Utilities warn solar subsidies could mean higher electricity bills for everyone

By Jason Hopkins

Electric utilities in Vermont are speaking out against the state’s solar subsidies, calling the current rules needlessly expensive for companies and ratepayers.

Vermont regulators are rolling back subsidies used to promote solar development following months of outcry. The issue centers around net metering, a program where owners of solar installation are credited for the excess energy they send back to the grid. This program — intended to promote pro-environmental policies by expanding renewable energy — is controversial because it mandates utilities credit panel owners above market rates. The process ultimately forces utilities to charge higher prices for electricity, even for ratepayers who do not own solar panels and are not involved in net metering.

Lou Varricchio

Net metering, a system that began to grow in the 1980s, became a popular way to promote renewable energy. However, as solar panel ownership grew to be more mainstream, the cost of propping up the solar industry has become more uneconomical for state governments.

“We want to serve our customers as best as we can and give them quality, reliable power for the lowest price we can — and net metering doesn’t really help us accomplish that mission,” Mike Sullivan, general manager of Hardwick Electric, explained to Vermont Public Radio. Sullivan’s company is a publicly owned electric utility that serves 4,300 customers across Vermont.

Hardwick Electric, for example, must credit some net-metered installations at around 17 cents a kilowatt hour. Sullivan pointed out that this rate is twice the cost of a solar project his company is making on its own.

“It’s right here in our grid, made locally, and it saves all our ratepayers money instead of driving all our ratepayers’ expenses higher for power, which is what net-metering does because it’s so heavily subsidized,” he stated.

Sullivan is not the only utility leader who has voiced concerns. During a hearing with Vermont’s Public Utility Commission in August, other utility executives spoke bemoaned expensive net metering and the ramifications it was having on their business.

Regulators began to take notice. In a May press release, the Public Utility Commission announced it was lowering rates for numerous net-metered installations, explaining that the program was becoming too expensive.

“These financial incentives also make net-metering the most expensive of Vermont’s renewable energy programs because the utility is essentially ‘buying’ the net-metered output at substantially more than market rates for comparable renewable energy,” the commission said in a statement. “[A] number of Vermont utilities expressed concern about the effect on rates of continued high net-metering prices.”

Many states across the U.S. are taking the same path as Vermont, with a surprising amount of reform happening in New England, a progressive stronghold. Connecticut, New Hampshire, New York, Maine, Idaho and other states have rolled back their net metering programs — with nearly all of them citing rising costs and unfair price increases as reasons for enacting change.

Net metering, a system that began to grow in the 1980s, became a popular way to promote renewable energy. However, as solar panel ownership grew to be more mainstream, the cost of propping up the solar industry has become more uneconomical for state governments. Anthony Klein — a longtime state representative in Vermont and chairman of the House Natural Resources and Energy Committee — expressed his regret in letting net metering proliferate so much under his watch.

“We made a couple of mistakes, and I take responsibility for it,” Klein told Vermont Public Radio. “This is not what we envisioned,” he continued. “We should not be bringing our utilities, our smaller utilities, to the brink of bankruptcies if that’s what it’s going to be.”

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Images courtesy of Wikimedia Commons/Public domain and Lou Varricchio
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5 thoughts on “Utilities warn solar subsidies could mean higher electricity bills for everyone

  1. Synapse-Energy, S-E, Ignored the Huge Costs of Net-Metered Solar to Ratepayers
    http://www.windtaskforce.org/profiles/blogs/synapse-energy-study-of-solar-savings-commissioned-by-suncommon

    In 2016, GMP bought 71970 MWh, at a cost of $15,699,137, or 21.813 c/kWh. GMP paid to owners about 18 c/kWh and 3.813 c/kWh was GMP costs.

    GMP had about 150 MW of BTM solar on its system in August 2018, which would have an annual production of about 150 x 8766 x 0.140 = 184,086 MWh. GMP would buy about 2/3rd of that, or 122,724 MWh. See table.

    GMP could have bought that midday electricity at wholesale prices (LMPs plus markup) of about 6 – 7 c/kWh, on almost all midday times, except on hot summer days, when LMPs likely would be higher. See graph on 15 of URL.

    Because net-metered is generated close to the user, there are other savings which amount to about 3 c/kWh, as estimated by GMP.

    So the real value of solar to GMP is about 9 to 10 c/kWh, say 9.5 c/kWh.

    That leaves a difference of about 11.793 to 12.793 c/kWh, which is rolled into rate schedules and which every ratepayer gets to pay one way or another.

    The more net-metered solar (to the happiness of SunCommon), the more other ratepayers pay.

    The additional cost paid by ratepayers, due to additional net-metered solar, would far exceed any S-E calculated savings, which primarily occur only on sunny summer days.

    S-E ignored the extra cost to ratepayers of about $15.1 million/y, which far exceeds the estimated savings of $1.3 million of the S-E report.

    S-E also ignored the cost of various subsidies, which make solar appear at least 30 to 40 percent less costly/kWh than without subsidies.

  2. As someone who put up solar 4 years ago we generate more than what we use in the summer and end up gaining credits. Those credits are used in the winter to heat our house and cut back on our propane use. Our credit rates are the same rates as we would be charged as the rate payers. I would love to be paid more than the going rate but that is just not true. Yes we got subsidies from the state and federal government to install solar. But shouldn’t we the people get some help from our government just like all those power companies and big oil get from the taxpayer’s. They make a profit for their CEO’s and shareholders, should we be subsidizing their profits with taxpayer money? Oh and by the way I lose my credits if I don’t use them within we 12 months. And the poor power companies get free electricity.

    • Re: But shouldn’t we the people get some help from our government just like all those power companies and big oil get from the taxpayer’s.

      A proverbial fallacy of relevance. The government shouldn’t ‘subsidize’ either but, rather, let the ‘free’ market determine economic success. After all, the ‘free market’ is ‘we the people’.

  3. Well la te da like thats news in vt they want you in a cave and paying the state to live there. And the flat landers enjoy the land you used to own.

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