There is a real sense that solar policymaking in the U.S. is at a crossroads. While a large number of states have adopted renewable portfolio standards, net-energy metering, solarize programs and other measures that have successfully advanced the adoption of distributed generation (DG) solar power, the very success of these programs is prompting many stakeholders to reevaluate the way forward.
Quite a bit of the reflection is driven by public utilities that must make a profit and guarantee the stability of their electricity distribution infrastructure. At the Intersolar North America conference in San Francisco last July, Steve Berberich, president and CEO of the California Independent System Operator, said during the panel discussion that detente between utilities and solar customers is needed to move the DG industry forward.
‘Utilities should be agnostic about what customers do [with PV],’ Berberich said. ‘Also, unless customers cut the line, they need to pay for that connection.’
This essential concept underlies much of the friction that exists between companies that supply solar energy generation capacity and those that supply the infrastructure for carrying it. The benefit of net metering is that the consumer is not paying transmission costs, even though that connection must be maintained.
‘Someone has to pay for those transmission lines,’ says Scott Fenton, a partner at law firm Bowditch & Dewey LLP who represents large solar developers. ‘If I put those lines in and this other party, this developer, gets to make money by transporting energy over my lines, I'd have issues with that, too.’
Fenton agrees that some mechanism must be found by which the solar owners, large and small, pay the utility company for the use of those lines.
‘It's really not an equitable system to say, 'Hey, I'm going to use your car every day as a taxi and keep the fares, but I'm not going to pay you for the mileage on the car.'’
At the same time, the solar electricity produced by DG ratepayers is providing a value that utilities generally overlook. Minnesota has made inroads by developing and applying a value of solar (VOS) tariff, although the tariff itself has yet to be implemented. Nevertheless, the approach has been hailed as an innovative effort to incorporate science and economics into the process of rate design.
Dan Berwick, vice president of business development at Borrego Solar, was disappointed that a possible solution to the issue in Massachusetts failed along with legislation (H.4185) that would have reformed solar incentives and modified rates. One intriguing provision called for a minimum bill that would have guaranteed the utility could recoup its infrastructure costs, even from ratepayers that generate most or all of their own electricity.
Berwick believes a minimum bill approach offers a crucial advantage over VOS policies in that it is relatively straightforward.
‘I don't know if that approach can be pursued in a way that satisfies both utilities and the solar sector,’ Berwick says of VOS-based tariffs. ‘I would like to think it can be because both sides are making arguments about what is fair, and I want to think that a cool-headed, constructive and rational approach to valuing the costs and benefits of renewable distributed generation can lead to agreement.’
Berwick says it is more realistic to suppose that a VOS approach may narrow the disagreement but not resolve it. The hardest part of coming to an agreement using this kind of approach is the standard issue itself.
‘If we had perfect information about everything about the grid and every solar system, the value of solar approach would be a lot easier,’ he says. ‘But I don't think even the utilities know enough about the true economics of their systems to properly value solar, even if they wanted to.’
All that said, there are profitable avenues to explore in the development of rational and useful policies for both rate design and net metering. Ideally, such work should attempt to adhere in more detail to a core principle of ratemaking, which is cost-causation.
‘At the end of the day, everyone can agree that fair compensation is a worthy objective,’ Berwick says. ‘Right now, given the regulatory climate and the kind of engagement we're getting from many utilities, fair compensation is better captured through retail net metering than through a value of solar approach.’
Given this environment, Berwick says legislative policies are inherently less risky than regulatory ones because statutes are harder to change than regulations. For this reason, he remains hopeful that lawmakers will step back to the plate.
‘With H.4185, we were attempting to put in place a better, more stable, more efficient, more rational policy framework for solar in Massachusetts,’ he says. ‘Nothing about my belief in the value to all stakeholders – the solar sector, the utilities and all ratepayers – of revising the policy framework in that way has changed.’