Home Climate change Will Virginia’s Residential Solar Market Survive the Coming Year? Unfortunately, the VCEA...

Will Virginia’s Residential Solar Market Survive the Coming Year? Unfortunately, the VCEA Came with a Ticking Time Bomb.

"Make no mistake, utilities hate net metering and will destroy it if they can."

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by Ivy Main, cross posted from Power for the People VA

When the Virginia Clean Economy Act became law in 2020, solar advocates celebrated. In addition to creating a framework for a transition to a zero carbon electricity sector by 2050, the VCEA and sister legislation known as Solar Freedom swept away multiple barriers to installing solar in Virginia. Among the new provisions were some that strengthened net metering, the program that allows residents, businesses and local governments who install solar onsite to be credited for excess electricity they feed back to the grid.

Currently, the law requires that customers of Dominion Energy and Appalachian Power be credited for the electricity they supply to the grid at the full retail rate for electricity. The credit is applied against the cost of the electricity they draw from the grid at night. The policy makes solar affordable and supports small businesses across Virginia.

However, the VCEA came with a ticking time bomb. It provided that in 2024 for Appalachian Power, and 2025 for Dominion, the State Corporation Commission would hold proceedings to determine the fate of net metering, and in particular the terms for compensating new net metering customers.

Well, it’s 2024, and the bomb just went off. On May 6, the SCC issued an order directing the two utilities to file their suggested changes. Appalachian’s proposal is due by September 2; Dominion’s is due by May 1, 2025. The SCC will establish a schedule for each case that will include provisions for the public and interested parties to participate.

There are two important protections to note. First, low-income customers will have their choice of installing solar under either the existing rules or the new ones. Second, customers who install solar panels and interconnect to the grid before the SCC issues its final order will continue to be covered by the existing provisions for retail net metering.

For anyone who’s been on the fence about installing solar, I can’t overstate the urgency of acting now. Nonprofits Solar United Neighbors and Solarize Virginia can help you get the best deal. Also check out the excellent advice and sample quotes from HR Climate Hub.

Make no mistake, utilities hate net metering and will destroy it if they can. The more customers who install solar, the less control the utility can exercise over them — and, even more critically, the less money the company makes for its shareholders from building new generation and transmission.

That’s not what our utilities tell legislators and the SCC, though. Instead, they promote a narrative that net metering customers impose extra costs on other ratepayers, creating a “cost shift.” The idea is that residents who go solar are making everyone else pay more of the costs of the grid while they themselves rake in money with their free electricity from the sun.

This argument has raged across the country for years. Utilities often argue that solar customers should be paid for their surplus electricity only the amount of money the utility would otherwise have had to spend to generate or buy that same amount of electricity from somewhere else. This “avoided cost” can be less than one-third of the retail rate for residential electricity. (The net metering changes would also affect commercial and non-profit properties, which pay a lower rate than residential – but still well above avoided cost.)

With a payback period of nine to 15 years in Virginia, residential solar is a reasonable investment with retail rate net metering, but it’s hardly a get-rich-quick scheme. Brandon Praileau, the Virginia program director for Solar United Neighbors, said in an email that lowering the net metering rate would eliminate the energy savings that homeowners see from solar today.

“It is the full retail 1:1 value of solar that allows solar to not be a boutique purchase that only fits a certain demographic but something that every homeowner can benefit from,” he noted.

Praileau added that the loss of net metering would also hit Virginia’s solar installers hard and lead to job losses, something I confirmed with industry members. Russ Edwards, president of Charlottesville-based Tiger Solar, says any devaluation of solar would have a “significantly adverse” impact on local companies like his that serve the residential market.

But the “cost shift” argument doesn’t actually depend on whether rooftop solar is affordable for customers or profitable for installers. The way utilities think about net metering, a homeowner could even lose money on solar and still be guilty of shifting the costs of maintaining the grid onto other customers.

Net metering supporters counter that rooftop solar provides valuable benefits to the grid and to other customers that the utilities overlook, like relieving grid congestion and lessening the need for utility investments in new generation and transmission. Solar also has larger societal benefits like increased energy security, local resilience, clean air and carbon reduction.

Over the years this dispute has spawned literally dozens of studies estimating the value of solar. A Michigan study found that rather than being subsidized by other ratepayers, residents who install solar actually subsidize their non-solar-owning neighbors. Closer to home, a Maryland study also concluded that distributed solar provided a value greater than the retail cost of energy.

But every state is different. California’s public utility commission recently slashed the net metering rate all the way down to a so-called avoided cost, in part because the huge growth of solar in the state has led to a power glut in the middle of the day. The residential solar market cratered as a result of the PUC’s action, with an estimated 17,000 jobs lost in the solar industry.

Virginia does not have California’s problem. With only about 6.5% of our electricity generated by solar and the world’s largest energy storage facility in the form of Bath County’s pumped hydro plant, rooftop solar still helps Virginia utilities meet peak demand. We also face a skyrocketing demand for electricity from data centers, which militates in favor of all the clean energy we can generate.

Ten years ago, Virginia set out to do a study on the value of solar, led by the Department of Environmental Quality. Unfortunately, our utilities pulled out when they didn’t like what they were seeing, so the study never progressed beyond a framing of the issues.

Since then, Dominion and APCo have often repeated the “cost shift” narrative but have never backed it up with evidence. Their efforts have had some effect with legislators, most recently with passage of a bill instructing the SCC to “make all reasonable efforts to ensure that the net energy metering program does not result in unreasonable cost-shifting to nonparticipating electric utility customers.”

But of course, that simply begs the question of whether a cost shift is actually occurring. Under the VCEA, the SCC will now have to “evaluate and establish” the amount a net metering customer should pay for “the cost of using the utility’s infrastructure,” and the amount the utility should compensate the customer for the “total benefits” the customer’s solar panels provide. The SCC is also instructed to evaluate and establish the “direct and indirect economic impact of net metering” and consider “any other information the Commission deems relevant.”

Presumably, this other information should include the state’s energy policy. The policy specifically supports distributed solar, including “enhancing the ability of private property owners to generate their own renewable energy for their own personal use from renewable energy sources on their property.”

The SCC will now have to navigate these opposing positions in what are certain to be contentious proceedings. Meanwhile, residents and businesses would be well advised to get their solar panels up this year.

This article was originally published in the Virginia Mercury on May 21, 2024.

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