In the increasingly contentious debate over solar energy, listen to what’s not said as much as what is said.
The state’s utilities and their business allies talk about the high cost of solar, but never mention its benefits. Solar developers and advocates talk about the benefits, but almost never talk about the cost. The result is a disconnected debate that goes nowhere, leaving lawmakers and the public in the dark about the true costs and benefits of the state’s incredibly complex solar incentives. What follows is an attempt to separate fact from fiction.
Associated Industries of Massachusetts ran a full-page ad in the Boston Globe recently that claimed the solar industry is seeking more than $8 billion in subsidies over the next 10 years. That seems like a lot.
AIM ran the ad, but officials with the business group say the numbers in the ad came from the state’s two leading utilities, Eversource and National Grid. The utilities have led the fight against solar incentives. The problem with the $8 billion number is that it ignores the financial benefits of solar. It’s like focusing on the cost of energy efficiency efforts without considering the savings from those initiatives. Paul Hibbard, an energy analyst and former chairman of the state Department of Public Utilities, said in a 2015 paper that the cost of solar is important, but it shouldn’t be viewed in isolation. He described the cost analysis of the utilities as “incomplete and misleading.”
On the same day that AIM ran its ad, the Environmental League of Massachusetts ran its own ad attacking the utilities. Why is the solar debate getting so contentious?
The two major solar incentives – net metering and solar renewable energy credits – are largely maxed out under current law. Solar developers say the industry is likely to stall unless the Legislature acts to extend the incentives or craft new ones. Massachusetts environmental policies – a new study released Thursday by the Environmental League suggests the state is unlikely to reduce its greenhouse gas reduction targets by 2020 – and big dollars are at stake.
What are the economic benefits of solar?
Solar installations reduce the need for new power plants, avoid the emissions from the plants, and often provide energy at peak demand periods. It’s not easy to calculate the economic value of these benefits, but the Acadia Center, an environmental group, took a stab last year. The group estimated the economic value of solar to the region’s power grid ranges from 22 cents a kilowatt hour to 26 cents a kilowatt hour, and the environmental benefit is worth 6.7 cents a kilowatt hour.
The cost of solar installations is coming down, so why aren’t the cost of the state’s incentives coming down, too?
Lawmakers on Beacon Hill are trying to decide how much solar incentives should be reduced. One incentive, for solar renewable energy credits, has already been cut, but you’d never know it from reading the materials put out by the utilities and AIM. Solar developers receive renewable energy credits for the power they produce, and the credits can be converted into cash at annual auctions. The state’s initial credit program was extremely lucrative for solar developers, paying them about 45 cents a kilowatt hour for their power, more than twice the retail price of electricity. But that initial credit program was revised in 2014, lowering the credit’s value to 27 cents a kilowatt hour. Utilities continue to focus on the old credit figure, in part because projects launched when that was available continue to receive it for 10 years. But it’s not realistic to roll those credits back now, since developers built their projects relying on the incentive rules in place at the time.
At 45 cents or 27 cents, the credits still seem on the high side, given that the retail price of electricity right now is about 19 cents.
I agree, and it’s likely further reductions are coming. But some in the solar industry say not all of the money is flowing to developers. They say hedge funds have bought up a lot of the renewable energy credits and are manipulating the market to their advantage.
Why are the utilities so alarmed about solar?
Utility officials are convinced solar can be built with fewer subsidies; they say they just want to protect their customers from excessive charges. But the aggressive campaign by utility officials to slash solar incentives suggests they perceive solar as a threat to their business model. The more solar that gets installed the less need there is for the electricity that utilities deliver to homes and businesses.
How aggressive is the utility solar campaign?
Pretty aggressive. When the Environmental League of Massachusetts was launching its ad campaign, utility officials reached out to ELM board members and funders in a bid to dissuade them. An Eversource spokeswoman said Tom May, the CEO of Eversource, and Charles (Chad) Gifford, an Eversource board member, made some of the calls.
How are solar advocates responding?
They tend to ignore the cost of solar, and push back against efforts to reduce solar incentives by accusing lawmakers open to the idea of being utility pawns. One ELM ad said utilities and their “army of lobbyists” want to keep Massachusetts residents “mired in the Stone Age of pollutants and pipelines.” Another ad highlighted the hefty profits of Eversource, and suggested that “businesses and homeowners are demanding solar energy, but the utilities stand in the way.”
Is there any hope for a more rational debate?
Unlikely, but there is a glimmer of hope. The Baker administration has very close ties to the state’s utilities, but the Department of Energy Resources is in the process of hiring a consultant to examine the costs associated with solar installations in Massachusetts and the incentives needed to keep the industry moving forward.