Why solar net metering beats a value-of-solar tariff every time
Note: This is a response to John Farrell’s Grist article “An Enormous Question for ‘Solar Choice’.”
Net Metering’s proven advantages over Value of Solar Tariffs in sustaining and growing a kickass solar market can be boiled down to six principles:
Don’t fix what isn’t broken. Don’t let your primary competitor determine the price of your product. Stick with the policy that revolutionized the game and gave birth to a bona fide industry the likes of which we have never seen before. Support fair value for Net Metering, and fight like hell for it. Because we can win. In fact, we are winning.
And by winning, I mean that Net Metering has facilitated unprecedented solar industry growth, and deployment of clean energy. The industry employs over 140,000 people, with growth at more than 10 times the national average.
Value of Solar Tariffs, on the other hand, are as dubious as they were when we called them Feed-in-Tariffs. The largest irony of Value of Solar Tariffs (VOSTs) is that they let the nation’s utilities—who have worked aggressively to undermine rooftop solar in recent years– determine solar’s value. This is, in a word, nuts.
You don’t have to make a character judgment about utility executives to understand that it’s in their business interest to disadvantage their only competitors. If Samsung were given the power to set the conditions for the assembly, distribution, and sale of Apple’s Iphone, how generous do you think Samsung would be towards their fiercest competition? Following a year in which utilities in many states tried to roll back all progress the solar industry has made in the last decade, trusting the utility fox to guard the solar henhouse seems like a reckless leap of faith.
When you dig into how a VOST would actually operate, it seems virtually designed as a weapon for utilities to throttle rooftop solar growth. A VOST creates hidden taxes for consumers. It practically guarantees annual market uncertainty that can hurt solar businesses. And it takes away a customer’s right to actually use the power they generate, which is philosophically important for many solar customers.
On taxes: as top national law firm Skadden Arps has pointed out, because in a VOST scenario the utility buys the solar electricity from the solar customer, that customer may be subject to taxes on that income, and may also make customers ineligible for the federal investment tax credit. Farrell himself admits to PV-Tech that’s he’s not so sure about his position on the VOST tax issue anymore, saying his own analysis of tax implications is “not a done deal.”
On market uncertainty: with the VOST, there’s a Trojan horse element in play. Because VOSTs are subject to renegotiation each year, utilities can bait the public with a generous value at a program’s outset, and just as quickly redefine it in a way that undermines their solar competitors. That’s what’s happening right now , as theVOST’s flagship program in Austin Texas is already showing signs of become a morass of differing opinions on what solar’s value should be. After valuing it at 12.8 cents per kWh in 2013, utility Austin Energy is now saying it should be worth 10.7 cents per kWh in 2014. In Minnesota Xcel has already filed a request for reconsideration of the VOST methodology that would reduce the value of solar. For a solar industry transitioning to a model based on economies of scale, this level of annual whiplash is dangerous.
On utility vs consumer control: VOSTs contradict the philosophy of a great many people who go solar precisely because they want to self-generate and self-consume. While net metering allows solar customers to actually consume their solar energy directly, VOST customers would have to sell it all back to the utility, and then get all the energy they need from the gird (and as mentioned above they get taxed on what they sell).
Some of the enthusiasm for VOSTs stems from the misguided notion that because utilities like it, we will avoid contentious policy debates and rancor between utilities and the solar industry. But utilities oppose net metering precisely because it’s so successful in deploying distributed solar and nurturing the growth of the solar industry. If a VOST were to accomplish the same thing, utilities would work just as hard to undermine it. But it will be much easier, because a VOST essentially hands them the reins. And that is why they like it.
Meanwhile, Net Metering continues to support steady and rapid industry growth and deployment of clean energy. It’s not remotely broken, and needs no fixing. And the appropriate price for net-metered rooftop solar is the retail price of electricity.
I’ll say it again, in summary: don’t fix what isn’t broken. Don’t let your primary competitor determine the price of your product. Stick with the policy that revolutionized the game and gave birth to a bona fide industry the likes of which we have never seen before. Support fair value for NEM, and fight like hell for it. Because we can win. In fact, we are winning.”