Connecticut legislature poised to act as community solar collides with net metering

Source: By Herman K. Trabish, Utility Dive • Posted: Wednesday, March 28, 2018

Connecticut’s community solar law has run head-on into the state’s net metering debate.

State legislators are scheduled to decide this week whether to move two key bills forward. One would mandate a new community solar program for the state. Among the many energy issues covered in the second is a controversial change to net energy metering (NEM).

Supporters of community solar don’t want it to be hampered by the proposed change to NEM. Advocates for the change to NEM don’t want the community solar law to move ahead without it. The result could be solar gridlock.

The numbers show how popular community solar, also called shared solar, is becoming. In 2015, 68 utilities in 23 states had projects; By March 2018, 228 utilities in 36 states had projects, according to the Smart Electric Power Alliance.

The District of Columbia and 17 states have codified community solar policies, according to the Coalition for Community Solar Access (CCSA). Connecticut’s long-delayed pilot projects were approved late in 2017 and this year’s Senate Bill (SB) 336would mandate a full-scale program – if the NEM debate doesn’t stop it.

A provision in Senate Bill (SB) 9, a budget bill with multiple energy provisions also working through the legislature, radically changes Connecticut’s retail rate NEM compensation for customer-owned solar. Solar industry and environmental advocates say SB 9’s compensation reform is unacceptable. Utilities and the state’s consumer advocate say NEM must be changed.

A decision by the Joint Senate Energy and Technology Committee is due by the end of March on still-evolving compromise compensation mechanisms. The vote could affirm compensation that allows the two bills to be merged. Or it could prevent one or both bills from moving forward. Community solar’s future in Connecticut hangs in the balance.

Model legislation

SB 336 is a “prime example” of how CCSA’s model legislation can be a tool to guide state policy, according to coalition Policy Director Brandon Smithwood. It reflects community solar “best practices,” developed from “lessons learned” in many programs. Its foundation is the CCSA’s policy matrix, which outlines key policy design decisions, he added.

Community solar allows developers and utilities to aggregate the more than half of all residential and small business electricity customers who do not have solar suitable roofs or cannot access rooftop solar. Each “subscriber” in the aggregated community buys a portion of a large-scale solar project.

Until 2015, there were less than 100 MW of installed community solar capacity, but by the end of 2018 there is likely to be more than 1 GW online, Smithwood told Utility Dive. Community solar is now “scaling and maturing,” but its potential is still almost untapped, he added. “Research has shown community solar has 7 times the addressable market of residential rooftop solar.”

Many of SB 336’s key specifics reflect provisions recommended by the CCSA model legislation, according to Smithwood.

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An example is the bill’s proposed 300 MW target for the first phase of development, he said. That is where Connecticut rooftop solar is likely to be by 2020 and follows CCSA’s suggestion to link community solar growth to residential solar growth. The ambitious target is crucial to achieving the economies of scale that make community solar affordable, Smithwood added.

“Where community solar projects are more expensive than rooftop projects despite the economies of scale, the case for supporting community solar essentially evaporates.”

Elin Swanson Katz

Head of Connecticut’s Office of Consumer Counsel

The proposed law’s requirements and timelines also follow CCSA recommendations, he said. They came from hard lessons in Massachusetts, where the lack of a deadline and rules on bill crediting are causing turmoil because utilities are not crediting subscribers in an accurate and timely way.

Other aspects of the customer bill credits are also well-handled by SB 336, according to Smithwood. It makes clear that the program’s first phase compensation will be through retail rate NEM and compensation after that should be through a “value of solar credit” determined in a Public Utilities Regulatory Authority (PURA) proceeding.

Several provisions for low and moderate income (LMI) subscribers in SB 336 follow CCSA recommendations, Smithwood said. They require cooperation with LMI customer advocates and organizations. The bill recognizes community solar’s “unique potential to expand access” by going beyond CCSA’s template” to create additional goals and supports,” he added.

Finally, and importantly, SB 336 follows CCSA’s project co-location recommendations. They were designed to avoid the regulatory and legal battles over an inadequately definitive co-location provision that delayed Minnesota’s now booming program for nearly two years, Smithwood said.

Connecticut Fund for the Environment Climate and Energy Attorney Claire Coleman agreed with Smithwood that much of the bill came from CCSA’s model legislation. But, she added, other provisions were developed based on work done by the Connecticut Academy of Science and Engineering, the Interstate Council on Renewable Energy and local stakeholders.

The opposition

Eversource Energy, Connecticut’s dominant electric utility, declined Utility Dive’s request for an interview and deferred to Attorney Vincent Pace’s testimony to the Joint Energy and Technology Committee.

Eversource “respectfully opposes SB 336 because there is insufficient information, at this time, concerning the three shared solar pilot program proposals,” Pace’s March 6 testimony said.

The pilots referenced by Pace were mandated in 2015 and 2016 legislation. Two are in Eversource territory and a third is in the service territory of United Illuminating (UI), Connecticut’s other major investor-owned utility. They were approved by the Department of Energy and Environmental Protection (DEEP) in June 2017 and by PURA in November 2017.

No action should be taken on SB 336 until “a report on the pilot program is filed,” Pace testified. The report will allow regulators and stakeholders to “evaluate the results and identify lessons” on which to base their decisions on community solar.

Roddy Diotalevi, UI’s senior director for external relations, made a similar argument against SB 336 in March 6 testimony to the committee. UI did not respond to Utility Dive’s requests for an interview.

Connecticut Fund for the Environment’s Coleman rejected the utilities’ argument. “It is another delaying tactic to slow the growth of shared solar,” she told Utility Dive. “DEEP and PURA will be able to consider the initial report on the pilots, due in July, while working to meet SB 336’s September 2018 deadline for final program rules.”

Both Eversource and UI also objected to SB 336 because of community solar’s cost. Each of the pilot projects is priced at more than $0.16/kWh “while large scale renewable costs have dipped below $0.09/kWh,” Diotalevi testified.

Change in compensation

More significantly, Eversource wants a major change in compensation to customer-owned solar that would replace NEM with a different and lower compensation.

“Payments to net metering customers are currently significantly in excess of the payments needed to purchase and install the generation equipment,” Pace said in his March 1 testimony to the committee on SB 9 — the budget bill that includes an update to net metering provisions in Connecticut.

The state’s costs associated with the present retail rate NEM incentive are shifted to non-solar owners and that shift will grow with the solar penetration, Pace testified.

SB 9 covers a wide range of issues, including provisions about the state’s solar incentives, its renewables mandates, its renewable energy credits and its energy efficiency program. But, crucially, it proposes to replace retail rate NEM with a buy-all-sell-all incentive.

Such compensation would remunerate distributed generation (DG) owners at approximately the wholesale rate for exported energy and charge them the retail rate for electricity. Onsite generation would not be deducted from their bills. The bill orders a PURA proceeding by Sept. 1 to set the precise value of the remuneration.

Eversource’s Pace testified that the SB 9 compensation structure would clarify energy transactions, limit the shift of costs to non-DG owners, and allow a better understanding of the benefits and costs of DG.

Connecticut Office of Consumer Counsel (OCC) head Elin Swanson Katz supported the utilities’ arguments.

“Two truths are paramount: (1) clean energy is important; and (2) ratepayer funds are limited,” she told the committee in March 6 testimony on SB 336. “Where community solar projects are more expensive than rooftop projects despite the economies of scale, the case for supporting community solar essentially evaporates.”

SB 336 includes “many of the design elements that one would want to see in a community solar program,” she said. They include provisions for LMI customers, for subscriber diversity, and for consumer protections. Its biggest drawback is its scale. A mandate with “no upper limit” could consume the energy efficiency program and limit competition from other resources, Katz testified.

OCC “welcomes and supports” the compensation structure proposed in SB 9, Katz added in her March 1 testimony. ”It is certainly time to move to a more cost-effective approach than net metering.”

OCC’s evaluation of NEM found it to cost non-DG owners “well over $0.20/kWh when you factor in the cost shift and the programmatic costs and other available subsidies,” she reported. But OCC rejects a value of solar approach because DG should be compensated not at its value but at its cost.

Acadia Center Staff Attorney Mark LeBel said both bills are being negotiated and it is unclear what the committee will do.

The politics of Connecticut solar

Democratic Senator Gary Winfield, co-chair of the Energy and Technology committee, is SB 336’s lead sponsor. Amid ongoing negotiations, he and other legislators did not respond to Utility Dive’s interview requests.

SB 336 is an “ideal community solar program in many ways” and has the support of Connecticut’s environmental and renewables advocates, LeBel said. “We support SB 336 and we do not support SB 9 because of its net metering and energy efficiency reforms.”

If those who support SB 9 are unwilling to change the buy-all-sell-all proposal, “we would be happy to see SB 336 move forward on its own,” he told Utility Dive.

“There are productive ways to change NEM. But the proposal in SB 9 prevents solar owners from benefiting from their own generation.”

Acadia Center, Connecticut Fund for the Environment and other solar and community solar advocates prefer an NEM successor tariff based on a complete calculation of the value of solar, including its costs and benefits. Some are unwilling to move away from retail rate NEM. LeBel sees a middle ground.

“A transition to a new method of compensation over the long term is necessary for when solar penetration is higher,” he said. “There are productive ways to change NEM. But the proposal in SB 9 prevents solar owners from benefiting from their own generation.”

There is still a good chance there will be substantial energy legislation in this session, LeBel said. The NEM debate is the “key sticking point.”

Connecticut Fund for the Environment’s Coleman said NEM can be a basis for solar in Connecticut in the near term. The utilities and OCC want more cost-effectiveness and transparency from DG compensation, she told Utility Dive. “We can get there without eliminating net metering.”

Connecticut’s installed solar capacity “is not nearly at the level that cost shifting is of any threat,” Coleman said. But, she added, “there could be benefits to moving away from a retail rate structure to a more value-based compensation system. That would reduce costs and be more transparent.”

What is unacceptable is “any compensation approach that limits customers’ access to rooftop or community solar,” she said. “We need to determine the right successor tariff, but net metering is working now.”

Like Acadia, Connecticut Fund for the Environment would like to see SB 9 and SB 336 merged, “and we can do shared solar without SB 9,” she agreed.

Election year boost?

NRG Energy Communications Director Dan Hendrick said the fact that 2018 is an election year may help community solar. “Members want to show their constituents some successes.”

Based on NRG Energy’s experience building community solar in several states, SB 336 is well designed, Hendrick told Utility Dive.

Stakeholder resistance to the buy-all-sell-all proposal in SB 9 has lawmakers concerned that the issues cannot be resolved before the legislative session ends in early May, he said. “But there is a path forward because the state wants jobs and economic growth and community solar can provide those things while helping to meet the new climate goals.”

A vital provision in SB 336, from a developer’s perspective, is the two-phase plan, through which 300 MW would be built with NEM and a next phase would be built with the successor tariff, Hendrick said. “That gives the industry the market signal it needs to start and the time it needs to develop.”

Hendrick, Coleman and Lebel were almost unanimous that the fate of the two bills, and community solar’s fate, will most likely remain uncertain until a committee vote scheduled by the end of March.