Another State Realized Solar Subsidies Are Too Expensive
Michigan officials are changing the way solar panel owners are paid for the energy they put back into the grid, joining a growing chorus of states that are recognizing the expensive costs of subsiding solar energy.
In an order issued Wednesday, the Michigan Public Service Commission decided to replace the state’s current system with a new model that compensates net metering customers less for the excess energy they generate and put into the grid. Non-net metering customers will see their electricity bill drop after the change.
Further explained, net metering is a system in which customers who generate their own power with nonrenewable sources — usually solar panels — are compensated for the surplus energy they give back to the grid. Net metering has grown in popularity as the price for solar panels have declined and greater interest in renewable energy sources grows. However, net metering is not without its controversy. Net metering customers are typically compensated at retail rates for their power, not wholesale rates. Solar customers getting paid at a bloated value ultimately shifts costs to non-solar customers.
Legislation passed by state lawmakers and signed by Republican Gov. Rick Snyder in 2016 called for an overhaul of Michigan’s energy industry, which tasked the Michigan Public Service Commission with finding changes to better conduct net metering. Beginning June 1, customers who provide power to utility companies will no longer be paid at a retail rate, but by an avoided-cost tariff based on how much those utilities pay to make energy themselves. However, some customers already involved in the net metering program will be grandfathered in for around 10 more years.
Following Wednesday’s landmark decision, the MPSC stated that the new model will ensure distributed generation customers are “assessed for their fair and equitable use of the electrical grid.”
Michigan’s path to reform follows other states across the country that have discovered their net metering programs have grossly overcompensated solar panel owners at the expense of all other energy consumers.
After state lawmakers called for them to conduct a study, officials with Montana’s largest utility company found that it was overpaying net metering customers by about three times the market value. Like Michigan, solar panel owners in Montana may soon be footing more of the energy bill. Over in New England, one Republican governor is calling for sweeping changes to his state’s energy industry in an effort to lower residents’ electricity bill. Included in his reform package, New Hampshire Gov. Chris Sununu shunned renewable energy subsidies that have artificially propped up otherwise failing solar panel companies.
Not everyone in Michigan is happy about the changes.
“I see this as complicated, unfair and costly to the industry,” said Eichler Clark, president of the Michigan Energy Innovation Business Council, in a statement published Thursday. Clark, along with other proponents of solar energy, said the changes will foment uncertainty.
“This short-sighted decision is beyond what the legislative directive was in the 2016 energy bill, which sought to ensure that rooftop solar users were covering their grid costs,” said state Rep. Tom Barrett Barrett on Wednesday, critiquing the commission’s decision. PSC’s research, Barrett argued, found that net-metered rooftop solar customers “actually provide an overall benefit to all ratepayers.”
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