How well do consumers understand rooftop solar economics?

Solar's vibrant growth is attracting scrutiny, including from the Federal Trade Commission

Solar power’s robust growth is attracting increasing scrutiny.

The Federal Trade Commission (FTC) held a workshop on June 21 to examine competition and consumer protection issues raised by solar’s growth, particularly the growth of residential rooftop solar panels.

The workshop, “Something New Under the Sun: Competition and Consumer Protection Issues in Solar Power,” set out to examine four issues, ranging from the state of the solar industry to net metering and competition within and among industry stakeholders, to consumer protection issues.

The FTC got an earful.

There was also some unwanted publicity in the run-up to the meeting when Politico Pro reported that New York Rep. Yvette Clarke (D) signed her name to a letter written by the Edison Electric Institute.

The letter claimed that solar companies push the risk in solar lease arrangements on customers without fully explaining the financial outlook and consequences of those arrangements.

Many of those concerns all were captured in comments filed by Mark Brnovich, the Arizona attorney general, who cited “common misrepresentations” made by solar companies. In particular he cited claims that solar panels will save customers significant amounts of money on electricity costs, claims that future utility rates will dramatically increase, and claims that homeowners will receive large tax savings and rebates.

Key to many of those claims are issues related to the how well consumers understand utility cost projections and the economics of net metering.

Net metering was featured prominently in the meeting and was the subject of a panel discussion featuring two former commissioners from the Federal Energy Regulatory Commission, Philip Moeller, who is now a senior vice president at the Edison Electric Institute, and Jon Wellinghoff, now chief policy officer at SolarCity, as well as several economists.

Net metering —a crediting mechanism that compensates rooftop solar users for the excess energy they export to the grid—is an essential value proposition to customers for many solar companies financing rooftop solar arrays. Any cuts to the remuneration rate paid to consumers under net metering can have immediateand sometimes drastic consequencesfor the companies' business model.

Moeller said that under net metering arrangements, solar customers “are not paying their fair share” while Wellinghoff argued in favor of a compromise solution such as the settlement in New York that proposes to move the state away from net metering.

On the academic side, the panelists presented a range of opinions on the allocation of costs and benefits of distributed solar, from the position that there is no connection between net metering and value from Severin Borenstein of the Haas School of Business at the University of California, Berkeley, to the arguments of Karl Rabago, executive director of the Pace Energy and Climate Center, who argued that utilities should not be able to charge a cost for not using their product, electricity, which is one of the key arguments in favor of granting utilities demand charges to offset the use of solar DG on their systems, to Tim Woolf, vice president of Synapse Energy Economics, who argued that approaches should be tailored according to state mandates and goals.

The debate underscored that, far from reaching a consensus on net metering policies, there is still a lot of work to be done to reach agreement on how to even measure the costs and benefits of distributed solar to the grid and to customers. But reaching such an accord may not be entirely favorable to distributed solar.

“When we get to the point that rates reflect the real costs and real benefits, it is quite possible it could kill or greatly reduce DG solar installations,” Borenstein said.

What to do about net metering

At least 35 net metering debates are taking place in 22 states as utilities and solar companies argue over the fair way to compensate distributed generation users for their excess energy. 

That intensity of opinion and range of opinion was also reflected in the comments filed with the FTC. Meredith McClintock, filing for RePower by Solar Universe, said that the elimination of net metering rates could significantly reduce solar's value proposition and has created enough uncertainty to severely curtail the market. She called net metering uncertainty “the greatest threat to DG growth.”

Becca Polisuk, senior legal counsel for Sunrun, writing for The Alliance for Solar Choice, argued that some utilities use electric rate design to stifle competition and cited example in Ohio and Michigan where utilities are either attempting to directly compete with solar providers (Ohio) or are trying to roll back net metering benefits.

“While enacting and maintaining policies like [net metering] is important to creating a competitive DG market, the threat of elimination of these policies can be just as damaging, and can keep a robust market from developing or, in the case of Nevada, the actual elimination of [net metering] can virtually eliminate an existing market.”

Thomas Kimbis, interim president for the  the Solar Energy Industries Association (SEIA), argued that “threatened incumbent utilities are using anticompetitive behaviors and taking advantage of their market position gained through monopoly powers designed for yesterday’s electricity platform, to stifle competition from DG solar companies.”

Kimbis also said that utilities are beginning to attempt to “jump platforms” by seeking to own and operate DG solar, which should raise “red flags” across the states, and he recommended that the FTC take a hard look at the anticompetitive actions of utilities in DG solar.

Those anti-competitive claims were turned around on the solar industry in a filing by Ashley Brown, executive director of the Harvard Electricity Policy Group at the Harvard Kennedy School.

Companies such as SolarCity are selling a wholesale product at retail rates via net metering, and “everyone is getting hosed,” Brown said in an interview. That eliminates competition and ensures that the costs declines in PV panels do not get passed on to consumers, he said. “Net metering is a tax on the poor a transfer of wealth.”

Brown cited studies by the Massachusetts Institute of Lawrence Berkeley Laboratory that suggest that American consumers of rooftop solar may be paying a premium, compared to other parts of the world. “The way they are selling is a scam,” he said.

Brown also argues that rooftop solar installations are much less cost effective than utility scale solar, a claim that was also mentioned by Borenstein and Moeller or EEI.

The public comment period is open on the FTC website until Aug. 22. The agency has no definite plans to follow up on the workshop. “The info just helps the staff know more about the issues,” FT public affairs officer Frank Dorman said.

Follow on Twitter

Filed Under: Generation Transmission & Distribution Solar & Renewables Distributed Energy Regulation & Policy
Top image credit: www.inhabitat.com