The sun will shine down as usual on Arkansas farms at the end of this month, but new solar arrays won’t offer the same yields.
After Sept. 30, the state’s rules for utility credits on newly interconnected solar-power systems will change. Credits will fall to about four-tenths of what existing system owners receive, and new restrictions will also go into effect.
“The new rules effectively kill solar for farmers since they generally have a lot of electric meters,” said Douglas Hutchings, president of Delta Solar of Little Rock, until now an industry leader in agricultural solar.
“Previously you could build a single system that would generate enough power to offset” a farm’s multiple meters, Hutchings said. “Now you have to pick a single meter to build your solar array behind, and anything that isn’t used behind that meter will receive the 12-month historical average wholesale cost.”
Since the computation includes nighttime rates and peak agricultural power use is seasonal, the result is a “very low average rate,” Hutchings said. “So the systems are no longer cost-effective except in very special circumstances.”
So Delta will shift its sales focus to nonfarm businesses with steady power use and forward-looking perspectives, said Chris Kane, the company’s vice president of business development.
The new net-metering rules could also take a stark toll on residential solar sales and make return-on-investment numbers trickier for businesses looking to pare their electric bills. The current net-metering credit is roughly equal to what consumers pay for retail power — about 10 cents per kilowatt-hour in a cheap-electricity state. New systems that don’t beat the deadline will get credit for the value of power utilities could buy on the wholesale market. That price, known as the “avoided cost” rate, is about 4 cents per kilowatt-hour.
A Rush to Connect
Utilities argue that the new policy evens the playing field for customers who do not have solar systems because the lower credit means solar customers are shouldering their share of infrastructure and maintenance costs.
Solar advocates reject that reasoning. But with the deadline looming, the state’s leading solar power companies are racing the clock. New systems do not have to be completed before October, but interconnection agreements must be in force to qualify for the old rate of credit for excess generation.
Delta is working on getting “legacy status” for about two dozen solar arrays now in planning or construction, Kane said.
Bill Halter, CEO of the largest solar company based in Arkansas, Scenic Hill Solar of Little Rock, said “everybody is very aware of the deadline.” He described how developers are securing legacy status for clients. “The utility has to give you a report that outlines the infrastructure upgrade that it is requiring you to do, and you have to pay for those upgrades by Sept. 30,” he said. “That’s what gets you grandfathering on net metering.”
Scenic Hill installed 32,372 kilowatts of solar capacity in 2023. That total ranked the company first in the state by far and 93rd overall among companies in all facets of the solar industry nationwide.
Halter, a former lieutenant governor of Arkansas, said that while his business model may not suffer much, he regrets the policy change.
“We see that the solar market is booming nationally and internationally,” he said. “We’re seeing factories being stood up in states surrounding Arkansas and across the country, manufacturing facilities for renewable energy, whether that be modules, inverters, racking, batteries. And Arkansas is not getting our share of that. It’s a shame that while this is booming across the country and around the world, our policy has moved in the wrong direction.”
The Power of Storage
Several industry leaders said that adding battery storage to solar arrays will blunt some of the policy change’s impact. But Lauren Waldrip, executive director of the Arkansas Advanced Energy Association, a trade group, said there’s “not going to be a silver bullet.”
The net-metering change is ill timed, she said, as the state scrambles to meet ever-growing power demands. Two coal-burning power plants supplying Entergy Arkansas, the state’s electric cooperatives and other utilities are set for retirement in the next six years. Arkansas Electric Cooperative Corp. announced last month that it is planning a 900-megawatt gas-fueled power plant in Morris County, Texas.
And AECC Chief Executive Officer Vernon “Buddy” Hasten said in late July that the cooperative will need $2 billion worth of new generation capacity to meet demand and reserve margins over the coming years. To build that capacity, members can expect a series of rate increases from 2025 through 2028 that will total about 14%.
Arkansas Annual Solar Installations
“Obviously, we’ve got a big problem on our hands, and we need all the generation we can get,” Waldrip said in a telephone interview. “We can’t afford policies that restrict more generation.”
The net-metering shift has already led some companies to cut back operations in Arkansas “to focus on other states that do provide consumers with choices and market competition,” Waldrip said. “We’ve seen cities discuss offering incentives like tax abatement to try to keep some of these companies around, providing jobs and contributing to their tax bases.”
Caleb Gorden, president of Shine Solar of Rogers, told Arkansas Business that his company will be doing business as usual after the net-metering deadline. “While we are not in favor of the change in legislation as it is not ideal for ratepayers, more and more customers are adopting batteries with their solar purchases, which helps to offset unfavorable net metering rules.”
Shine has seen recent strong growth in states around Arkansas. It now puts up residential arrays in eight states: Arkansas, Missouri, Texas, Oklahoma, Kansas, Iowa, Wisconsin and Louisiana. Shine installed 10,391 kilowatts of solar capacity last year, ranking second among Arkansas-based companies, according to Solar Power World.
“Arkansas is our third highest volume state,” Gorden said. “We believe solar is here to stay. It’s just unfortunate that Arkansas will not be a leader in the movement any longer.”
Seal Solar of North Little Rock installed 6,633 kilowatts of solar generation in 2023, followed by Delta at 1,394 kilowatts. Requests for comment from Seal Solar for this article drew no response.
Looking Ahead
Hutchings likes to “half joke” that Delta is an education company that happens to build solar arrays on the side. “I am confident that the model will continue to thrive,” he said, even though the net-metering change complicates the equation. The “one-to-one” net-metering rate that’s going away was simple and attractive, he said.
“It allowed you to simply add up what you produced over a given billing period and subtract what you used to get the ‘net,’” Hutchings said. “Now you have to track the real-time usage. … Providing business owners with information on how they can save money will continue to be the focus.”
In a statement, Entergy Arkansas spokeswoman Heather Kendrick said the electric utility, Arkansas’ largest, fully supports net-metering opportunities for its customers. But she said the new policy, adopted by the state Legislature early last year along with a compromise buffer period that’s now coming to an end, “helps restore economic fairness for all customers,” those with and without private net-metering systems.
“It is unfair and inappropriate for all other customers to be forced to subsidize net metering facilities through utility rates, nor require customers to pay a premium because those resources cannot be depended on to serve other customers,” Kendrick’s statement said.
Other states have taken aim at consumer-attractive net-metering policies in recent years. California, which rolled out its net energy metering program in 1996, revised its policy in April 2023, cutting compensation for solar arrays’ excess energy by about 75%. The change drastically reduced demand for residential solar panels, but encouraged battery installation.
The California Solar & Storage Association blamed the net-metering change for a 77% to 85% drop in sales from 2022.
But time is on solar’s side, Arkansas executives say. The U.S. Energy Information Administration reported last week that solar accounted for 59% of U.S. generating capacity additions in the first half of 2024, “supported by new battery storage capacity.”
Hutchings said solar is now the most economical form of power generation, and he predicted it will grow even cheaper. “Anyone who tries to stop it or slow it down is simply on the wrong side of history,” he said. “Solar will continue to dominate new generation globally and the current rules [in Arkansas] simply ensure that the value accrues to your electric provider and not you.”
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