The state of Nevada’s rapidly growing residential solar-power industry ground to a halt in January 2016, as public utility commissioners approved a new rate structure that effectively erases state-level incentives for rooftop-solar installations. While the move is unique in its impact—installer SolarCity almost immediately laid off 550 employees in the state—it also is emblematic of options being discussed by utility regulators across the country and could have some wondering if residential solar power might become a victim of its own success.
The Nevada decision came less than a month after the U.S. Congress included an extension of the 30 percent federal investment tax credit (ITC) for residential and small commercial solar-power installations. While solar advocates cheered the extension, the move could put more pressure on utility regulators to rethink net-metering plans that compensate solar-panel owners at retail prices for the electricity those customers sell back to the grid.
“The tax credit is likely to sustain demand for solar, so it is a concern now,” said Autumn Proudlove, a senior policy analyst with the North Carolina Clean Energy Technology Center. The center created and manages the Database of State Incentives for Renewables and Efficiency (DSIRE), a national registry of state-level programs for boosting energy efficiency and the adoption of solar, wind and other renewable technologies.
“Utilities are concerned about cost shifts occurring,” Proudlove said.
The rapid success of solar adoption in a number of states means utilities are beginning to meet the maximum connected capacities required under previous rate agreements. With those “aggregate caps” met, many utilities are pushing back on calls to add yet more rooftop solar to their distribution grids.
The ruling by Nevada’s public utility commission (PUC)—which was strongly supported by NV Energy, the state’s leading electric utility—is unique in that its new rate structures will raise connection charges and reduce payments to all residential customers with solar panels, not just those who add panels after the ruling’s effective date. In other words, the 17,000 customers who invested in panels with the understanding of a certain rate of return have had their expectations upended. As of this writing, affected customers had filed a class-action lawsuit against NV Energy, and this particular provision was up for PUC review.
While other states’ changes haven’t been retroactive, PUCs have begun shifting rates for new connections once aggregate caps have been met. Hawaii now only reimburses new solar customers at the wholesale power rate, which is the rate the utility would pay commercial electricity generators. Last year, Salt River Project (SRP), a public utility serving the Phoenix area, reduced reimbursement rates and imposed a demand charge, similar to what large commercial customers pay, on new solar-power customers.
That move generated a lawsuit by SolarCity, claiming SRP “designed the new terms to make rooftop solar uneconomical, to exclude competition, and to punish consumers who want to adopt rooftop solar,” according to company spokesperson Nate Watters.
“All of the significant solar markets and states are looking at these issues with an eye toward the future,” said Galen Barbose, a research scientist with the Lawrence Berkeley National Laboratory whose work is focused on electric-utility rate design and the economics of residential solar.
Not all states are seeing such adversarial reactions. In Massachusetts, for example, at least one of the state’s major utilities has hit its cap for systems over 10 kilowatts (kW). (Residential-scale systems are exempt from that state’s net-metering calculations.) As a result, a net-metering task force has developed recommendations that the state’s legislature is currently considering. In New York, net-metering rates are being considered part of the state’s larger, forward-thinking “Reforming the Energy Vision” effort, which is taking a comprehensive look at a range of current and proposed distribution-system technologies.
Solar-power advocates argue that simply reducing the rate of compensation for electricity produced by rooftop panels to that of commercially generated electricity ignores value that localized generation can add to a distribution system.
“They would say there are unique values that come with these smaller scale, distributed systems,” Barbose said. These advantages could include reduction in line losses, because these systems are closer to where electricity is actually consumed, and deferral of capacity upgrades to local distribution equipment. Of course, there is the societal value of reduced carbon emissions related to electricity generation.
While net-metering debates are most prevalent in the states in which solar has gained the largest market shares, both Proudlove and Barbose see these fights as coming attractions for battles sure to arise as other states approach their own net-metering caps.
“I think the issues underlying these debates are really fundamental to some basic changes” coming to the electric-utility industry, Barbose said.
With utilities all regulated at the state level, a consensus solution, or set of solutions, has yet to arise.
“The next evolution might become some kind of convergence coming to how states address this issue,” he said.