Declining Support for Net Metering Threatens Solar Deployment
At the very moment that we are asking Vermonters to electrify and invest in clean, renewable energy, Vermont’s Public Service Department is recommending cutting support for the state’s net-metering program, one of the few programs proven to support renewable deployment in Vermont. If approved by the Public Utilities Commission, this would be the sixth cut to net metering in six years and would come while a potentially devastating tariff investigation, supply chain problems, inflation and rising interest rates, and changes to Federal tax policy are reversing the steady decline in solar prices. Declining support for net metering in this environment threatens to put solar out of reach for many Vermonters just when we need to accelerate renewable deployment.
Every month, REV receives dozens of calls from families and small businesses that are looking to go solar. Almost without exception, these ordinary Vermonters talk about trying to do the right thing and want to know what incentives are available to make solar financially viable for them. We point them to two policies that can help: Vermont’s net-metering program and the Federal Solar Investment Tax Credit. Unfortunately, net-metering compensation has been steadily falling, and the ITC, which was 30% in 2019, will drop to 22% in 2023 and expire altogether in January of 2024.[1] It is a sobering message to deliver to Vermonters reaching out to do their part.
In comparison to 2017, a Vermonter purchasing a residential solar system today would receive approximately $225 less in net metering compensation each year.[2] Over the same period, the decline in the Federal Investment Tax Credit has largely negated the declining price of solar panels and the imminent expiration of the credit will make consumers’ upfront costs thousands of dollars higher. In short, despite advancements in solar energy and an ever-growing need for clean energy, state and federal policies are making it less and less economical for Vermonters to invest in renewables.
Low- and Moderate-Income Vermonters will be Left Out
When creating the net-metering program, the Vermont Legislature correctly recognized the right of all Vermonters to self-generate power but every cut to net metering compensation increases the payback period for Vermonters. Low and moderate-income (LMI) Vermonters, who have the most limited access to financing and are most sensitive to long payback periods, are the first to be denied access to self-generation when net-metering is cut.
The challenge of accessing clean energy for LMI Vermonters is exacerbated by the regulatory hurdles that inhibit the construction of community solar arrays (CSA). Because the upfront cost to individuals can be very low, they are often the best way for LMI Vermonters to access renewable energy but siting these projects is frequently tied up in a lengthy and uncertain regulatory process. While Vermont was once the national leader in CSA development, it is now harder to build these systems in Vermont than it is in other states like New York.
Opportunities to Reduce Greenhouse Gas Emissions will be Lost
For every person and business who decides that the payback period for adding solar is longer than they can manage, Vermont losses another opportunity to address its climate goals. For virtually all midday hours, when solar is producing, the marginal source of electricity in New England is a fossil-fueled power plant.[3] This means that for every solar panel that is installed in Vermont and for virtually every kWh of electricity it generates, one fewer kWh is generated by a plant burning natural gas, oil, or even coal, and close to 700 lbs/MWh of greenhouse gas emissions are avoided.[4]
The Department sidesteps the value of these emissions reductions when discussing net-metering by assuming that any decline in net-metered solar projects will be offset by an increase in other utility-scale solar projects so that utilities can meet the Tier II requirements under the RES. While this might be true up to the Tier II minimum threshold, this is myopic a view of the public interest. Vermont should be looking to exceed the minimum thresholds in the RES, rather than viewing them, as the Department seems to, as a cap on in-state renewable generation. By the Department’s own estimates, the RES will result in greenhouse gas emissions reductions across all sectors that are on the order of 12-14% by 2030. The GWSA mandates a 40% reduction by 2030. While the GWSA includes other mitigation measures that are not captured in these calculations, it is clear that Vermont should be doing everything in its power to exceed the minimum thresholds set in the RES, rather than adjusting net-metering compensation with the express purpose of limiting the rate of net-metered solar deployment.
A Broader Lens is Needed to Promote Clean Energy Development in Vermont
Much of the Department’s rationale for recommending cuts to net-metering compensation hinges on a narrow and poorly contextualized assertion that net metering creates a cost shift that harms Vermonters who are not participating in the net-metering program. Whether or not net metering adds to or reduces societal cost at all is sensitive to assumptions in how those costs are calculated and the Department does not provide a breakdown of how this cost would impact residential versus non-residential rates or state what the impact is for individual ratepayers. While addressing equity concerns around energy costs is essential, this should be done in the broader context of Vermont’s budget. Reducing the effectiveness of the net-metering program is not the appropriate way to address these concerns.
Given the Department’s narrow view of how to evaluate the net metering program, it is time for the Legislature to retake control of net-metering compensation and to design a Renewable Energy Standard that is truly compatible with our GWSA climate goals.
Footnotes
[1] Comercial solar projects will continue to be eligible for a 10% ITC.
[2] Assumes a 15kW system with 0.15 capacity factor that receives net-metering credits for 30% of its generation.
[3] Synapse Energy Economics (2020). Solar Savings in New England.
[4] ISO-NE (2021). 2019 ISO New England Electric Generator Air Emissions Report. https://www.iso-ne.com/static-assets/documents/2021/03/2019_air_emissions_report.pdf