In case you missed it, the fight for solar power’s future has begun.
Solar has experienced a remarkable transformation, moving from a niche technology to one that has transformative power for the electrical grid. But like any new, disruptive technology, solar power has its detractors. The latest hurdle for the solar industry is an emerging battle over net metering programs.
Like all distributed generation, solar relies on net metering to facilitate a connection to the electrical grid. In effect, buildings with solar systems use the grid as a giant battery, adding power when the sun shines and taking power when it doesn’t. Net metering programs basically allow the meter to spin in both directions: solar power produced during sunny days can “net out” electricity used during dark or rainy periods. Without net metering, solar — or any other distributed form of renewable energy — just isn’t economically viable.
Net metering doesn’t just happen on its own: these are regulatory programs established to encourage solar and other distributed energy systems by giving them an efficient and fair mechanism for connecting to the grid. Most states (42, plus D.C.) have implemented some form of net metering. As solar grows, these programs are increasingly under attack. They are also hitting artificial “caps” established as an early compromise.
Take Massachusetts. Each utility in the state has a cap on how much solar capacity it can connect under the net metering program (these caps apply to commercial projects, but not to individual homes). During 2015, utilities began to reach their net metering caps, significantly slowing solar installations in parts of Massachusetts, stalling several large projects, and putting the industry into a holding pattern. This is no small problem: the solar energy industry in Massachusetts employs over 12,000 people, and the state’s clean energy sector is valued at $11 billion annually. But in the face of opposition from some of the state’s utilities, the legislature has yet to raise the net metering caps, leaving Massachusetts’ net metering program in limbo.
Critics of net metering say that these programs allow solar customers to use the electricity grid as a “free” battery, getting the benefits of reliable power without paying for the costs of maintaining the grid, shifting costs to other consumers. This argument has some merit. On the flip side, the true value of solar power is often much higher than standard electricity prices because solar panels typically generate power when demand — and prices — are highest.
Some utility companies also oppose net metering on economic grounds: in effect, they are losing customers to solar, while gaining “competitors” in the form of many tiny power plants. Faced with significant competition from Solar City and other installers, Warren Buffet’s NV Power led the push against Nevada’s net metering program, arguing that solar was over-compensated and damaging its business. Despite overwhelming support among Nevada voters for the net metering program (about 75%, across all parties), Nevada rolled back its net metering program in a dramatic fashion. The fallout was immediate. Elon Musk’s SolarCity fired 550 workers, while two other large solar installers (Vivant and Sunrun) have announced plans to close their Nevada operations. Several lawsuits are pending.
In sharp contrast to Nevada, Maine lawmakers have recently discussed a unique form of net metering that would compensate solar power producers based on the actual “value of solar.” Right now, Maine utilities compensate solar owners at a rate of 13 cents/kilowatt-hour, which is roughly the retail price of power when purchased from the utility. But a study conducted by the Maine Public Utilities Commission found that the actual value of solar power produced in Maine is 33 cents/kilowatt-hour. In addition to displacing expensive “peak” power, the study cited lower air pollution, energy diversity, and reduced need for new power plants as reasons why solar power is worth more.
There is a middle way. Around the country, states should consider modifying their net metering programs to eliminate caps, compensate solar owners by paying them a “value of solar tariff” based on the true value of solar power, and allow utilities to charge a fair monthly connection fee to solar customers. This system would encourage the continued growth of solar while addressing the primary economic concerns related to net metering.
There are other technological issues to address, such as how to balance and manage the electrical grid as more distributed generation comes on line. But right now, across the country, we are faced with are two choices: embrace the dawn of a new, cleaner, energy system or turn our backs to the sun. My advice? Enjoy the sunrise.