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January 18, 2016

Solar without subsidy?

Amy Rabinowitz, vice president and deputy general cousel at National Grid, stands in front of solar panels at her office in Waltham. National Grid had record solar interconnections last year and said solar in Massachusetts is here to stay.
Solect COO Jim Dumas (right) with business partner Craig Huntley, says lower costs to produce solar panels help the industry compete with natural gas, whose prices hovering near record lows.

As Massachusetts lawmakers debate this month whether to raise the net-metering cap on solar, utility National Grid has thrown new evidence in the ring showing the solar industry may be ready to start standing on its own with fewer subsidies.

Even though the net-metering cap in National Grid's territory was hit in April, the utility interconnected 138 projects subject to the cap from then through November, compared to 83 in 2014 when net metering was available. The utility received 12,000 applications for solar projects since reaching its cap, 435 of which may have been subject to the cap. It also interconnected more than 12,000 solar projects in 2015 -- more than the past four years combined.

“The market is going gangbusters because people are interested in solar,” said Amy Rabinowitz, vice president and deputy general counsel at National Grid.

Net metering is one of three main subsidies businesses and residents receive to install solar panels and use solar energy. It deals with how much they get paid to sell excess power from their systems back onto the grid. Since the various subsidies have made solar installations so popular in Massachusetts, the cap limiting how many solar system owners can receive the net-metering rate was hit in early 2015 in National Grid's territory, and Massachusetts legislators have been weighing raising that cap since September.

The issue pits utilities like National Grid and Eversource Energy – who must reimburse solar system owners at the higher retail rate vs. the lower wholesale rate for their excess power – against those in the solar industry – particularly installers, manufacturers, consumers and environmental advocates – who believe solar's success is dependent on continued government programs.

Even though National Grid is showing statistics that solar installations continue to grow without the net-metering subsidy, installers like Hopkinton-based Solect say more projects would be underway if the cap were raised.

Jim Dumas, chief operating officer at Solect, said community solar projects, which provide solar power to large groups of people who can't do solar on their own, are heavily dependent on net metering. Plus, supporting solar installations in any way possible leads to more jobs and cleaner energy for everyone, he said.

“One of the arguments is not everybody can take advantage of solar, so why are we subsidizing only people that can? Well, anybody can take advantage of solar because of community solar programs,” Dumas said. “When net metering caps got filled in National Grid's area, by the way, a new project would get stalled, and that absolutely hurts.”

Solar growth

The solar industry in Massachusetts has grown exponentially over the past few years. In 2014, the state installed 308 megawatts of solar electric capacity, ranking it fourth in the nation for that year, according to data from the Solar Energy Industries Association. In 2011, that number was less than 50 megawatts. With a collective 876 megawatts installed, Massachusetts is sixth nationally for overall installed solar capacity.

Solar is growing, but it's not yet time to let it stand on its own, said Jurgen Weiss, an energy expert at Cambridge consulting firm Brattle Group.

“This is an emerging industry; it has a bunch of benefits, too, for everybody, including for example the fact that it emits less [carbon dioxide] than the power plants we use, and those benefits are not fully reflected in utility prices,” Weiss said.

In addition to net metering, the state offers solar renewable energy certificates (SRECs), which require utilities to purchase a certain amount of solar credits as subsidies. The federal government offers a tax credit that discounts the cost of solar installation by 30 percent.

These credits help spur solar growth and are fairer to customers than net metering because they subsidize wholesale electricity costs, Rabinowitz said. If a customer gets the net metering credit, they would receive the retail 19 cents per kilowatt hour for all excess power they sell back onto the power grid, as opposed to the wholesale 4 cents per kilowatt hour they would receive if they didn't get the net metering credit.

“At that wholesale price – plus the SREC and federal tax credit – customers are still getting more than some of the projects in neighboring states.” Rabinowitz said.

Dumas said he agrees solar is here to stay, but part of the reason the industry is moving forward so quickly is because people are expecting the caps will be raised, as they have been in the past.

Legislative debate

Both legislative bodies at the Massachusetts State House passed versions of a solar bill in November but were unable to come to a compromise before winter recess began. The House's bill, which proposed raising net metering caps by 2 percentage points, was slammed by the solar industry because it included fixed charges for solar users after a certain number of megawatts.

A conference committee with members of both houses was established to hammer out a compromise. Negotiations are closed, so committee chair Sen. Ben Downing (D-Pittsfield) was unable to comment on them.

The caps, which are currently 4 percent on private installations and 5 percent on public, are calculated as a percentage of peak electrical uses. Since solar installation owners are paid the higher net-metering rates by the utilities through a collection on ratepayer bills, essentially every electric customer is paying for the net-metering subsidy.

Weiss said while net metering is important in solar's early stages, if more growth occurs, changing the subsidy to make payments more fair to all customers might be a good idea.

“We ought to have a discussion about how we're going to fund electricity infrastructure in long run, that includes having a good discussion about making modifications to the utility structure over time,” Weiss said.

Rabinowitz said she agrees utilities may have to change their structure with the times, and said she would specifically like to see a decrease in the amount of cross-subsidies in utility billing.

“We believe solar needs to be a part of the clean energy future. We need to get the structure right so it really can flourish in a way that it's good for the environment, so it's good for customers, so it's sustainable,” she said.

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