Solar Industry Girds Against 'Drastic' Bill Targeting Net Metering

Solar Industry Girds Against 'Drastic' Bill Targeting Net Metering
Rep. Lanny Fite, R-Benton, and Gary Moody, director of state and local climate strategy for the National Audubon Society

Environmental advocate Gary Moody was set to take a victory lap Thursday evening in a virtual forum on solar energy in Arkansas, satisfied to report that solar supporters had beaten back threats to Arkansas’ growing sun power industry in the current legislative session.

But earlier that day, Rep. Lanny Fite, R-Benton, had advanced House Bill 1787 in the Insurance & Commerce Committee, and Moody figured no late-session threat could be bigger to the state’s solar progress.

Moody, who works in Little Rock as the director of state and local climate strategy for the National Audubon Society and is a staunch solar energy advocate, said the bill would usurp utility regulatory power from the Arkansas Public Service Commission and destroy net metering in the state.

The PSC made a key ruling last summer pegging the rate of compensation for solar power fed onto the grid to the retail rates they charge customers for electricity.

Utilities had favored giving far less for solar customers’ excess power, a policy that would have made solar array projects far less economical, industry and environmental advocates say.

The legislation, which is sponsored on the Senate side by Sen. Blake Johnson, R-Corning, “gets rid of the concept of net metering,” the accounting method utilities use to compensate solar customers, Moody said.

“Among other things, it would overrule the net metering rule recently issued by the Public Service Commission, and legislatively set rates for net metering customers, dropping the compensation for any electricity sent back to the grid,” he said. 

Under the bill’s provisions, solar customers would receive the utilities’ “avoided-cost rate” for their excess power, “which hovers around 3 cents per kilowatt hour” as opposed to the current compensation at “a retail rate of about 10 or 11 cents per kilowatt-hour,” said Moody, whose ultimate argument is that the environmental benefits of solar power are good for birds.

“So we're talking about a drastic devaluation for solar customers, it would absolutely make it very difficult for projects to be economic at scale in Arkansas,” he said.

The Arkansas Advanced Energy Association, an industry group including solar design and installation companies, is leading a lobbying charge against the legislation. Executive Director Stephanie Osborne told Arkansas Business on Wednesday that the bill would threaten hundreds of millions of developing projects in the growing industry and scrap policies that have been working well.

“Arkansas solar policy is working — the Solar Access Act of 2019 has spurred a wave of solar and energy efficiency projects for our cities, counties and school districts,” the AAEA said in talking points Osborne distributed. “The legislation was supported 28-2 in the Senate and 83-5 in the House.” 

Osborne added that last year’s PSC ruling “strikes the appropriate balance of allowing improved consumer choice, fair compensation, grid cost recovery, and guardrail protections to ensure responsible growth so that solar investments benefit all Arkansans.

“Now is not the time to overrule the PSC’s unanimous order that is just a few months old,” Osborne said. “Arkansas needs to ensure regulatory stability to allow the market to thrive.”

Fixing 'Unfairness'

Fite told Arkansas Business on Wednesday that solar incentives — and he sees the one-to-one retail rate for net-metering customers as basically an incentive — benefit the industry while shifting cost burdens from solar customers to other utility ratepayers.

“My bottom line is that customers with solar systems sell back power onto the grid at the retail price, and the utilities have to buy it,” Fite said in a telephone interview. “That’s more than they would pay if they were getting the power elsewhere, and somebody has to pay the additional cost of that retail rate. And that is the people who don’t have solar. My bill is to correct that problem, fix that unfairness.”

He said the avoided-cost rate solar power customers might expect under his plan is about 4.5 cents per kilowatt hour as opposed to the current rate of 10 or 10.5 cents. 

As to the potential for stalling solar power projects across the state, Fite said that federal investment tax breaks already offer significant incentives, that net-metering rates “shouldn’t be subsidized by other people in the community” and that current policy hurts low-income ratepayers. 

“We’re grandfathering in everyone” who already has a solar system, Fite said. “I have numbers to show that as solar power keeps increasing, this price burden on other utility customers will continue to grow.”

Rob Roedel, spokesman for the Arkansas Electric Cooperative Corp., echoed that theme when he was asked for comments on HB 1787. 

“It appears that this bill would eliminate the unfair net metering cost-shift to those who can least afford it,” he said. “We support solar development as long as the economics are fair to all.”

Going 'Backwards'

Moody and solar industry officials argue that solar customers actually save utilities and other customers money by cutting costs for power generation and reducing environmental and health costs tied to generating electricity by burning fossil fuels. According to the AAEA, “altering the Solar Access Act will raise electricity rates for all ratepayers.”

The association and Moody also pointed to hundreds of millions of dollars’ worth of projects spurred by 2019’s Solar Access Act that could be imperiled.

While eliminating hundreds of solar industry jobs, HB 1787 would “overrule a unanimous PSC finding in favor of legislative ratemaking, eliminate net metering and mandate 2-channel billing, effectively treating small net-metering customers like wholesale merchant generators,” an AAEA news release said. The legislation would also “close the door on community solar, eliminate meter aggregation and eliminate any off-site solar or remote net-metering facility,” the association said.

Moody said the bill takes aim at both economic advancement and environmental responsibility in Arkansas.

“We counted up $500 million in investment in Arkansas solar projects in the last two years,” he said. “And we've gone from 43rd in the country to 25th in the country in solar deployment in that time. But yeah, some would still like to see it go backwards. So we will be fighting tooth and nail to make sure this doesn’t pass.”