Is it really over, though?
Janis Kreilis
On May 2, Indiana Governor Eric Holcomb signed into law Senate Bill 309, which phases out retail net metering (NEM).
The debate in the Hoosier state had resembled those of its Midwestern counterparts. In one corner, you had utilities, arguing that retail net metering customers had been compensated too generously for their rooftop solar or wind energy and that the costs of running the grid were shifted onto non-NEM consumers. In the other corner, you had solar and environmental advocates warning that the bill could kill Indiana’s solar industry (and the jobs that it brings), which is still at an early stage in its development.
Solar rooftop systems installed by the end of 2017 will be grandfathered into the current retail rate for 30 years. After that, the rate will be gradually decreased for new customers until 2022, when retail net metering will effectively end and the customer will be able to receive the utility’s marginal cost plus 25%. In practical terms, the drop in current prices would be from $0.11/kWh to about $0.04/kWh.
Although Indiana generates less than 0.5% of its energy from solar and ranks 22nd in the nation in terms of installed capacity, according to the Solar Energy Industries Association, the sector grew more than 70% last year and currently employs three times more people than the natural gas sector.
If other states offer any lesson, it is that Indiana is walking on thin ice in terms of developing its solar industry. Nevada, which ended NEM in 2015 – originally, without grandfathering the existing customers – saw major solar companies announce they were leaving the state. Eventually, the Nevada Public Utilities Commission backtracked on its grandfathering decision and ultimately restored NEM for the customers of certain utilities.
Hawaii, too, replaced NEM with grid-supply and self-supply rate options in 2015. The island state leads the nation in the share of solar in its energy mix, and the rapid and massive wave of rooftop solar installations had started to strain the grid. In the first quarter of 2017, 37% fewer systems were set up than during that same period in 2016.
Hawaii does have a peculiar mix of factors leading to the regulators’ pressing the brakes on solar: the high cost of oil-generated electricity, coupled with the sunny weather, made solar particularly attractive, while the fact that Hawaii must run its own grid meant that any imbalances created by the large share of solar generation could not be offset over a wider geography.
Arizona followed suit in 2016, replacing NEM with a five-year average of utility-scale power purchase agreement prices in the short term. In the long term, the price would be determined by an avoided-cost method. The effects of this move remain to be seen but solar advocates have (predictably) criticized it.
Although it is true that retail-rate NEM policies do shift the transmission and distribution costs from NEM customers to non-NEM customers, due to the limited number of rooftop installations (some of Indiana’s utilities have fewer than 100 solar customers), the overall impact on the electricity prices could be considered negligible.
Before Gov Holcomb signed the bill, solar advocates had expressed their readiness to fight the measure in court. The full effect of the bill will also take decades, during which the solar industry in the U.S. will have grown further, adding to its political clout and potentially garnering support for repealing the policy. As the case in Nevada shows, the battle might be far from over.
