Don’t Make the Rest of Us Pay for Your Solar Subsidies

Charles M. Arlinghaus

 

Solar advocates are fighting to protect and increase the subsidized, above-market electric rates they get through a program called net metering. The debate isn’t about whether to allow solar energy but over how much of a subsidy to give solar and how to pay for the electric grid. As with so many issues, reasonable compromises are possible that allow every residential solar panel to be treated equally with reasonable accommodation but limited subsidies.

 

New Hampshire, like most states in the country, has a government program called “net metering” that serves to encourage small scale usage of solar panels as well as a small amount of wind energy. One benefit of producing your own electricity is that you don’t buy any during the periods when your panel or wind turbine is producing electricity.

 

But you can’t actually “go off the grid.” Solar, for example, only produces electricity about 10-15% of the time and you need electricity the other 85% of the time too. What’s more, you can’t store almost any of the excess you produce when the sun is shining. There are no effective ways to store electricity on a large scale so it must be produced essentially as needed — when you flip the light switch, there must be a turbine turning somewhere that very second and you must be connected to it by a wire.

 

Under net metering, an individual or other very small producer puts his excess power back into the grid. and this is where the subsidy comes in.

 

It would be difficult or impossible for a homeowner to market and sell the power by himself. So, the electric utility is required by the state government to buy your excess power keeping track of it through what is called a smart meter. The utility is required to buy the extra power not at the normal rate it purchases power we use — the market price — but rather at the retail rate, a rate that is double or triple the rate at which it would otherwise purchase power.

 

In other words, the state’s net metering law forces utilities to purchase power from individuals at an above market, subsidized rate — an excess charge that is then paid for by other customers.

 

Because this arrangement is a subsidy that raises the cost of electricity, the amount other ratepayers are required by law to subsidize is capped at a total of 50MW of electricity.

 

A program that started as something of an aside for the homeowner putting a few panels up on his roof has grown to include smaller businesses and municipalities seeking to arbitrage the enhanced rate. Solar marketing companies have done a good job utilizing the subsidy and other government cash incentives to expand the program and they’ve reached the cap.

 

Supporters of eliminating the cap believe the program would expand dramatically if subsidies were more broadly spent but therein lies the problem.

 

It is not particularly fair for poor and middle class ratepayers to subsidize the electricity of wealthier consumers who want to get paid back for their solar panels. The $40 -$50,000 cost of installing panels is beyond the savings account of most NH consumers.

 

When the total subsidized load is limited to about 1% of peak load, while still a targeted subsidy it’s small enough that people don’t lose much sleep over it. But advocates would have us eliminate the cap and extend the subsidy to larger and larger solar arrays by getting bigger and bigger businesses into the act, even extending the program to other means of production like hydro — all at an above-market subsidized rate.

 

Remember that every kilowatt of electricity we force the utility to purchase through the subsidy program and other ratepayers to pay for is a kilowatt that could have been bought at less than half that price somewhere else. NH already pays about $500 million more per year for electricity than it would if its costs were average — $527 million in 2014. This program is only a little tiny bit of that right now but every little bit matters.

 

On the other hand, there is an easy, market-based compromise that helps the wealthy solar advocate and doesn’t penalize the rest of us. If we, the ratepayers, bought your excess power at the rate we would otherwise pay — the current market rate — there would be no need for a cap. No subsidy, no cap.