Recent expansion of solar power users has increased utility bills for non-solar users, but Vermont is taking steps to stop these increases. Even with the expansion of solar in the state, utilities are still seeing increased costs to produce and distribute electricity to customers, but fewer customers are paying for the services, even though all users are benefitting from the service. The changes to net-metering by the legislature will help all energy users in Vermont.
Net-metering takes its toll on Vermont
The explosion of net-metered solar power in Vermont has sparked a lively debate in renewable energy circles, putting the future of solar under the microscope and pitting some renewable energy advocates and developers against the state’s Public Utility Commission and power companies.
Caught in the middle are Vermont ratepayers who, critics maintain, have subsidized the rapid expansion of net-metered customers, including some who generate so much excess solar power that they actually pay nothing for electricity.
“We have a broad ratepayer concern,” said Riley Allen, deputy commissioner of the Department of Public Service, speaking recently about a new rule, referred to as “Net-metering 2.0,” designed to make the rate structure more equitable.
The Public Utility Commission recently issued new net-metering rules for Vermont that has left some solar developers squawking — especially those putting up systems beyond the homeowner scale.
A look back
Net-metering has been around nationally since the late 1970s.
The premise is simple: A homeowner or business has solar panels installed, connects them to the grid, and any excess power generated by the panels is sold to a local utility at a fixed cost, offsetting the power the homeowner or business has used and lowering their monthly power bill or, in many cases, zeroing it out entirely.
And it has been successful in Vermont, creating a boom in solar projects over the last few years.
In terms of the number of permits issued, most of the net-metering program in Vermont is made up of small-scale systems under 15 kilowatts, which you see often on houses or in yards. By capacity, however, more than 80 percent of the net-metering program in Vermont is made up of the largest category of systems — those that generate between 150 and 500 kW, much like the rows of panels you see today in fields.
Next month, net-metering in Vermont turns 20.
What started originally as a small-scale effort to encourage homeowners and farms to produce at least some of their own electricity from a renewable source has become the yardstick by which Vermont now measures the health of its solar industry.
Technically, net-metering can be applied to several types of renewable energy generation: methane, hydro, wind or solar. In any case, a homeowner or business can have a system installed, tie it to the grid and the power generated will offset the power they’ve used.
But solar is by far the most utilized in Vermont.
Under state law, a homeowner’s utility has to pay a certain rate for the excess power that is fed back to the grid. Typically that rate, about 20 cents per kilowatt, was more than or close to the retail rate most Vermonters pay for power. Before its growth spurt over the last few years, net-metering was a boon to customers and utilities alike.
In fact, the energy generated by net-metered solar lowered the demand for power during peak loads, which reduced capacity and transmission charges. This was true for both the state and New England electric systems.
The unprecedented growth of solar projects and the net-metering program in the last few years — a pace unforeseen by legislators and regulators alike — has actually diminished the overall value solar provides to utilities and their customers.
“Statewide, the solar industry in Vermont has seen a pretty dramatic reduction in the amount of solar being permitted and installed, on the order of magnitude of 50 percent drop in 2017 compared to 2016,” said SunCommon’s James Moore. “The vast majority of that reduction came in those larger (150 to 500 kW) projects. There are many fewer of those happening in Vermont.”
But SunCommon, the largest Vermont-based solar company, has remained fairly insulated from any downturn. That is due in part to its size, but also to a clear focus on small projects of 15 kW or less.
“Our focus has been helping Vermonters and small businesses go solar,” said Moore.
“We employ more than 100 Vermonters here at SunCommon and all of those folks are focused on helping households and small businesses invest in our clean energy future and do their part to address climate change.”
Without Net Metering 2.0, Moore said he believes 2017 could have been an even bigger year for solar than 2016, but the Department of Public Service maintains that a balance needed to be struck.
“We believe in the sector and its part in our long-term renewable energy future, but we want to see it developed in a way that is sustainable, and can be well-absorbed into the system; not just from a grid integration standpoint, but also in fairness to other ratepayers that aren’t participating,” Allen said.
“While we hope to foster the development of a robust distributed-resource environment for independent developers, we are also mindful of the impact and implications for the broader base of ratepayers that are potentially impacted by the pace with which we pursue those ambitions,” Allen said.
Vermont depends on the largely natural gas-powered regional grid for roughly two-thirds of its power needs and by lowering the demand for power during peak load times, the costs associated with the regional grid were lower, as well.
But over the last several years, solar has penetrated the energy market so extensively that peak loads have shifted toward the end of the day, and in some instances, after dark, when solar panels are no longer converting sunlight into electricity and no longer helping power companies lower their costs.
But utilities are now paying premium retail rates for the ever-expanding net-metered solar being generated in Vermont, and they are not seeing the reduction in capacity, transmission and regional grid costs they once did.
Non-solar ratepayers have been feeling that upward rate pressure as a result. Green Mountain Power cited net-metering costs as one of the reasons for its 5 percent rate increase this year.
According to its 2016 report, the Public Service Board conservatively estimated that net-metered solar power costs Vermont ratepayers $21 million a year more than if that power was bought elsewhere. In fact, a larger solar project that doesn’t qualify for net-metering is actually cheaper per kilowatt than a net-metered project. A moderately sized solar plant under the standard-offer program would cost ratepayers 7 cents to 9 cents less per kilowatt hour generated.
“The net-metering program is intended to offer utility customers financial incentives to develop new, small-scale renewable energy resources,” the report explains. “Renewable energy acquired through the net-metering program costs more than alternative sources of renewable energy.”
That’s a costly gap, solar watchers caution.
“Therefore, the net-metering program has an important, but limited, role to play in realizing the state’s renewable energy goals,” the report goes on. “Large customers should not be permitted to leverage the incentives offered by the net-metering program to deploy fleets of net-metering systems to offset their own significant power costs at the expense of other rate payers.”
Need for change
That’s where Net-Metering 2.0 comes in.
Net-Metering 2.0 lowers the rates power companies will be required to pay for new net-metered customers by roughly one to two cents per kilowatt hour for smaller systems, and closer to three to five cents for larger systems. The rate is tied to a system’s size and siting.
It also tightens loopholes on charges that net-metered customers were not paying, making it more equitable.
Several charges on a power bill are not related to the number of kilowatt hours used by a customer on a monthly basis. For instance, there are charges for “customer service,” “energy efficiency” and an “electric assistance” charge. With the rapid development of net-metered solar projects in the state, utilities were seeing the pool of customers paying those charges dwindling.
The new net-metering rule redefines those excess monthly charges as “non-bypassable,” meaning net-metering credits can’t be used to pay for those line items on a power bill — closing a loophole and preventing that pool from shrinking further.
Critics argue the rule change followed heavy lobbying of the Legislature by utility companies unhappy at the loss of revenue from net-metering. It has also raised questions about the commitment of Gov. Phil Scott to renewable solar energy programs that help combat climate change, meet Vermont’s goal to be 90 percent carbon-free in energy use by 2050, and create high-paying jobs.
Entrepreneur companies — like All Earth Renewables — argue the rule change discourages new investment in the solar industry, with some prominent players planning to leave the state. That affects development of larger projects.
Public officials involved in the energy and utility sectors said the Legislature tried to strike a balance between the need for renewable energy and savings for consumers, versus the impact on power companies that have to maintain the transmission lines and earn a reasonable rate on their investment.
Allen noted that Green Mountain Power serves 77 percent of the Vermont electricity load and reports that it is 60 percent reliant on renewable energy and 90 percent carbon free. Two of the next three largest utilities, Washington Electric Cooperative and Burlington Electric Department, report that they are 100 percent renewable, he said.