The state of Maine makes a good case study for trying to make sense of the tug of war going on across much of America when it comes to small scale solar power for homeowners and small businesses. A recent article in the Bangor Daily News lays out the arguments for all stake holders clearly and succinctly. As usual in the course of human affairs, it comes down to money, or as the Romans would say, “Qui bono?”
Most people would probably agree with the propositon that making electricity from sunshine instead of fossil fuels is a good thing. Even the rapacious Koch Brothers and Warren Buffett would concur. But business is business, as they say. Building power plants and the grid that brings electric power to our homes and businesses costs money — lots and lots of money. The total investment by the utility industry just in North America alone amounts to trillions of dollars.
To make investors more willing to lend money to the utilities, policy makers decided generations ago to grant the industry monopoly status. In return, investors are guaranteed a specified rate of return on their money. Utility stocks are not sexy, but they are a safe investment. Today when banks are paying a meager rate of 1% a year or less, the 5 to 7 percent return guaranteed on utility stocks looks quite attractive.
Some companies sell cars. Some sell clothing or food. Utility companies sell electricity. It’s what they do. Anything that lowers the amount of electricity they sell is a dagger pointed right at the heart of their business model. No wonder they are less than thrilled when some homeowner installs solar panels on his roof and buys less electricity from the local utility as a result.
Even though the cost of solar systems has declined significantly in the last 10 years, a residential solar installation can still cost $15,000 or more. Many residential solar owners want to sell the excess electricity their system makes back to the utility. The process is known as net metering. The electric meter on the home keeps track of how much electricity flows in and how much flows out. The customer then gets a credit on the monthly bill for the amount of electricity fed back into the grid, which helps pay for the cost of the system.
The biggest bone of contention between residential solar owners and utility companies is how much the utility should pay for that excess electricity. Home owners say they should get paid the same rate they pay to buy electricity from the company. That seems logical, but the utilities contend that sort of parity does not adequately compensate them for their cost of maintaining the electrical grid.
That’s where the trouble begins. Solar power advocates point out that utilities benefit from certain “avoided costs” when they take back electricity from solar customers. They don’t have to spend money to increase the size of the grid. Plus, the community gets the advantage of electrical energy that adds no carbon emissions to the local atmosphere.
Maine is currently governed by a Tea Party governor who has made a career out of denigrating individuals in favor of the large corporate donors who paid to put him in office. The governor’s energy office cites with approval a comment by the Dirigo Electric Cooperative in a 2008 rate case before the state’s public utilities commission. It referred to net metering as “a reverse Robin Hood program, taking from those who cannot afford self-generation to give to those who can.”
The Maine Public Advocate’s Office has expanded on that argument. It suggests that state and federal solar policy largely limits the benefits of solar power to landowners with high federal tax liability. In other words, the well-to-do. The federal tax credit for solar installations is not a cash rebate but rather an offset against any federal tax due.
“If all customers bear the costs of the program, all customers should have the opportunity to participate and obtain those benefits,” the Public Advocate says. By definition, people who rent their homes are ineligible for rooftop solar systems and cannot benefit from net metering programs.
What has solar customers in Maine riled up is a fear that what happened recently in Nevada will happen to them. The Nevada PUC allowed NV Energy to unilaterally amend its net metering program. Not only did it eliminate that benefit, it sanctioned the imposition of new monthly fees for residential solar customers, making it impossible for them to help offset the cost of their systems.
In Maine, the governor’s office is making noises that suggest it would favor a similar plan, one that would limit the net metering period to three years. Assistant House Majority Leader Sara Gideon of Freeport called the governor’s suggestion a “reckless, ill-conceived plan.” Gideon sponsored a solar policy bill last session that proposed a successor to net metering and would have grandfathered existing customers for 12 years.
The heart of the dilemma is the fact that electrical grids have always been constructed on the assumption there would one or two large local generating facilities that would supply power to the community at large. They were never intended to accept input from multiple sources at the edges of the grid and are relatively inefficient at doing so.
In the final analysis, it comes down to how much economic pain each stakeholder should endure as society transitions to zero emissions alternatives to fossil fuels. If the utility companies get their way, they will put that transition off as long as possible in order to protect their economic interests. While that is rational behavior in a traditional capitalist model, it makes no sense for a world imperiled by fossil fuel pollution. Ultimately, business as usual is a death warrant for the people of the world.
The only sensible policy is to eliminate the artificial market advantage fossil fuels enjoy due to subsidies and policy considerations. Only when the cost of fossil fuels equals their true economic impact on the community will the transition to zero emissions begin in earnest. The capitalist system contains a fatal flaw at its heart. As Chief Seattle once asked, “Who speaks for the Earth?”
Photo credit: Foter