News: CJ Exclusives

Solar ‘net metering’ may not be a bargain, analysts warn

Utility can pass cost of rebates to all ratepayers, and homeowners often aren't told of all the costs of installing rooftop solar

House Bill 589, passed earlier this year by the General Assembly, could put allies of North Carolina’s renewable energy industry somewhat at ease, said Randy Wheeless, a spokesman for Duke Energy, at a Nov. 1 meeting of renewable advocates.

The new law lets the utility offer rebates to its customers when they install rooftop solar panels. Wheeless told the Research Triangle Cleantech Cluster the new law should partially offset the impact the industry felt after the 2015 General Assembly killed a 35 percent tax credit for investments in renewable projects.

Even so, ratepayers will pick up the cost of those rebates. Academic and public policy researchers caution that expanding rooftop solar facilities may let green-energy supporters feel virtuous, but the added expense would shift to those who least can afford to pay them.

General Assembly Republicans who oppose corporate incentives wrangled for years with Democrats and green power enthusiasts within their own caucus before finally ending the state renewable energy tax credit.

Duke Energy owns 35 solar facilities in North Carolina. Still, it purchases 10 times more renewable energy than it produces, Wheeless said. The state Renewable Energy Portfolio Standards, which require utilities to purchase an increasing percentage of renewable energy over time, pushed the company to buy more power even if renewable energy costs more than comparable amounts of traditional power.

Duke launched a rooftop solar rebate program in South Carolina a few years ago. At the outset, 27 customers signed up for “net metering” with rooftop solar. Now, 3,500 customers get rebates for either leasing or purchasing the panels, Wheeless said.

Net metering allows residents to power their homes with solar energy, and sell excess power they don’t need to the electric utility.

North Carolina has slightly more than 6,000 rooftop solar customers. Wheeless expects rebates to “spur a lot” more participation in residential areas.

Jon Sanders, John Locke Foundation director of regulatory studies, said utilities fare well under the rebate program because the REPS law includes a provision (known as the “green source rider”) letting the companies recoup the cost of the rebates and higher energy prices.

“Guess what that means about who pays for it? Customers who don’t participate — or can’t, such as people who rent, who live in apartments, or are in mobile homes. It’s another case of forcing poor people to subsidize the choices of the rich,” Sanders said.

“This law basically subsidizes a specific consumer choice for a specific product by consumers who wouldn’t make that choice for themselves. There are many terms for such a thing, but ‘sustainable practice’ is not among them,” Sanders said.

He warned consumers to be careful before leasing rooftop solar installations or participating in net metering. Some companies will advertise the rebates to unsuspecting people, suggesting the installation is all benefit and no cost.

“They’re told their electricity bills will go down, but they don’t find out about other costs until later: Lengthy contracts, maintenance costs, impact on home value, and ability to sell,” Sanders said.

Consumer Reports is one of many outlets warning about those pitfalls.

A 2015 Massachusetts Institute of Technology report titled “The Future of Solar Energy” gave economic reasons to be wary of rooftop solar as a way to meet REPS mandates.

The estimated installed cost per peak watt — a measurement of energy — for a residential photovoltaic system is about 80 percent higher than for a utility-scale plant, the report said. A typical commercial-scale installation falls somewhere in between.

“In an efficient and equitable distribution system, each customer would pay a share of distribution network costs that reflected his or her responsibility for causing those costs,” such as electric grid maintenance and new transmission lines to carry the rooftop load, the report said.

Instead, most U.S. utilities bundle distribution network costs, electricity costs, and other costs into one charge. Then they combine that rate structure with net metering, which pays residential solar owners more for the power they produce than the utility could buy from other sources.

“The result is a subsidy to residential and other distributed solar generators that is paid by other customers on the network,” the report said. The cost shifting already has created conflict in some cities and states, and is likely to worsen, according to the report.

The Institute for Energy Research issued an October 2016 report titled “The High Cost of Rooftop Solar Subsidies” that reached similar conclusions.