceived and economically destructive program.   The Legislature is being handed in the hectic final days of the session a costly measure that will set energy policy for decades to come with no protections for ratepayers,” AIM said in its letter to the committee.

 

Topics: Massachusetts House of Representatives, Energy, Subsidy

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