by Emma Foehringer Merchant
March 09, 2020

For residential solar customers in Utah, reimbursement for the solar power that installations export to the grid is at risk of dropping precipitously.

Under a proposal from Rocky Mountain Power, a subsidiary of Berkshire Hathaway utility PacifiCorp with 915,000 customers in the state, the “export credit rate” given to new solar customers would drop from 9.2 cents per kilowatt-hour to an average of 1.5 cents per kilowatt-hour, a value that analysts say would come in well below the utility's avoided cost.

Rocky Mountain Power and solar advocates are now locked in a regulatory tussle over the true costs of solar, as the state’s public service commission considers the value for exported customer-generated power. A wide gulf separates the groups’ calculated — and their ideology on valuing the resource.

“The outcome of this docket is really going to decide the future for rooftop solar for Utahns,” said Briana Kobor, regulatory director at Vote Solar, an industry group that advocates for solar accessibility. Last week, Vote Solar presented the results of a study that valued exported self-generation in Utah at 22.6 cents per kilowatt-hour — higher than Rocky Mountain Power’s suggested value by a wide margin.

Along with determining how much consumers get paid for the power produced by solar installed on their roofs, Utah's regulatory proceeding could have wider implications for net metering struggles around the country. It may even help set precedent for valuing solar based on an extensive set of positive attributes, rather than just its grid benefits.

In recent years, net metering has met utility resistance in states such as Indiana, Nevada, Arizona and Kansas. States including New York, California and Hawaii have phased out net metering or begun the transition to more complex programs to value residential solar. The solar industry has logged wins in some of these cases but utility challenges continue. 

The calculations

Vote Solar conducted its own analysis of how customer-owned generation interacts with the grid, signing on more than 3,300 customers willing to provide the organization with their solar-system data. The group's quantification of solar value takes into account 11 economic variables, including avoided energy costs as well as environmental impacts like the health benefits of reducing air pollution. The organization also added in several benefits it was unable to monetarily quantify, such as reliability and resiliency.

In contrast, Rocky Mountain Power’s analysis includes just three categories, said Kobor: avoided line losses, avoided energy costs and integration costs.

“Rocky Mountain Power is just not looking at the whole picture,” Kobor told Greentech Media. “They’ve taken a deliberately narrow view of the benefits that solar can provide.”

A utility spokesperson told Greentech Media it’s still reviewing Vote Solar’s testimony, which includes the study results. In testimony filed with the state Public Service Commission in February, Robert Meredith, the utility’s director of pricing and cost of service, said Rocky Mountain Power based its proposed export credit price on “the actual value for exported energy as it varies across seasons…and time-of-use periods.”

The rate proposed by the utility is brazenly low, said Austin Perea, a senior solar analyst at Wood Mackenzie Power & Renewables. 

“That’s not even trying to be objective,” he said. “That’s literally lower than the avoided cost.”

Utah’s residential market, which ranks just below the nation’s top 10, has already faced hiccups in recent years.

The utility’s current export credit rate is the result of a “transition program” established in 2017. Rocky Mountain Power and solar advocates, including the Utah Solar Energy Association and Utah Citizens Advocating Renewable Energy, but not Vote Solar, agreed to bridge the switch from run-of-the-mill net metering, where a customer is charged or credited based on the net difference between electricity imports and exports, to the longer-term export credit rate. The interim rate, 9.2 cents per kilowatt-hour, equated to 90 percent of the average energy rate.

Since that agreement, residential installation growth has trended downward. Though the total number of Utah residents going solar is still increasing overall, growth dropped from 146 percent in 2016 to 24 percent in 2018, before falling further to 15 percent in 2019. In testimony filed with regulators, Kate Bowman, the renewable energy program manager at Utah Clean Energy, another industry advocacy group, also noted the state’s tax credit for residential renewables has begun stepping down, further skimming off incentives. It expires fully in 2024.

Based on the organization’s calculations of solar value, Vote Solar is calling for re-establishment of net metering. If regulators decide against that option, the group wants the new export credit rate set at 22.6 cents per kilowatt-hour, plus a fixed 20-year price for customers. Vote Solar also wants exports netted on an hourly basis, rather than the current 15-minute interval method. As Bowman put it, “As the netting interval increases, so does the complexity for customers,” which means it's more difficult to assess the value of going solar.

Above all, Kobor said the organization wants a transparent program that allows potential customers to assess the value of solar and utility compensation before they sign up.

“I want to know when I sign on the dotted line to put solar panels on my home that I have reasonable certainty of what my general program is going to look like,” said Kobor.

Rocky Mountain Power will respond to Vote Solar’s arguments with rebuttal testimony filed with regulators. Along with its average rate of 1.526 cents per kilowatt-hour, the utility wants to eliminate interval netting, which it says will allow customers to more easily match electricity generation with usage.

Quantifying solar value

Rocky Mountain Power’s low proposed rate contrasts with PacifiCorp’s broader solar and renewables targets. In a draft resource plan released in October, PacifiCorp, which serves 1.9 million customers across six states in the West, laid out plans for 3 gigawatts of new solar by 2025 and 6.3 megawatts by 2038. That includes 3 gigawatts of new solar in Utah, paired with 635 megawatts of battery storage, to come online between 2020 and 2037.

PacifiCorp's approach underscores the reality that even as many major U.S. utilities embrace large-scale renewables, some continue to throw up roadblocks for distributed, customer-owned solar systems. Scuffles around net metering and the value of solar are not limited to Utah. Kobor points to recent decisions in Montana and Idaho, where regulators deflected utility-led changes to net metering that would have eroded value for customers, handing victories to the solar industry.

Proposals to change net metering are unlikely to relent unless advocates and utilities can come to an agreement on how customer-generated solar should be valued. Kobor acknowledges there’s “a gulf in perspective” there, with advocates layering in climate and resiliency benefits and the utility sticking to more conventional considerations, like energy cost and deferral of system upgrades. Policy may have to bridge the chasm: In Colorado, for instance, a bill passed last year requires regulators to consider the social cost of carbon, a dollar value assigned to the societal damages associated with 1 ton of carbon dioxide, in its decision-making on utility resource plans.

In Utah, regulators will also have the ultimate power to determine whether the benefits of net metering outweigh its costs — the question at the core of this proceeding. Their determination of solar value won’t come for months, but Kobor hopes it will take a similarly comprehensive frame.

“It may be less traditional for a utility regulator to look at things like the social cost of carbon,” said Kobor. “[But] we’re never going to be able to capture the full benefits of investing in clean energy if we don’t think about our future.”