By Andy McDonald
Kentucky’s young solar energy industry is being threatened by the state’s electric utilities, which are trying to stifle competition and limit their customer’s freedom to use solar energy in their homes and businesses.
House Bill 227 would end net metering, a simple and effective policy that allows customers with solar electric systems to connect to the power grid and be credited for excess energy fed back to the grid when they produce more than they need.
Net metering has supported the expansion of the industry across the country. HB 227’s passage would cause job losses and the closure of small solar businesses across the state.
The bill effectively ends net metering by drastically reducing the credit provided for excess solar power supplied to the grid. The utilities want to reduce the value of solar supplied to the grid by about 70 percent, to about 3 cents/kWh. This compares to current net metering, which values solar energy at the same retail rate customers pay for power purchased from the utility, which typically ranges from 9 to 11 cents/kWh in Kentucky.
This proposed law would greatly slow investment in rooftop solar and threaten the existence of many local companies. Its passage would undo the advances made by the industry over the last decade, during which customer costs have fallen by two-thirds, making the technology affordable and accessible for many more Kentuckians.
The utilities assert that net metering customers don’t pay their share for maintaining the grid, which supposedly shifts costs onto other ratepayers. But they have offered no economic analysis to support these assertions and they fail to acknowledge the many quantifiable benefits that the alternative provides to the utility and other ratepayers.
For example, solar reduces the need to operate expensive peaking plants on hot summer afternoons, when electricity demand is highest and solar production is at its peak. Reducing operation of these expensive peaking plants provides savings to all customers. There has been extensive research around the country documenting these and other benefits that customer-owned solar provides to all of us.
Utilities such as LG&E/KU were comfortable citing these benefits when they applied to the PSC for permission to build their own large solar power plants, which helped justify their investment and profits from these plants. But when they talk about net metering customers, they refuse to acknowledge that these benefits exist or can be quantified.
Consider that LG&E/KU offers an optional “time-of-use” rate that charges customers 27 cents/kWh for energy used between 1 p.m. and 5 p.m. from April to October. This is the peak time for solar production. If energy at this time is worth 27 cents/kWh, how could a customer’s solar energy be worth only 3 cents/kWh?
The notion that net metering customers are an unfair burden on other ratepayers is refuted by a study conducted by the U.S. Department of Energy. The study concluded that “for the vast majority of states and utilities, the effects of distributed solar on retail electricity prices will likely remain negligible for the foreseeable future,” with rate impacts unlikely before the alternative source reaches a high percentage of total electricity sales, on the order of 10 percent (Galen Barbose, January 2017, p. 29).
But in Kentucky this alternative represents a mere fraction of 1 percent of total energy demand and our net metering law already has a “safety valve” that allows utilities to request permission to stop offering net metering when they reach 1 percent of annual peak demand.
Imagine if our legislators, instead of suppressing this emerging industry, recognized the enormous economic development and job creation potential. This industry is one of the fastest growing sectors of the economy in other states and now employs more than 260,000 people nationwide. If this industry were empowered to grow as it has in nearby states like North Carolina and Ohio, we could see thousands of new jobs and hundreds of millions of dollars of new investment.
Instead of pushing HB 227, our legislators should institute simple policy measures that would actually save taxpayers money while opening up the emerging market in Kentucky, enabling job growth, and helping families, businesses, public agencies, and schools reduce their energy bills.
This is ultimately a policy choice for legislators. Do they want to support the growth of a new, dynamic industry in Kentucky and empower citizens to reduce their energy bills or restrict competition to protect the narrow interests of utilities?
Andy McDonald works for Earth Tools Inc. in Owen County, Ky. He is a member of the Kentucky Solar Energy Society and Kentucky Solar Industries Association.