What’s with H.4185 (“an act relative to net metering and solar power”)?

Jonathan Kamens asks:

Will, can you give us some idea of what the goal of H.4185 is and, if it is passed in its current form, what impact it will have on existing and new solar panel installations. Also, will it make solar panels less attractive and therefore slow the expansion of solar power in Massachusetts?

There are a number of states in which concerted lobbying and financial pressure (i.e., campaign contributions and all the other tricks lobbyists play) by entrenched fossil-fuel interests have made solar panels on people’s rooves at best less attractive and at worst completely impractical. I don’t want to see that kind of thing happening in Massachusetts!

The short answer is that I’m not sure how House 4185 will play out. It is very much in flux right now.

Here’s a longer answer: One of the major incentives for installing solar has been the “SREC” market. SREC stands for Solar Renewable Energy Credit — utilities pay people who have installed residential solar for the right to take credit for the renewable power flowing from the installation. The utilities use that credit to meet the Renewable Portfolio Standard, a law we fought for in 2008, which requires utilities to meet a certain portion of their energy needs with green power. The SREC sales are income source over and above the payment from the local utility for any solar power sold back to the grid. Over the past few years SREC sales have gone as high as $0.50 per kilowatt hour.

Recently, the SREC market has tanked as there has been a glut of SRECs available. People in the solar industry whose business depends on the SREC subsidy have been actively lobbying for an approach to putting a floor under the market. At the same time, they have been active in seeking to raise the net metering cap which in some areas limits the expansion of solar. Utilities have a variety of countervailing concerns and the issues are exceedingly complex.

People (like me), who have installed solar panels on their homes, get to use the utility grid as a giant battery — pumping power into it and drawing it out when we need it. If our generation meets our needs, then our utility bills net out to close to zero and we get the battery service essentially for free. That’s a great benefit to us and to the cause of solar, but those who don’t have solar (for any number of reasons), are carrying the fixed costs of the grid for us. So, there are legitimate tensions between solar users and solar installers on the one hand and utilities and non-solar customers on the other.

As I understand it, House 4185 has become a very complex effort to strike a balance among those concerns — responding to the SREC crash and raising net-metering head room, but trying to address concerns about solar cost. Right now, there is no consensus about whether or not it is fair and I’m not sure it will pass in any form this year, given the level of confusion at this late date.

Published by Will Brownsberger

Will Brownsberger is State Senator from the Second Suffolk and Middlesex District.

25 replies on “What’s with H.4185 (“an act relative to net metering and solar power”)?”

  1. There is no question that everyone who pays taxes and uses electricity (i.e., pretty much everyone) is subsidizing the installation of solar panels on private homes. Free use of the grid; federal and state tax credits; federal, state and local rebates; all of these “redistribute income” from people who do not have solar panels to those who do.

    People who think that’s a bad thing need to suck it up and get a clue. Our climate is in free-fall, and much of the United States, including much of the Massachusetts coast, is likely to end up underwater in our lifetimes. Yes, I and other solar panel owners benefit financially from them (albeit not for ~10 years after installation, when they are finally paid off and cash-flow positive), but every solar panel installed on a roof in Massachusetts is a blow against climate change.

    In short, installed solar panels benefit everyone, not just the people whose rooves they are sitting on, and therefore everyone should be subsidizing further expansion of solar power and making it more attractive, not less so.

    It pains me to see all the huge, unobstructed, south-facing rooves in my neighborhood that don’t have solar panels on them. Given the incentives and cost structures available right now, there is no excuse for those rooves not to have solar panels on them. We need to make sure that remains the case.

    I hope you will stay on top of this bill.

  2. One clarification… The reason why the solar panels on my roof in particular won’t benefit me financially for ~10 years because I chose to own my panels outright. That’s the most beneficial arrangement if one can afford it, but if not, there are other options nowadays for installing solar panels which require zero out-of-pocket expense for the homeowner and start accruing financial benefit the day they are turned on.

  3. You are absolutely right that the subsidy through the rate structure is just one of a number of climate-oriented subsidies and not the largest. The largest is the federal tax credit — a 30% rebate off the top. And indeed, the cost of that rebate is born by all other taxpayers.

    What some utilities argue is that they can have a greater carbon impact through other green investments — that residential solar is not the most cost-effective carbon-reduction investment to subsidize, even from a pure carbon reduction standpoint. I haven’t been able to evaluate that claim yet and it is very much in dispute and is part of the confusion around the legislation.

  4. Will,

    This bill, H4185 has some very valuable merits, including eliminating the net metering caps immediately to allow for stranded projects to get built and to put the Governor’s goal of 1600 MW into statute. Beyond the raising of the net metering cap immediately, there is no urgency in completely overhauling the current virtual net metering system other than to reduce costs to ratepayers and utilities. If this bill passes as written, the utilities will receive an effective zero interest loan from solar owners like yourself who will not be allowed to allocate excess production or to use excess production to offset the as of yet undefined amount of the new minimum bill that they are insisting is necessary to maintain the distribution system so you may accrue net metering credits for years before you can monetize them, giving the utility the use of millions of dollars for no interest. There are several other grave concerns in the bill, such as the fact the residents in Municipal Light Plant towns, like Belmont, will no longer be eligible for solar incentives like SRECs as the SREC program is replaced by a declining block incentive that is only for residents of Investor Owned Utility territory towns.

    For these and many other reasons (eg Lack of incentives for Community Shared Solar in the final draft language despite promises from NECEC all along that Community Solar would get an adder in the Declining Block Incentive).

    I suggest the Joint Senate and House Ways and Means Committee recommends that the Net Metering Cap be expanded by 4% immediately as an attachment to the current Environmental Bond Bill and that all the other provisions of H4185 are implemented after a two year period in which the elements of this bill may be properly and openly debated by all stakeholders, not just the select few who sat down with the utilities to write H4185 behind closed doors.

    Respectfully,

    Haskell Werlin
    Solar Design Associates
    Harvard, MA.

  5. Thanks, Haskell. It is indeed a likely outcome that, as you suggest, we might just adjust the cap and leave the other issues for later, given their complexity. Probably not in the EBB — that’s about other things, but likely in another vehicle.

  6. There is little published in the Globe about how SRECs work:

    “Solar success costing owners – Price of state bonds dips with popularity of panel systems”, by Jose Martinez (Jan 17, 2014)

    http://www.bostonglobe.com/metro/regionals/west/2013/01/17/values-drop-for-solar-power-certificates/dE06kqyIGuAu9mivNiq3MI/story.html

    “Equal and equitable access to solar” – op/ed by David Enos and Worth Robbins (July 8, 2014)

    http://www.bostonglobe.com/opinion/2014/07/08/equal-and-equitable-access-solar/irnDIwfKhhWwvCxqKh8E1I/story.html

    Reading these, my understanding is the old legislation tried to set up an artificial supply and demand market SRECs, in expectation that the market would take off and would adjust itself, but in reality, the market diverged from equilibrium. The solution is to understand what are the underlying causes – could it be costs for solar panel installs are kept artificially too low? Could it be that the cost to utilities to maintain the smart grid needed in the back end are perhaps too high?

    One can always mandate that the utilities buy more SRECs, to prop up the demand, but before doing that one has to analyze whether the whole scheme (a) makes economic sense, and (b) serves to help the environment.

  7. In the long term, favoring a particular solution in legislation is a bad idea. Technology changes and what may be perfectly rational at one point may become counterproductive at another. Case is point is the mandated use of ethanol. It is now clear that ethanol is not achieving the environmental goals we hoped for, but the powerful political lobby will not go away and we are consequently stuck with a bad solution.

    A much better strategy is to make sure that the market price of every energy source reflects all costs, including, environmental ones. In the case of fossil fuel, it means we need to add a tax on carbon. Once we do, solar will naturally be more attractive without any subsidies. But other solutions, like wind, electric cars recharged from non-carbon energy and good old conservation will also be more attractive. Consumers will naturally gravitate to what is most appropriate in any given case. Best of all, we will not be creating vested interests and will retain our flexibility to follow new developments in technology.

    Kiril

  8. One cannot rely exclusively on market forces in a partially regulated market, and one cannot entirely deregulate the electricity generation and distribution industry because of the environmental, safety, and right-of-way issues involved. Therefore, striving for market prices that reflect reality is at best a partial solution.

  9. It’s very messy — I do support a carbon tax, but that’s a new tax (always politically difficult) and also hard to implement for an individual state. The interim alternatives do get horrendously complicated, but that’s what we are working with. If we can’t just leave it to the market, we take on the responsibility of sorting through which technologies are cost-effective in reducing emissions and that is precisely the set of computations that is bogging us down.

    Here is an additional helpful resource about SREC’s .

  10. Will,

    Thanks for hosting this forum, I find it very informative. I’d like to take a friendly exception with how you think your PV is impacting other rate payers.

    The impact to other rate payers is from you buying less energy from the grid, and thus making a lower contribution to support fixed costs. But energy conservation (a lot of it incentivized by utility programs and the state) also has this impact, and I haven’t heard anyone suggesting we should do less energy efficiency.

    The fact that a residential, behind the meter PV, may push some power onto the grid I think is relatively trivial in the grander scheme of impact to rate payers. (At least at current residential PV penetration rates). Further there are some studies that show that there may be a net benefit to rate payers from net metering. Thus, I wouldn’t assume that you’re free riding on other rate payers. I also suspect your energy conservation efforts may be having just as big, or bigger impact, on other rate payers.

    Not to say that equity is not an issue (I’m a renter). But the community shared solar model hopefully can enable much broader participation – including lower income and urban households. Watertown, with its high proportion of rentals, I think could especially benefit. Unfortunately these projects are not easy to do. Very complicated.

    Thanks for the opportunity to participate in the forum.

    p.s. I take no position on the pending legislation. My company is a long term contractor to state agencies like DOER, so I don’t think it’s appropriate for me to comment.

    1. Very well taken point, David! Investments in energy conservation, which I deeply believe in, look the same as investments in renewables from the standpoint of utilities. And, in fact, there is some push back developing on utility subsidies for conservation — not all ratepayers are in a position to take advantage of those subsidies, especially the larger grants, which require even more substantial investment by the homeowner. And money aside, major conservation projects involving interior work can be prohibitively disruptive in some homes.

      This is the morass of competing goals and equities that we get into when try to bureaucratically optimize billions of dollars of private investment. In the long run, we have to get back to market forces — we need a national carbon tax to drive down fossil fuel consumption in a way that doesn’t put clumsy government regulation in the middle of every energy-related consumer decision. For now, we’re stuck with a whole thicket of very messy and ambiguous regulatory problems.

  11. There are some boobytraps in this legislation. A minimum monthly contribution to be included on a customer’s total bill that ensures each customer contributes each month a reasonable amount toward the costs of the electric distribution system that are not caused by volumetric consumption

    This will hit the low income strata the most. And discourage energy conservation. It does not matter if you have solar or not. Get rid of this.It is most regressive.

    And “not caused by volumetric consumption” sounds like corporate welfarewith the low usage consumers subsidising the large consumers.

    I Have oil heat and my fuel company just charges per gallon for oil. He does not charge me for his equipment and truck trips. The cost is embedded in the per gallon price. With electricity ,I think we should go the other way and even get rid of the fixed “customer charge” and replace it with a per KWh based charge Any fee or charge should be based on energy usage. The more kilowatthours you use the more you pay.

    I don’t trust utilities and their commissioners to do the right thing so I decided not to convert to gas.

    Even the current “customer charge” can be paid with net metering credits. Any minimum payment will disproportionately burden smaller residential solar installations..

    No thought is given to the value of the source (carbon free electricity) and if you produce more electricity than you use you are a producer. So that being the case does pilgrim power pay a fee to get on the grid, and do these coal & gas fired power plants ?

    And anyone who installed solar undertook the capital risks for the system. Do they get a payment for their“Stranded Assets”

    Why the urgency wait for next session. shoot this turkey down. maybe the DA will indict someone under the golden dome or dark money scandel exposed. Re introduce this next session and shed some light on it.

  12. Following my reply above to David: I agree it’s a mess. But some very environmentally-oriented legislators feel it is the best mess they can put together. Frank Smizik, House Chair of the Committee on Global Warming, and someone completely committed to responding to climate change, just circulated a letter in strong support of the bill. I’ll continue to study this issue — not sure where I’ll end up. The text of Chairman Smizik’s letter appears below:

    Dear Colleagues,

    I write to you to provide some clarity on H.4185, An Act relative to net metering and solar power. This bill makes two necessary changes, establishing in law Governor Deval Patrick’s goal of 1,600 megawatts of solar energy in the Commonwealth by 2020, and eliminating the net metering cap. The latter is extremely time-sensitive, as we have just about hit the current caps, and there are many late-stage projects that will not get built if we do not act. Again, failure to pass any net metering legislation this month will hurt the burgeoning renewable energy industry by causing uncertainty and unnecessarily stalling viable projects, which will damage our state’s economy.

    Addressing these goals is the reason I am advocating for legislation to pass this month. I have filed and passed legislation raising the net metering cap twice before, and it became clear to me that arduously raising the cap every two years was inefficient and out of step with the rapidly growing desire for net metered renewable electricity in the Commonwealth. I filed a bill this session that would have eliminated the cap up to a certain date, at which point new mechanisms would be put in place. The bill we are now reviewing, H.4185, which is in House Ways and Means, was a compromise between many different parties with different interests, and is therefore not perfect in anyone’s view. Some of the details are complex and I would like to clarify some misconceptions.

    The bill includes a timeline for replacing the existing SREC II trading market with a Declining Block Incentive (DBI). The current SREC market allows solar owners to sell credits to utility companies on an open marketplace. The DBI is a more predictable incentive structure, albeit with the same goal- to defray the cost of developing and installing solar systems. The incentive amount declines over time. This is done in order to provide market signals for increased competitiveness of solar, driving lower prices and saving ratepayers money. The change from the SREC market to a new, more stable incentive structure will only affect new projects becoming active after July 2015. Current solar owners will continue to receive SREC credits for the lifetime of their system. While switching away from the SREC market system will affect SREC trading companies (which make a profit off of the trades and add net cost to the net metering system as a whole), the new incentive structure will be far better for people trying to get solar projects financed and built. Instead of dealing with a volatile market, owners will know the exact fixed incentive amount their project will receive for a 15-year period. This will make it much easier for them to receive help from banks, in addition to eliminating the extra costs SREC traders create, which get passed onto all ratepayers. The new incentive program will be overseen by the Department of Public Utilities, with all decisions being made through an open, public process.

    H.4185 also creates a minimum bill requirement that only applies to specific customers in a very specific situation. It will only apply to customers who net meter their electricity, and it will only apply to them in months where they produce more electricity than they use. It ensures that all customers contribute to the cost of maintaining the electric grid. The dollar amount of the minimum bill will be determined by the Department of Public Utilities in a public and transparent regulatory process, wherein regulators will consider the benefits of distributed generation as well as the costs to the electric grid. Five dollars is an educated estimate of what the amount could be. The minimum bill charge will not reduce the amount of net metering credits received for producing excess energy. The statute language also completely limits what the money can be used for—upkeep of the electric grid—ensuring that utilities will not make any profit from the charge nor will they use it for overhead, new projects, etc. It is fair to ask that all customers connected to the electric grid help pay for its upkeep, because even if someone is producing enough electricity on their own, they are still connected to the grid and are benefitting from its existence. If net metering customers do not help contribute to the cost of grid maintenance, utility companies will ultimately pass that cost onto regular customers.

    I have fought for better renewable energy policies for many years, and I am immensely proud of the work we have accomplished and the economic growth the Commonwealth has experienced thanks to the renewable energy industry. Our ultimate goal is to allow the sector to continue its impressive growth, and that means eliminating the caps on net metering and preserving our 1,600 MW goal in statute. Stakeholders continue to hold constructive discussions about this bill, so it is an ongoing process. It is my sincere hope that all parties will reach an agreement by July 31st so that Massachusetts can continue leading the nation on clean energy and distributed generation. Again, it is imperative that we pass a bill this session.

    I am happy to serve as a resource for further questions about H.4185.

    Sincerely,
    Frank I. Smizik
    15th Norfolk District
    Chair, House Committee on Global Warming and Climate Change

  13. REBUTTAL to Frank’s letter
    “The new incentive program will be overseen by the Department of Public Utilities, with all decisions being made through an open, public process.”
    In principal you are correct, I disagree in practical terms:
    While the process is open, It is difficult for the average lay person to even become aware. I became aware of the 4183 because I do general surveillance of the legislature and read the bills. Why does the average citizen have to be an astute expert sleuth? Amend the bill to require in non ambiguous terms how the ratepayers are to be informed of an impending hearing on whatever issue coming to the DPU. Such as bill envelope stuffing’s, ect.
    Also, the commissioners just have to go through the hearing process but ultimately can do what they want to. That may not matter if we have an environment friendly commissioner but if we get a bad governor that stuffs the commission with his cronies that can be bad with no legal safety interlocks to trip preventing a bad outcome.

    “H.4185 also creates a minimum bill requirement that only applies to specific customers in a very specific situation.”

    Again be specific:
    That is what I hope it would be but that is not what 4185 says. Why not amend the bill to specifically say that?

    There is nothing to prevent a commissioner to raise it to $50.00 or interpreting it literally and minimum billing for any and everyone. Typical bills have lots of weasel worded implied terms.
    “Five dollars is an educated estimate of what the amount could be”
    Codify this into H4185 like not to exceed Five dollars in any billing period. You might credit this against the customer charge which already does this? I pay $6.43 customer charge.

    May I ask, who drafted this bill? ALEC or the Koch Bros.? Does not sound like Frank’s wording after reading his letter.

    There is a lot of linguistic work with the language of the bill and its intentions that are out of alignment. Personally I don’t think there is enough time to correct this considering the slow process but I could be surprized they did this with the upskirting bill after the Supreme Court shot down the existing law.

    Will chamber a round and shoot this Turkey (H4185) down. Frank has his grammatical homework to do. My suggestion that he takes his letter and drag and drop language from his letter into the new bill. Can this be reintroduced on a priority basis next session?

    And can all future bills be plain language like our auto insurance policies?

  14. As an SREC-I generator, I agree that I should contribute toward maintenance of the grid that my system relies upon. But this should be proportional with giant producers and consumers who benefit from it in much greater scale than I. A minimum bill is the opposite of that.

    Wouldn’t it make the most sense to recoup this cost from all consumers and producers in proportion to the AMPERAGE of their connections to the grid, rather than to their usage/production?

    That way two similar residences would contribute equally, regardless of who is producing solar energy — removing a disincentive to install solar.

    Large producers and generators would pay proportionately more due to the higher amperage of their connections.

    1. Correct. A “certain fee” that would be a good deal smaller than $5 since large-scale customers that had a hundred times worth of hookup amperage would be paying a hundred times that fee.

      It treats “depending on the grid” as an infrastructure cost rather than a usage cost.

  15. Yesterday I attended a briefing on H.4185 for legislative staff. You can see the PowerPoint presentation from DOER here.

    Andrew Bettinelli
    Legislative Aide
    Office of State Senator William N. Brownsberger

  16. If the caps are raised, 4% is really not enough. The muni cap of National Grid – which is the cap of most concern – would be raised by approximately 50 MW. That would probably get eaten up in a matter of days. 5 or 6% would be a more logical number so that any new state solar system could be developed without this sense of panic to do so too quickly. I am ambivalent like most solar industry folks at to whether 4185 or a cap raise goes through this session. I see some sense in 4185 – although the process to get there was troubling. One thing is clear – the industry is in deep trouble if nothing at all happens by Wed.

  17. Another letter in environmentalist support of the bill (with changes) recently arrived — this one from the Sierra Club.

    The Massachusetts Sierra Club supports the increasingly successful transition of the Massachusetts economy to one powered by renewable energy. A major part of that mix of clean energy is solar. We therefore strongly support H.4185.The bill significantly improves very important aspects of existing policy for generating and distributing solar electricity.

    We support the changes advocated in the letter dated July 18, 2014, from the Chapter and our colleagues at Environment Massachusetts, Environmental League of Massachusetts, Health Care without Harm and Clean Water Action. We believe that solar policy should (1) expand access to solar generated electricity to all income groups, including those voters who are members of lower income families, and (2)protect customers from utility price volatility. The Chapter therefore asks the Committee to consider additional changes to expand both access to solar and to expand the market for solar that is not likely to be reached by the proposed bill.

    This expansion of access will not only create more jobs within the Commonwealth but will also break new ground in incentivising owners of apartment dwellings and condominium associations that have solar accessible rooftops and access to community solar opportunities to provide solar power to lower income families. We urge the Committee to empower the Department of Public Utility to adopt and implement regulations that support this expansion.[FN1]

    For that purpose, we propose that there be added as an additional paragraph to Section 11J, to permit multifamily dwelling owners and associations to submeter solar generated electricity by dwelling by implementing the following:

    “In order to promote and facilitate the development and deployment of solar photovoltaic systems for low income users in residential dwellings, including rental apartments and condominiums, the department shall adopt regulations that permit submetering of each dwelling unit that will include metering the use by each such welling unit of electricity generated by a solar system for the rental property or condominium association. For purposes of determining eligibility as a low income user, the department shall use the standards for eligibility for solar rebates for a moderate income and moderate home value.”

    At the present time, most apartment building owners and leases pass on to the residents the cost of electricity to the building owner has no incentive to modernize the electricity sources and systems, or even to promote energy efficiency for that matter. Submetering is an initial step to removing that barrier.

    Solar power’s success is playing a major role in meeting the Commonwealth’s environmental goals. For example, it can grow to be come an even larger factor in reducing the need for more natural gas, which now is responsible for about 65% of the state’s energy needs, as well supplying significant distributed energy to the grid and thereby contribute to grid stability and reliability. A correlative benefit is of course achieving the Commonwealth’s greenhouse gas emission reduction targets. Taking into account these considerations will, we believe, facilitate, not slow, the advance to a more energy-efficient and renewably powered Commonwealth.

    We look forward to the enactment of H. 4185 with the changes as noted. Thank you for your consideration. Don’t hesitate to contact us, if you have questions.

    Respectfully,

    Edward Woll, Jr.
    Chapter Vice-Chair, Chapter Energy Chair
    [email protected] – 617-338-2859
    1 It is important to note that upwards of 80% of households (many of whom are low income voters and renters) and businesses cannot take advantage of roof top solar generated electricity because the roof is unsuitably sized or oriented or is excessively shaded. “The Solar Energy Business Association of New England estimates 80 percent of Massachusetts households and businesses fall in one of those categories.” http://www.commonwealthmagazine.org/Voices/Back-Story/2014/Spring/012-A-solar-garden-grows.aspx “But a majority of residents — nearly 80 percent according to NREL — are discovering their rooftops are unsuitable for solar panels.” http://www.renewableenergyworld.com/rea/blog/post/2014/06/community-solar-complements-rooftop-as-residential-market-booms

  18. I would like to point out that the way Green power is marketed, it never will show a cost advantage over fossil fuel power. I would like to see a slow decoupling between the green power plans on offer and the cost of conventional fueled electric. It would provide an incentive to have green power for cost reasons so that when fossil power spikes like it is now, green power would be a good market based alternative rather than a political and moral statement.

Comments are closed.