Making Solar Worth What We’re Paying

Debate continues to rage about the cost of solar in Massachusetts, especially as legislation is introduced to continue the net metering credits which are responsible for much of the solar development in the state.

The basics of the net-metering program are simple: Through this credit mechanism, the purchasing customers do not actually use the electricity generated from these projects but they pay the developer for the output and receive a credit on their bill from their electric company who takes the electricity and sells it into the short term market. That credit is more than the cost of the payments to the developer, yielding the customer a net financial benefit. Net-metering critics claim that the cost of these credits, paid for by all other customers, far outweigh what the electricity is worth to the other customers and say we should simply stop doing it.

Supporters argue that the electricity generated by the solar projects provide equal or better value to all other customers than the cost of the credits by reducing the need for supply from fossil fueled generation and reducing demand on the distribution and transmission system, thus cutting the need for new infrastructure and putting downward pressure on the price of electricity in the market. The reality is that the addition of the solar power into the grid under the current regime provides very little of these benefits. In fact, some would argue that it imposes costs on the system because of the intermittency of supply, requiring conventional resources to ramp up and down to meet the constantly changing fluctuation on the system.

Rather than debating the value of net-metering credit regime, the solution is to ensure its value by doing the things we should be doing anyway as part of modernizing the grid.

Other states, such as Hawaii, New York and California, are leading the way on this and Massachusetts is poised to do the same. The idea is to think of the utility distribution system as a platform for the integration and management of all resources on the system, not just solar. With respect to solar, we need to require two-way inverters which will allow the power to flow in both directions as needed by the system and storage. This will allow the power to be dispatchable and used more efficiently.

In the nearer term, utilities should be selling the capacity value of these projects into the Forward Capacity Market (FCM) to offset the cost of the credits. But they’re not. Currently, the solar developers are claiming ownership of the value and don’t uniformly put these resources into the FCM. But they neither need nor deserve the value of the capacity. It should be used to offset the costs of the credits and receiving the credits should be conditioned on the capacity value going to the utilities.

We estimate that if all of the megawatts from net metering projects were in the market today, customers would benefit by about $22 million to$36 million per year. While not a huge sum as compared to the hundreds of millions of dollars the utilities claim these credits are costing, the utilities should be doing what they can to mitigate the costs.

More importantly, getting the capacity value into the market has a cascading effect of reducing the amount of capacity purchased by ISO-NE from conventional resources and puts downward pressure on the price for capacity in the market. It also provides legitimacy for reflecting these resources into the regional system planning, much as was done for energy efficiency savings a few years ago, resulting in deferring or completely avoiding hundreds of millions of investment in unneeded infrastructure.

Let’s stop arguing about the value of solar and start doing what we need to do to make the over 900 MWs already in place worth what we’re paying for it.

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