Costs and Benefits Debated as Connecticut Approves New Plan for Home Solar Payments

Connecticut regulators this month approved a new method of reimbursing residential producers of solar energy – an issue that has in the past divided Eversource and the solar industry — but leaves unresolved key questions of the cost and benefit of residential solar to the state’s energy consumers.

In 2018, lawmakers directed the state’s Public Utilities Regulatory Authority to revise the formula for reimbursements, in part in response to criticism by Eversource and others that the state’s net metering program was an overly expensive attempt to promote solar development.

Connecticut has historically used net metering to pay homeowners for any unused electricity that is fed into the grid.

The new program, set to take effect in early 2022, includes a similar net metering option, but also includes a “buy-all” option that would purchase 100 percent of a household’s energy production, but at a rate intended to provide a comparable return for homeowners. That option would make it easier for regulators to track how much utilities like Eversource are paying for that power.

The 2018 legislation also called for a study to fully analyze the costs and benefits of the state’s home solar incentives and other “distributed energy resources,” but the state’s regulators found the results lacking and did not incorporate the findings into developing the new reimbursement program.

That study — a joint effort by PURA and the Department of Energy and Environmental Protection — was also clear about its limitations: it did not include the cost of home solar to the state’s energy customers, a politically-charged subject, and did not quantify many of the benefits of home solar cited in its report.

Mike Trahan, executive director of SolarConnecticut, the state’s solar trade group, said the industry was in favor of the study. He said he was disappointed that the study wasn’t able to determine the value of domestic solar.

“We had hoped that the study would once and for all end this flimsy viewpoint that there is a net cost shift to non-solar users,” Trahan said.

Eversource had cited a DEEP analysis to argue that payments to residential solar generators  were higher than they needed to be to procure the amount of solar energy they generate, and that the payments were passed on as “hidden costs” to electric customers without solar arrays.

Proponents of residential solar argue that even if solar owners are paid higher than the market rate for the electricity they produce, a “cost shift” to customers without solar arrays isn’t significant until such solar projects – like those on house rooftops – make up 10 percent of power generation.

Based on that analysis, Connecticut would need to contribute twice as much domestic solar energy as it does now to have any significant effect on electric rates.

Those claims are backed by several studies, including by a 2017 study by the Lawrence Berkeley National Laboratory.

“Those people who believe in cost shift think that 50,000 homeowners that have solar on their roof right now are causing some sort of economic calamity for the other million ratepayers who don’t have solar,” Trahan said. “That’s ridiculous.”

A new program, more transparency?

Part of what makes solar “cost shift” a convenient political cudgel is that there is no hard data on how much residential solar incentives actually cost Connecticut’s other ratepayers, and the costs are spread throughout different rate-setting calculations.

The debate over net metering boils down to whether the benefits outweigh the costs, said Bert Hunter, executive vice president and CIO of Connecticut Green Bank.

In theory, the “buy-all” option will allow regulators to moderate the cost to consumers, instead of just letting home solar owners sell their unused electricity at the same retail rate charged to Eversource customers, something that Hunter described as a “blunt instrument.”

“Buy all” costs should be easier to track. It’s as simple as multiplying the amount of power purchased from home solar arrays by the rate – which will be fixed and set by PURA each year.

But complicating this new payment program – meant to be in place from 2021-2027 – is the inclusion of a new metering option similar to the existing system for reimbursement.

Those payments will be calculated by the monthly net energy provided to the grid and paid in the form of bill credits that roll over indefinitely. What’s different, is that those bill credits can’t be cashed out at the end of the year like they can now. Instead, customers will have to wait until they end their electric service contract, like when moving out of their house.

Problem solved, but questions unresolved

That both Eversource and SolarConnecticut have agreed to the new plan is a far cry from where the two sides were as the debate consumed lawmakers just three years ago. Trahan and Brad Mondschein, the deputy director of SolarConnecticut, credit Eversource with reaching out to find common ground to work from.

“That’s a first, as far as I know,” Trahan said. 

While they’ve reached an agreement on a new tariff system, the underlying questions remain – with costs too difficult to calculate, and benefits too difficult to quantify.

According to Green Bank President and CEO Bryan Garcia, home solar projects have different benefits for different people.

Homeowners with solar want to control their energy costs or help reduce carbon emissions. Policymakers may reckon that a series of smaller solar installations create more jobs than large-scale projects, he said.

Hunter said that there are benefits to the resilience of the electric grid, as people with solar and battery storage could still have power as long as their battery keeps recharging, even if there is an outage.

Distributed energy like home solar can also be valuable generators for microgrids – designed to keep power for essential services like hospitals, shelters and emergency services during widespread power outages, according to the value study from DEEP and PURA.

SolarConnecticut will ask the agencies to start that cost-benefit study again.

“We should start by going back to the vendor and saying, ‘Look, everybody agrees your model doesn’t have what it takes to capture all of the benefits, can you improve your model so we can continue the process?’” Trahan said.

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