Wind, solar subsidy set for review
Program's growth spurs fairness issue
The array of solar panels recently installed on Ian Bowles’s slate roof in Jamaica Plain should pay off for him in less than a decade, but the green power the state’s former top environmental official generates may cost other utility customers for many more years.
Bowles and the increasing number of homeowners, businesses, and municipalities connecting solar panels and wind turbines to the region’s power grid receive a little-known subsidy, and the cost is being borne by other utility customers, who may soon pay anywhere from a dime to as much as $100 more on their monthly electricity bills.
The surcharge on customers who do not feed into the grid has become increasingly controversial as state lawmakers this month hash out the language in a bill that would double the amount of power that utility companies could buy from those producing their own energy.
“At a certain point, there’s absolutely a fair argument about the equity of this,” said Bowles, the former secretary of energy and environmental affairs, who argues that the benefits of reducing harmful carbon emissions outweigh the relatively small costs to utility customers.
As lawmakers debate whether to raise the cap on the state’s so-called net metering program to 6 percent of the maximum amount of electricity that utilities can produce on days when demand peaks, utility representatives, business groups, and ratepayer advocates have raised concerns about the fairness of continuing a program designed to spark the growth of solar and wind power, which are now being adopted more rapidly.
Massachusetts now generates enough wind and solar energy to power 38,000 homes. It produces 118 megawatts of solar energy, up from 3 megawatts in 2007 and nearly half of the state’s goal of 250 megawatts by 2017. The state also produces 61 megawatts of wind energy, up from 3 megawatts in 2007 but far from the goal of 2,000 megawatts by 2020.
Utility companies across the country have become more vocal about the burdens of net metering programs, which exist in at least 40 states and generally require utilities to pay the independent power producers the same amount the utilities charge to supply energy to everyone else. The utilities, however, complain that the rates they pay power producers do not factor in the cost of storing and delivering the power, which they end up passing on to others in the form of a surcharge.
“Because the costs of maintaining the distribution system are not reflected in the price paid by utilities, it results in a situation in which the remainder of the utilities’ customers are indirectly subsidizing” producers of renewable energy, said Dan Riedinger, a spokesman for Edison Electric Institute, a Washington-based trade association that represents power companies.
John Howat, a senior policy analyst at the National Consumer Law Center in Boston, said that everyone ultimately benefits from the additional energy with cleaner air and increased redundancy in the system.
“There are valid policy objectives associated with a transition to more renewables,” he said. “My concern is that the benefits of net metering deals accrue generally to high-income households, with others left holding the bag.”
While the surcharge for renewable energy remains modest for most homeowners and the costs of electricity have fallen substantially in recent years, Massachusetts has among the highest energy costs in the nation and business groups say the additional fees reduce their members’ ability to compete. NStar said the pending legislation would mean the average residential customer’s monthly bill would increase about a dime and that large businesses and other institutions would pay about $100 more per month.
Officials at the Greater Boston Chamber of Commerce have been pressing lawmakers to consider amending the bill to limit the additional private and public institutions allowed to participate to those that use all the electricity that they create, because a relatively small number of power producers now generate much of what the state’s utilities can buy under the existing cap.
They have also urged lawmakers to allow the utilities to pay power providers wholesale rates for their energy, which they say would reduce the expenses for other ratepayers. That would be the rate utilities now pay coal and natural gas plants, which is less than half what those participating in net metering projects are paid.
“The chamber supports an approach which ensures that new net metering projects do not put new cost burdens on ratepayers,” said Jim Klocke, the chamber’s executive vice president.
NStar estimates that doubling the current cap of 3 percent will increase net metering subsidies in Massachusetts to about $60 million annually.
State officials said they support raising the cap to continue encouraging the adoption of renewable energy. While they acknowledge the inequity of the system, they say the costs incurred for others remain small enough that the environmental benefits of net metering outweigh the price.
“There is a point that we would have to look at the percentage, and how it affects the rates of other customers,” said Steven Clarke, assistant secretary for energy in the Executive Office of Energy and Environmental Affairs. “I don’t think 6 percent gets near that point. But I don’t think we have a strong sense of when we reach that point.”
The net metering legislation is part of a larger energy bill that has to be completed by the end of the month before the Legislature adjourns.
Larry Chretien, executive director of the Massachusetts Energy Consumers Alliance, a nonprofit group representing residential energy consumers, argues the state should do as much as it can to promote renewable energy now, while natural gas prices are low.
He also noted that the impact on low-income ratepayers is cushioned by a discount many of them receive. “I think the cost impact is overblown,” he said.
At Bowles’s Victorian home, the new panels will earn him about $2,000 a year in credits from the energy he supplies to NStar, or enough in about eight years to cover the $12,000 he paid to install the solar panels and the $5,000 to prepare his roof.
“We’re doing something we need to do, which is to diversify from fossil fuels,” he said.