Net metering bill would make Indiana an outlier on solar policy
As dozens of states consider adopting fees and less-favorable rates to tilt the scales against net metering, advocates say a proposal in Indiana would offer rooftop solar customers the worst deal in the country.
Senate Bill 309, authored by Republican Sen. Brandt Hershman, would end net metering by 2027 at the latest, and earlier than that for new panel installations by customers of utilities that hit caps on net metering capacity. The new rules would require customers to buy all the electricity they consume from the utility at a retail rate while selling everything they generate to the utility at a lower wholesale rate.
If the bill passes, Indiana would be the only state in the country with a “buy all, sell all” model that doesn’t credit customers at the full retail rate for the energy they consume from their own solar panels, said Autumn Proudlove, senior policy analyst at the NC Clean Energy Tech Center, which tracks net metering rules around the country.
“I don’t think that I’ve seen any other models proposed that would be less financially favorable to solar customers since most of them allow the customers to at least self-consume energy from the system,” she said.
As in other states, the reform effort is driven by utilities who say net metering unfairly forces customers without solar panels to subsidize those who have them. Environmental and solar advocates oppose the bill, citing studies from other states that show benefits of distributed solar generation outweighing costs.
Jesse Kharbanda, executive director of the Hoosier Environmental Council, says studies that quantify the upsides — like avoided costs of distribution upgrades and environmental compliance — often find the value of solar in a state is higher than the local retail energy rate. A 2015 review from Environment America and Frontier Group found that was the case in eight of 11 value of solar studies.
“There’s just no ambiguity about the fact that solar brings much more to the grid than it takes from the grid,” Kharbanda said. “And moving to a buy-all-sell-all model is completely in opposite to that.”
Approaches in other states
Though Indiana could be the first with such a buy-all, sell-all plan on the books, it’s not the first state to propose it.
Michigan lawmakers considered a similar plan before ultimately preserving net metering in sweeping energy bills that passed in late December. They also directed the Michigan Public Service Commission to design a tariff system for distributed generation, though solar advocates are concerned that process won’t account for the benefits from solar.
Other Midwestern states have also taken aim at net metering, though their approaches have been less punitive to solar customers.
Illinois considered ending net metering last year in major energy legislation that would have replaced it with a one-time $500 rebate for new solar panel owners. The plan would have compensated solar customers at a wholesale rate for generation sent to the grid, though they would still get an effective retail rate credit for the energy consumed from their own panels. The final bill retained retail-rate net metering until utilities hit a cap of 5 percent of the previous year’s peak demand.
On the other hand, Minnesota became the first state to adopt a value-of-solar tariff in 2014. The state consulted with stakeholdersand Clean Power Research to develop a method for quantifying the benefits of distributed solar.
“The legislature said utilities could run through that exercise and come up with a value of solar and offer that as the going rate instead of net metering, or they could just stick with net metering,” said Brian Lips, project coordinator at the NC Clean Energy Tech Center. “All the utilities so far have stuck with net metering.”
This option would also credit customers on a buy-all, sell-all model, though value-of-solar tariff would likely be higher than the wholesale rate and potentially higher than the retail rate.
Kharbanda said he’d like to see net metering left in place while the design of any replacement plan is left to the Indiana Utility Regulatory Commission. The state tasked the IURC with updating net metering rules in 2011, and tapping the commission’s economic and engineering experts helped avoid a needlessly contentious situation, he said.
“You had public interest groups and investor-owned utilities literally standing next to each other endorsing what came out of the process,” he said. “It makes this (legislative) effort really disappointing and isn’t really, in the end, the wise way of dealing with such a promising economic sector in Indiana”
Rules ending net metering in Nevada upended the state’s booming residential solar industry. The new plan credited customers at around the wholesale rate for energy they returned to the grid, but still credit self-consumed generation at the retail rate. The rule change took effect abruptly, though more favorable rates were later restored to existing solar customers.
‘Completely open’ to amendments
Supporters of the bill, including the Indiana Energy Association, say the 10-year buffer before the rules take place should be enough time for the industry to adapt and avoid a market shock. But Kharbanda is doubtful about the 2027 end-date the bill sets for net metering. The 1 percent of peak load cap could trigger the buy-all, sell-all model for new solar customers well before then, he said.
Indiana’s 184 solar net metering customers in October 2011 grew to 923 by October 2016, according to the U.S. Energy Information Administration. That’s still fewer than any neighboring Midwestern state. No Indiana utility is closer than a tenth of the way to filling its 1 percent cap on net metering capacity.
Hershman’s office did not respond to interview requests. Rep. David Ober, author of an identical House version of the bill and chair of the House Utilities, Energy and Telecommunications Committee, said his office “has been rather busy with foot traffic this week talking to folks about this bill.”
“Obviously they’re looking at making amendments to the bill, which I’m completely open to,” he said.
He’ll wait for the Senate version of the bill, scheduled for a Feb. 2 hearing, to come over while he learns more about both sides of the issue and considers how other states have handled it, he said. As chair, he replaced Republican Rep. Eric Koch, whose 2015 bill to abruptly end net metering never received a floor vote after it mobilized opposition from environmental groups, the solar industry, religious leaders and the Tea Party.
Ober said he’s trying to take a data-driven, collaborative approach.
“I’m new to these this issues and I hope I’ve built up a reputation as someone in the Statehouse as someone who is a little more thoughtful in trying to find what’s good policy,” he said.