Two bills under consideration seek to balance the desire for solar incentives with the burden of high electricity bills.
By Tux Turkel
Two bills now before the Legislature are aimed at reducing future sticker shock for electricity customers, without completely eroding the incentives that have attracted hundreds of millions of dollars in solar investment from across the world in the past few years.
If passed, the bills, L.D. 634 and L.D. 1026, would amend Maine’s net energy billing rules, which dictate how certain classes of solar developers are paid for the power generated by their projects.
“The administration is trying to thread the needle to reduce the impact on ratepayers,” said Maine’s Public Advocate William Harwood, “without doing too much harm to the solar industry.”
Nailing down the precise impact on ratepayers isn’t easy because of the complicated formula that underpins the program and uncertainty about the number of projects that ultimately will get built.
One estimate from the Public Utilities Commission calculated that delivery rates could rise more than 44 percent by 2025, if projects totaling 1,667 megawatts of capacity come online. But if solar reimbursements are trimmed as proposed in L.D. 634 and all proposed projects are built, delivery rates could still rise 35 percent or so, according to Harwood’s estimates.
Delivery rates make up roughly half a total electric bill. Most of the impact won’t come until 2023 or 2024, however, when more projects are in operation.
“Costs associated with this program are significant,” said Susan Faloon, a PUC spokeswoman. “L.D. 634 could potentially result in savings, but the magnitude is difficult to predict.”
Also in play is L.D. 1350, which would direct the PUC to conduct a new round of competitive bids for clean-energy contracts. This would add to the state’s renewable portfolio standard law, which requires that utilities buy certain percentages of power from sources such as solar and wind. Environmental groups made a pitch for the bill Tuesday at a news conference outside the State House. They were joined by construction interests, highlighting the jobs that could be created by building these projects.
To battle climate change, Maine passed laws in 2019 that featured generous financial incentives meant to lure more renewable energy development. One element directed utilities to buy power from projects with under 5 megawatts of capacity at fixed rates.
This provision proved wildly successful. Hundreds of projects with a combined capacity of more than 1,600 megawatts – more than the output of the Seabrook nuclear power plant – announced plans to build. Today, roughly 160 megawatts have come on line, but many others projects are in various stages of permitting and development. These are a combination of community solar farms supported largely by residential subscribers and projects built for commercial and institutional customers.
But there’s a problem.
Reimbursement for the commercial projects is tied to the so-called standard offer, the annual default rate that most homeowners and small businesses pay for their electricity supply. Global spikes in energy prices, notably for the natural gas that fires half of the power generation in New England, sent standard offer rates up by more than 80 percent this year.
That created a windfall for solar developers, but a mounting burden for electric customers. Roughly 65 percent of all the projects currently online are commercial and institutional, and the net cost of their power ultimately is recovered from ratepayers.
At today’s wholesale energy costs, utilities such as Central Maine Power and Versant Power have to pay solar developers for the price of the power, which now is in the 20-cents per-kilowatt-hour range. It’s galling for consumer advocates, as well as large businesses that use a lot of electricity, because solar power from larger-scale projects that win contracts under a separate program run by the PUC have been signed at closer to 5 cents per kWh.
“Why pay 20 cents for renewable power when we know we can get it for five?” Harwood said.
Recognizing the growing disparity, lawmakers last year reined in some incentives. They reduced the eligible capacity limit for projects, from 5 megawatts to 2 megawatts. They also set up a working group to hammer out longer-range changes to net energy billing and to make recommendations for the 2023 legislative session.
But with Mainers facing high energy prices right now, lawmakers are under pressure to take more immediate action – not without controversy.
Net energy billing debate
Community solar has proven popular with Mainers. Thousands have signed up for the growing number of projects, and get credits worth 10 to 15 percent of their bills for subscribing. But other customers have to make up the cost, which is higher now than anticipated and is expected to remain high over the next few years, when the bulk of pending projects are due to start operating.
The Mills administration has been negotiating with the solar industry to lower the impact. A key element in the amended version of L.D. 634 would reduce the reimbursement for projects that haven’t “commenced physical work of a significant nature” by Sept. 1, to rates that were in effect in 2020. That was before the big run-up in energy prices.
According to the Governor’s Energy Office, this measure would have the effect of reducing the cost of the commercial net energy billing program from roughly 21 cents per kWh to 13 cents, a number in line with the value in other New England states.
Lobbyists are doing their best to influence the final outcome.
Paper mills and factories that use a lot of power dislike the net energy billing program. Tony Buxton, a lawyer who represents the Industrial Energy Consumer Group (IECG), calls the program poorly designed and a mistake. Even before the standard offer rate increases, he said, it would cost customers $2 billion over 20 years.
“IECG has fought against uncontrolled net energy billing for three years,” Buxton said. “This is the only energy purchase legislatively mandated in Maine history over which the PUC has no control whatsoever.”
Buxton has been skeptical of the Governor’s Energy Office compromise, which he said has been worked out behind closed doors with little public input.
“I think the administration does want to lower NEB costs,” Buxton said, “but believes it cannot overcome the national solar lobby and its wealthy Maine beneficiaries.”
Mid-game rule changes
But from the solar industry’s perspective, Maine seems to be changing the rules in mid-game. Companies have made major investments based on the policies articulated in 2019, and expected them to remain in effect as projects went from conception to development.
“This is something we did not want and do not like,” said Jeremy Payne, executive director of the Maine Renewable Energy Association. “We’re watching this very closely.”
Payne said the industry already has accepted project size eligibility being cut from 5 to 2 megawatts. Now Maine is contemplating more “retroactive changes to policy,” he said, unwelcome and unexpected adjustments that could make solar developers think twice about the stability of Maine’s renewable energy business climate.
“Is Maine a reasonable place to invest?” Payne said they are asking.
How this will play out in the Legislature is uncertain. The two solar bills garnered divided reports in the legislative committee that handles energy and utility matters. And it’s not a simple ideological split among Democrats, Mills and Republicans. Rather, some Democrats disagree about the best path forward to both protect consumers and encourage renewable energy development.
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