In net metering talks, Vermont ideals clash with ratepayer realities

  • A solar panel during a ribbon cutting ceremony for a new solar array on Friday, Sept. 22, 2017, at the Elizabeth Mine site in Strafford, Vt. The solar array takes up 27 acres and straddles Thetford and Strafford. (Valley News - Charles Hatcher) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

Published: 11/16/2019 10:27:26 PM

MONTPELIER — Vermont officials want to restructure the way solar power producers are reimbursed for their electricity, saying the existing system rewards the wealthy and burdens most ratepayers unfairly.

Net metering, a system that pays corporations and individuals more for their renewable power than the retail cost, has triggered a burst of solar installations in Vermont, from almost nothing in the early 2000s to more than 300 megawatts today — enough to power roughly 60,000 homes.

The number of new net metered solar installations has leveled off over the past two years, but Vermont has some of the highest numbers of small-scale power generation compared to electricity usage in the country.

Nationally, Vermont is ranked 25th for total amount of solar installed in-state.

Despite the drive to have more renewably sourced energy and reduce the use of fossil fuels, the state Department of Public Service thinks the payment Vermonters can now receive for installing residential solar should be cut almost in half, largely to prevent cost shifting to other ratepayers.

A system of ‘above-market rates’

The Vermont Public Utility Commission, the three-member quasi-judicial panel that regulates utilities, opened a formal review in March of the net metering rule, seeking to streamline its approval process and clarify previous rule changes.

Net metering — enshrined by the Legislature in 1998 — allows homeowners and businesses who install up to 500 kilowatts of renewable energy to offset the electricity they use with the power they produce and, if there is extra, get paid for power going back to the grid.

The vast majority of net metering projects in Vermont have been solar.

Proponents say net metering has promoted the construction of in-state solar generation, helping meet the state’s emissions reduction goals, reduce peak demand and support a thriving clean energy economy.

Vermont utilities are subject to a renewable energy standard, which requires utilities to procure 75% of their electric sales from renewable sources by 2032, with 10% of that coming from in-state, small-scale generation.

Lawmakers are considering bumping the renewable energy standard up to 100% while increasing the amount of in-state generation utilities must procure.

But critics of Vermont’s net metering system say it disproportionately burdens regular ratepayers while rewarding the wealthy and large corporations such as the Killington resort. The state’s largest ski area, owned by the Utah-based POWDR, generates solar energy on its rooftops and in fields in Addison County and sells it back to the electric utility at higher-than-market rates.

Vermonters for a Clean Environment, a small Danby, Vt.-based nonprofit run by activist Annette Smith, said in a PUC filing that large arrays that do not serve local customers benefit “wealthy investors with high passive income” seeking to take advantage of tax credits.

“This rarely disclosed practice is enriching the wealthy at the expense of ratepayers who are paying the above-market rates given to net-metered projects,” it wrote.

In 2011, Vermont passed a law setting net metering compensation at 19 to 20 cents per kWh depending on the size of the system. After a few subsequent reductions, net metering compensation for new systems dropped to around 14 cents to 18 cents this July.

Last year, the average cost for wholesale electricity purchased from grid operator ISO New England was between 4 and 5 cents per kWh.

The Department of Public Service thinks the significantly higher payment for net metering is no longer needed.

Cost shifting to ratepayers

Adjusting the system will be a long and complex task.

While the PUC initially focused its proposed changes on streamlining the approval process and clarifying what a “preferred site” means for solar developers, the commission decided this summer to also review how net metering is compensated. One of the goals of the net metering statute is that the program not “shift costs” to non-net metering customers.

In August, the PUC asked utilities, solar companies, state agencies and other interested parties to answer specific questions about costs and benefits of net metering and criteria for assessing preferred sites. Comments were filed this month by electric utilities, multiple solar companies, trade group Renewable Energy Vermont and nonprofit Vermonters for a Clean Environment.

Washington Electric Cooperative, which serves 11,460 customers in rural north-central Vermont, estimated that net metering cost non-participants $798,508 in 2019. The state’s largest electric utility, Green Mountain Power, estimated that the 263,515 MWh of net metering generation installed in its customer territory will lead to $33 million in cost shifting in 2020 — equivalent to 5% of its total annual cost of serving customers.

In testimony, the Vermont Electric Cooperative estimated that the existing compensation rate will cost it about $2.5 million more than the power is valued. That difference is expected to be $2.3 million in 2020.

However, Norwich Solar Technologies, a commercial and municipal solar developer, takes issue with utilities’ claims that net metering is costing customers, noting in a filing with the PUC that Green Mountain Power’s power supply costs have actually decreased by $33 million in the past six years, factoring in bill credits for net metering customers.

Both utilities and state officials say there’s now an unfair cost shift associated with net metering. By analyzing the number of residential net-metered solar arrays per household in towns around the state, the state determined that residents of higher-income towns are more likely to have solar panels than those in lower-income communities.

“This inequitable distribution of the benefits of net metering makes the cost shift to non-participating customers more problematic,” the department said in a Nov. 1 filing.

In that filing, the Public Service Department proposes allowing net metering customers to net out their consumption and generation on a monthly, not annual, basis. Excess generation fed onto the grid would be compensated through a bill credit at a 10-year price of $0.09 per kWh.

The department says that the “current compensation structure encourages significant over-generation” during the summer, when wholesale electricity in New England is relatively cheap and clean.

Solar growth levels off

Since 2012, Vermont’s solar generation has expanded dramatically, with much of the growth coming from net metering, according to installation data reported by utilities to grid operator ISO New England.

In 2010, Vermont had a total of 5.06 MW of net metered solar installed; in 2018, that figure had increased to 196.21 MW.

That expansion has created an industry of solar companies like SunCommon and Encore Renewable Energy, which have grown rapidly in recent years by installing solar arrays. The Waterbury, Vt.-based SunCommon, Vermont’s largest solar installer, has 160 employees and is expanding geographically, recently acquiring a business in Rhinebeck, N.Y.

State officials want to move carefully, mindful they could damage a fast-growing industry that employs an estimated 6,000 people in Vermont.

“We do have concerns about just changing the structure entirely and essentially putting thousands of people out of work,” McNamara said. “Those are good jobs, so the department is definitely concerned about a very abrupt change that would have pretty significant impacts.”

Starting in 2017, the amount of new metering solar capacity installed started to level off and 2018 saw the first decline in the history of the Vermont program.

SunCommon has seen its own Vermont business level off, though it’s still seeing growth at its outpost in New York state, said co-founder James Moore.

The PUC, at the direction of the Legislature, significantly overhauled net metering in 2017, in part to slow down solar development in the state.

One of the major changes was that systems larger than 150 kW must be built on “preferred sites” — such as landfills, gravel pits, quarries, brownfields and parking lot canopies.

That change and a slight decline in net metering compensation last year contributed to the recent decline in annual installed solar capacity, according to solar developers and the state.

Moore said SunCommon supports the reduction of the net metering benefit.

“I actually think that’s good and appropriate,” he said.

Reducing power costs for everyone, he said, will ultimately promote more environmentally sustainable choices.

Decline of community solar

One sector of net metering that has been particularly hard hit by rule changes in the past couple of years: community solar.

Around five years ago, some solar companies in Vermont started developing group net metering projects that allow Vermonters who rent apartments or have unsuitable properties for solar to pay into a remote solar array and receive credit on electric bills.

A 2018 report from Vermont Law School described community solar as an “important avenue for participation” in solar projects for low- and moderate-income Vermonters.

“Both the lower cost and the ability to buy fewer panels help make community solar more accessible to low-income individuals so they can reduce their electricity bills and reduce their carbon emissions,” the report said.

Moore, of SunCommon, said the company started offering community solar in 2014 and had around 700 participating households. But changes to the net metering rule and increased permitting costs have stopped SunCommon from pursuing new community solar projects in Vermont.

One major change disallowed solar arrays over 150 kW on farm fields unless the landowner was using more than half of the electricity generated. And last year, Dummerston, Vt.-based community solar firm Soveren Solar closed up shop.

“True residential community solar was kind of collateral damage when the PUC made changes to Vermont’s net metering program a couple years ago,” Moore said, whereas “really big arrays that had a single participant like a town or a big business could still move forward because they had a different economy of scale.”

Some Vermont solar companies are still developing larger net metered solar projects for businesses, municipalities and school districts. Last year, lawmakers passed a law, Act 81, that raised the cap of net metering projects for schools from 500 kW to one megawatt.

But virtual solar projects for businesses and other entities have taken a hit as well, developers say.

Gregg Beldock, CEO of Bullrock Corp., has developed over 30 MW of solar projects in Vermont, mostly for commercial clients. He used to employ hundreds of people in Vermont; now, due to declining reimbursements and other rule changes, he has moved almost all of his solar development over to New York.

“If you have high rates on day one … and then you change those rates and you don’t expand the size of the project you can build, you limit the size of the project, you’ve now created a reverse economy of scale,” he said, adding later, “Putting individual solar on everyone’s households, it’s a nice ethos … but it’s not an efficient way to become renewable.”

Beldock also thinks regulators erred in capping the total amount of net metered solar a single entity like a hospital or business could obtain.

Is net metering necessary?

While Vermont has a goal of reducing greenhouse gas emissions, they have actually been rising in recent years.

Solar developers say net metering is crucial to curbing emissions.

Williston, Vt.-based AllEarth Renewables said in a PUC filing that a “truly electrified, renewable energy-powered economy will require a vast increase in electric demand and the generating facilities needed to meet that demand.”

But electricity only accounts for 10% of the state’s greenhouse gas emissions — far below the national average of 28%.

The bulk of the state’s emissions — almost 70% — comes from transportation and heating. In a rural state with long winters, lowering emissions from those sectors has proven difficult. Agriculture, meanwhile, contributes to 11% of the state’s emissions.

The Department of Public Service argues the higher cost of net metering actually holds Vermont back from meeting climate goals, which hinge on switching from fossil fuel-powered vehicles and heat to electric alternatives.

“Given that customers are much more likely to switch to electric technologies if the economics favor this decision, the cost of electricity will have a significant impact on the pace of electrification,” the department said in its Nov. 1 filing.

Yet Vermont does need more in-state renewable generation to meet requirements of the renewable energy standard — a lot of it.

As of the end of last year, Vermont had 306.30 MW of solar installed, according to grid operator ISO New England. If utilities were to meet their in-state renewable requirements, that would require 345 MW of additional in-state energy generation to be installed by 2032, according to state regulators.

There is no requirement what the mix of renewables must be to comply with the requirement.

“We fully expect that net metering would be a component going forward,” said McNamara, of Public Service Department.

Utilities have started to partner with developers to build their own solar projects, in part to meet the renewable energy standard.

While new net metering installations have declined in recent years, 2018 saw the largest amount of solar installed by utilities to date, according to a report from the Solar Energy Industries Association.

In the past few years, Green Mountain Power has built multi-megawatt solar arrays paired with battery storage in the Vermont communities of Essex, Ferrisburgh, Milton, Panton and Rutland, which it says saves customers money by allowing the utility to draw on stored energy during summer peaks.

And Vermont Public Power Supply Authority has been working with its member municipal utilities to build solar in their customers territories, said Ken Nolan, the authority’s general manager, in an interview this summer.

“They’re under great pressure to build these projects to avoid the future impact because the renewable energy standard standards, they start out fairly low … but it ramps up quickly,” he said.

What’s next?

State Rep. Sarah Copeland-Hanzas, D-Bradford, said in an interview in September that the Statehouse’s Climate Solutions Caucus will introduce a bill next session to require utilities to procure 100% of their electricity from renewable sources, with a greater share coming from in-state generation. As it stands, electric utilities meet a large portion of the renewable requirement through buying out-of-state renewable energy credits.

And while he supports continued reduction in compensation rates for distributed electricity generation, Moore, of SunCommon, said he hopes to see Gov. Phil Scott’s administration reduce the permitting hurdles that have been put in place for larger renewable systems.




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