Russell Schiermeier graduated from the University of Idaho with a degree in mechanical engineering. But a decade ago, he bought a few hundred acres near the Snake River in Idaho’s high desert and began to farm. In the years since, his farm has grown to encompass more than 3,000 acres with crops such as alfalfa, corn and peppermint, and Schiermeier has experimented with carbon sequestration and cover cropping.
Two years ago, Schiermeier installed solar panels to power the irrigation pumps that provide essential water to his crops. “That’s kind of the rub in Idaho. We’ve got such a wonderful growing season...but we just don’t have any water,” he said.
Idaho’s solar market ranks 22nd in the nation for installations, but the agriculture-heavy state has registered a growing interest among farmers who’d like to use solar to offset electricity costs associated with pumping water.
A recent ruling from the state utility commission on net metering challenges that development, however. Under the ruling, new commercial solar customers of Idaho Power will now fall under a yet-to-be-determined retail rate, with no guidance so far on what the rate will be or when it will be set. That uncertainty is hurting solar's prospects in the state, according to advocates.
Solar still accounts for a marginal percentage of overall electricity load in nearly every state in the U.S. But net metering battles, which often pit utility companies against residential-solar advocates over the value of solar, have become increasingly common in recent years, says Autumn Proudlove of North Carolina State University’s Clean Energy Technology Center, which monitors quarterly shifts in state-level clean energy policy.
“Net metering is definitely the biggest topic right now that we’re seeing action on,” said Proudlove, the CETC’s senior policy program director. “And of that, successor tariffs are really where a lot of the focus is.”
While the CETC has tracked net metering policy since 2014, Proudlove has seen a surge in activity in recent years. By her estimate, about half of all U.S. states have or are currently considering a successor tariff to traditional net metering, a policy that determines how solar customers are compensated for the solar power they export to the grid.
This year the issue also made a splash at the federal level when a group called the New England Ratepayers Association filed a petition with the Federal Energy Regulatory Commission arguing in favor of federal jurisdiction over net metering. FERC dismissed the petition in July.
“You see a fair amount of conflict around net metering policy in various states [and] various markets. They play out a bit differently, but the overall theme is that it remains a struggle to maintain a fair compensation scheme for solar customers,” said Sean Gallagher, the Solar Energy Industries Association’s vice president of state affairs.
Idaho is one example of those struggles, but it is certainly not an isolated case. As distributed solar becomes increasingly common — Wood Mackenzie forecasts 13 percent residential solar growth in 2021 — disagreements may grow over the level at which exported solar should be compensated. Here’s a look at some of the most noteworthy recent net metering battles as 2021 begins.
In Idaho, the Public Utilities Commission has decided a few prior cases similar to its December decision on Idaho power that impact farmers and other commercial customers, including dockets from investor-owned utility Rocky Mountain Power. Another from Idaho Power pertains to residential customers. In those cases, regulators have allowed existing customers to continue receiving the legacy retail rate for 25 years while mandating a utility study on a new rate.
Because that new rate hasn’t yet been established and new customers will fall under the new rate whenever it is decided, the decisions have imposed a chilling effect on the entire market, according to solar advocates.
“It’s subject to change, and that, in many ways, is the problem,” said Lisa Young, director at the Idaho chapter of the Sierra Club. “No one can plan for that.”
Adam Young, who says his family has been farming in Idaho since just after World War II, installed two solar sites on his land last year. Young says future installations will be impossible until there’s more clarity.
“We’re in a situation where we would simply not invest in a new solar system right now, based on what we know from the PUC decision,” said Young.
Electricity used to pump water counts as one of the most significant expenses for Young's and Schiermeier's farming operations. Schiermeier went so far as to call Idaho Power his most important partner in agriculture. But without more clarity, pursuing more solar amounts to a “leap of faith” that the new rate will remain favorable, he said.
The Sierra Club and some solar companies have filed a petition for reconsideration on the decision with the utility commission.
A Rocky Mountain Power case has stirred up similar controversy in Utah, one of Idaho's neighbors to the south. The utility suggested paying customers an export rate of between approximately 1 and 3 cents per kilowatt-hour depending on season and time of day, an 84 percent decrease from current rates. Advocacy group Vote Solar, in a separate analysis, argued that solar is worth about 24 cents per kilowatt-hour.
In the fall, the PUC split those proposals, setting export rates at around 6 cents per kilowatt-hour, depending on the season. In response, Vote Solar and Vivint Solar argued that “the commission failed to carry out its statutory obligation to analyze the costs and benefits of net metering.”
Rocky Mountain Power, meanwhile, called the decision "a victory."
“While we didn’t get everything we wanted, we feel like this is a fair decision by the commission that helps reduce the subsidy to rooftop solar customers," said Joelle Steward, Rocky Mountain Power's vice president of regulation, in a statement.
Solar advocates have asked for a reconsideration of the decision in Utah. The case is ongoing.
States such as New York and California have worked in recent years to home in on the specific values and benefits that solar provides to the grid. That’s created more complicated compensation schemes, but some that numerous stakeholders believe will eventually capture solar's value more accurately.
“A lot of states...recognize that net metering has worked pretty well because it’s simple [and] it’s easy to understand,” said Proudlove. “But it’s a rough mechanism, and it’s not actually reflecting the exact value of solar energy to the grid.”
In California, still the state with by far the most installed solar, stakeholders are now embarking on a process to create a new successor tariff to the state’s first successor tariff, called “net metering 3.0.” California adopted “NEM 2.0” in 2016.
Solar advocates see solar as a valuable asset, as Vote Solar's calculation in Utah indicates. But utilities have long taken issue with a potential “cost shift” from solar customers to non-solar ratepayers that they associate with net metering. That same conflict is still at play in California. In 2016, when utility Pacific Gas & Electric moved its customers over to NEM 2.0, the utility noted that under the new program, “rooftop solar customers continue to receive subsidies that are borne by all other customers.”
A study prepared for the California Public Utilities Commission last year found that net metering “participants benefit from the structure, while ratepayers see increased rates,” though the overall program was cost-effective “from a combined participant/utility perspective.”
The picture gets even more complex when storage, a growing trend for solar installations in California especially, is taken into account.
During the NEM 3.0 proceeding, solar advocates are gearing up to prove the value of solar while advocating for a gradual stepdown in compensation, said SEIA’s Gallagher.
“Our job is to demonstrate, to the extent that we can, that distributed solar and distributed energy resources broadly…are beneficial to our customers and provide benefits to the system as a whole,” said Gallagher.
In 2020, an unlikely group of allies joined up on a net-metering agreement in South Carolina. Utility Duke Energy, along with solar advocacy groups including Vote Solar and the nation’s largest solar installer Sunrun, outlined a settlement that serves as an example of “a more collaborative stakeholder-based approach” to net metering policy, according to Proudlove.
The agreement includes time-dependent rates plus a $30 bill minimum*, a price threshold Gallagher says most solar customers in the state already meet. At the time of the agreement, Lauren Bowen, who heads the Southern Environmental Law Center’s Solar Power Initiative, said the deal “recognizes the importance of the partnerships needed between utilities, solar companies and homeowners to expand the solar economy.” SELC was a party to the agreement.
Net metering rates are often set on a utility-by-utility basis, however. And while solar companies and advocacy groups were able to find agreement with Duke, a Dominion proposal the utility unveiled in December as part of its rate case “is somewhat more challenging,” said Gallagher. It lowers compensation rates and adds a monthly fixed charge, plus a per-kilowatt subscription fee for solar customers.
In testimony on the changes, Dominion said they “are all designed to work together to ensure proper recovery and thereby reduce the associated cost shift” that utilities associate with net metering. But according to Gallagher, “It’s one of the worst solar tariff proposals we’ve seen across the country in the last several years."
Regulators are now considering both proposals. And because Duke and Dominion serve electric customers in North and South Carolina, the outcome could have ramifications in both states.
“The commission in South Carolina is now faced with two very, very different proposals,” Gallagher added. “It does create some confusion with the commission as to how they should think about these issues.”
The conflict ahead
Because net metering struggles are widespread, this overview is by no means exhaustive. Proudlove also mentioned successor tariffs under consideration in Kentucky and Connecticut, while Gallagher pointed to a recent extension of net metering in Ameren’s Illinois territory and a decision in Michigan that lowers export rates for solar customers in Consumers Energy territory. In the third quarter of 2020, the last for which the North Carolina Clean Energy Technology Center has published data, 12 states plus Washington, D.C. had some policy action on net metering or the value of distributed generation. The center is now analyzing data for the full year of 2020.
Gallagher calls net metering “the foundation of growth” for residential solar. While utilities are increasingly establishing carbon emissions targets, the continuing conflict over net metering indicates that this embrace of renewables doesn't necessarily extend to the distributed solar policies that many see as undercutting their business models. In 2021, tensions will almost certainly persist over the value of customer-generated power.
Correction: This article originally stated the $30 bill minimum was for system sizes above 15 kilowatts. It applies to all systems.