Editor’s note: This op-ed is by David Hallquist, CEO of Vermont Electric Cooperative.
Vermont loves solar. As you drive around the state, solar installations — large and small — are popping up everywhere. Tourists comment on the proliferation of panels, an advertisement to Vermont’s commitment to the environment. A recent report from Environment America shows Vermont to be ninth in the nation for installed capacity (21st in terms of actual production).
Like other states that are experiencing high levels of solar adoption, Vermont is in the admirable position of showing that we can establish effective policies that help us to reduce our carbon footprint. At the same time, we find ourselves in new territory. We are learning firsthand that along with the benefits associated with the adoption of renewable energy, many challenges emerge. This is the time to honestly and fairly address these emerging issues so that we can take a smart, strategic and sustainable approach in the future.
One area that is due for evaluation is called the net metering policy. This enables utility customers to generate renewable energy electricity (rooftop solar panels, for example) while remaining connected to the electric grid. Net metering customers can offset utility bills by using the electricity they generate, but if the electricity they generate is less than what they need, they rely on the utility to fill in the deficit. If they produce more than needed, the utility is required to purchase all excess electricity at premium rates.
In Vermont, the Legislature has established a cap for net metering. Utilities are required to interconnect net metering projects until their combined load is 4 percent of the utility’s peak load. Today, many utilities, including Vermont Electric Cooperative (VEC), have hit the cap or are nearing it, but there is no legislative or regulatory provision for utilities to accept additional net metering without putting ratepayers at risk.
On average a net metering solar customer produces electricity 4.1 hours per day. The other 19.9 hours they are receiving power from their utility. They are also using the grid for the entire 24 hours as they push power back onto the grid during the production hours.
At first glance, it might seem that the solution is simple – just raise the cap. But, to do so without fairly evaluating the benefits and costs, would do a disservice to many Vermonters. The reason is that a utility’s net metering customers are being cross-subsidized by their non-net metering customers.
Net metering operates under rules in which utilities must pay generators high, incentivized credits for the power they produce. Under the current rules, generators are able to use these credits to offset the service charge on their bills which is used to offset the fixed costs of operating the grid. In other words, they enjoy the benefit of being connected with the grid, but do not always have to pay for it.
To put it in perspective, on average a net metering solar customer produces electricity 4.1 hours per day. The other 19.9 hours they are receiving power from their utility. They are also using the grid for the entire 24 hours as they push power back onto the grid during the production hours.
While this is a question of fairness and equity for all ratepayers, VEC serves a territory that has a high percentage of low-income residents; some of whom are giving up basic needs in order to pay their electric bill. For those members to have to pay extra to support net metering is an unfair burden.
While incentives and subsidies have played an important role in promoting the adoption of solar in Vermont, it is time to evaluate how much longer they will be needed. In a competitive marketplace where the price of solar installations is plummeting, it may no longer be necessary to provide them.
The price of solar is now $3/Watt installed. Home Depot offers a 10kW kit for $22,500. Hire an electrician and the price will be around $2.50/Watt installed. The Department of Energy’s Sunshot initiative is to drive that price to $1.50, and I believe they will get there.
It is important to recognize that there are environmental and economic benefits associated with net metering that are not captured by electric rates. Determining how to account for these benefits has been a long-standing challenge with rate-making policies at the local and national level. Rate-making is done from a least cost planning standpoint and there is a reluctance to raise rates to address other concerns. If it is the will of Vermonters to continue to offer incentives and subsidies, this is an issue that can be resolved through legislation and regulation.
Vermont’s net metering legislation has been effective, and along with other local and national policies, has accomplished the goal of creating a competitive environment that would drive down the cost of solar to the point that the marketplace can take over. We have reached that point. VEC proposes that we can create fair policies and the high rate of solar installations will continue. Solar installers will have to face a competitive marketplace and VEC believes that will be a good thing.
