THE HOUSE AND SENATE failed to agree on net metering legislation Wednesday night and recessed until next year, leaving the state’s fast-growing solar industry stalled in a regulatory limbo.
Solar developers have been pressing the Legislature for more than six months to raise the cap on net metering before the holiday recess, warning that failure to do so would stall dozens of projects and lead to retrenchment in the industry. Officials say there are 270 companies involved in the solar business in Massachusetts employing 12,000 people.
The Senate passed a measure raising the cap this summer, but the House waited until Tuesday night to vote 150-2 for a bill that raised the cap slightly while slashing the rates solar developers would be paid for the electricity they feed into the regional power grid. The Senate responded Wednesday afternoon by unanimously passing a compromise proposal that scaled back the net metering rate, but not nearly as much as the House. The two branches appointed a conference committee to resolve their differences; the effort went nowhere and the House adjourned at 6:38 p.m. and went home.
As the session wound down, it became clear that the House and Senate held starkly different views of the solar industry. House members paid heed to warnings from utilities and business groups that solar developers were making big profits by tapping into lavish incentives being paid for by electric ratepayers.
The leaders of seven state business groups, including the Greater Boston Chamber of Commerce, the Springfield Regional Chamber of Commerce, the Massachusetts Taxpayers Foundation, and the Retailers Association of Massachusetts, circulated letters urging lawmakers to essentially blow up the existing system for subsidizing solar.
“The current solar subsidy program is unfair, unaffordable, and unsustainable. It is among the most generous in the country,” the business leaders said. “The subsidies no longer reflect the cost of installing solar. Instead, they are exceeding them and these excess costs amount to hundreds of millions of dollars per year paid by the 99 percent of ratepayers without solar.”
Net metering is one of two incentives that solar developers receive, but it is the one that utilities and business groups have focused on in complaining about out-of-control subsidies. The other subsidy, called a solar renewable energy credit, has received far less attention.
Senate officials said they were willing to scale back the net metering incentive, but they warned that the House’s measure would go too far and make solar projects uneconomical. “You can’t just look at the cost,” said Sen. Benjamin Downing of Pittsfield, the Senate’s point person on energy issues. He noted a task force earlier this year examined the cost and benefits of solar and concluded that for every dollar invested in solar the state receives $2.50 in benefits.
Downing also cast the issue in broader terms. “We have been and we must remain a leader in clean energy,” he told his Senate colleagues. “This is the way we combat climate change.”
Net metering is the payment system for solar power generators who feed electricity into the regional power grid. Under the existing net metering system, developers are paid the retail price of electricity, about 17 cents a kilowatt hour currently, for the power they deliver to the grid. Caps in utility service territories limit how many commercial and large-scale solar projects qualify for net metering; the cap was reached several months ago in the National Grid territory and is approaching the limit in the Eversource territory.
The proposal passed by the Senate during the summer called for raising the net metering cap and revamping subsidies for solar power later. The House’s proposal on Tuesday raised the cap slightly and called for dramatically reducing the net metering rate once the state reaches 1,600 megawatts of installed capacity (it’s currently at about 950 megawatts). The House proposal set the new net metering compensation rate at the wholesale price of electricity, which is about 5 cents a kilowatt hour currently. A 5-cent rate would have represented a 71 percent reduction in income for solar developers. The House bill also set in motion a regulatory process to establish minimum utility bills, so even solar generators that produce more electricity than they consume would have to pay some of the cost of maintaining the power grid.
The Senate responded on Wednesday with an amendment to the House proposal that did away with the minimum bill language and created a trio of net metering rates. Under the Senate proposal, residential and small commercial and industrial solar projects would have received a rate equal to the retail price of electricity, currently 17 cents a kilowatt hour. Low-income, public, and so-called community solar projects would have been paid the retail price of electricity minus the distribution charges contained in the rate, which Downing said worked out to about 12 cents a kilowatt hour. All other projects would be paid the rate utilities charge customers for the power they purchase on their behalf, which is currently 8 cents a kilowatt hour.
Downing told his colleagues that the Senate proposal was not ideal, but it was better than not getting anything done and running the risk of undermining the state’s solar industry.
Solar developers have been warning that projects would be canceled if the Legislature failed to act before recessing. The developers say it takes 8 to 12 months to put a solar deal together. With a key federal tax incentive that reimburses solar developers 30 percent of the cost of a project set to expire at the end of next year, time is running short.
“Months of inaction and delay fueled by utilities and their high-powered allies led to this missed opportunity, which will directly harm consumer savings, local jobs, and solar progress for a growing number of communities,” said Sean Garren of the advocacy group Vote Solar. “Because House leaders ran out the clock, 171 towns and cities [in the National Grid territory] will be left in the shade and more will be joining them when further net metering caps are hit. The result is that hundreds of planned solar projects will wither on the vine and millions in investment dollars will go to other states.”
Legislative officials said the conference committee would continue to meet over the holiday recess to see if the differences between the branches can be resolved. But the philosophical gulf between the House and Senate is wide. Rep. Brian Dempsey of Haverhill, the House’s budget chief and a member of the conference committee on solar, said the six-member group of senators and representatives met to demonstrate a commitment to finding common ground. “But the issues aren’t necessarily easily revolved,” he said.