Cloudy days ahead for Maine's solar industry?

More affordable solar array technology, a federal tax credit, net metering and the prospect of cheap, clean electricity brought sunny days to Maine's solar industry in recent years.

But the industry is bracing for the upcoming rollback of Maine's net metering rules and what some are calling a “behind-the-meter tax,” which could have a chilling effect on the industry's growth. The future gets cloudy at a time when Maine is already falling behind its counterparts in New England and much of the nation.

As of this writing, a bill is in committee at the state Legislature that would essentially pause the rollback. The rollback has created concern among consumers and the combination of policy uncertainty and overall lack of state support for solar is creating challenges for solar providers.

“Because we've had a good net metering policy, the federal tax credit and the price of PV modules has come down dramatically — all of that contributed to continued interest in solar energy,” says Sundog Solar owner Chuck Piper. “But that's going to dry up and probably go away if the new net metering rules don't get changed. I don't know how people are going to react to that.”

Piper was referring to a Maine Public Utility Commission ruling, issued in January, that will phase down credits that new residential customers can receive for excess energy that's sent back to the grid. The rule will go into effect Jan. 1, 2018.

Artificial surge

With the new rule set to go into effect in five months, solar equipment providers are seeing a surge of demand, as customers aim to get solar arrays installed under the current net metering rule.

“People are coming out of the woodwork to install solar, so they can be grandfathered in,” says Piper.

That's creating something of a dilemma from the business-planning perspective. For now, Piper has enough work to take his crew into August, and the phone is still ringing. But he expects there could be a drop-off come Jan. 1.

“I'd like to hire more people, but how can I hire people when I have to lay them off in January?” he says. “We need stability and the assurance that we're going to be able to keep them employed,” especially given that it takes time to train new hires.

At ReVision Energy, Maine's largest solar equipment provider, co-owner Phil Coupe is having the same problem.

“We're noticing more people moving forward with contracts, but we're pretty concerned there will be a significant drop-off in that interest come Jan. 1 2018,” says Coupe. “As a business trying to make responsible decisions about hiring and investing in trucks and equipment and additional space, you feel like your hands are tied, because on the one hand you have increasing demand, but on the other hand you're worried demand will fall drastically at the turn of the new year. It's really challenging to operate a sustainable business in an uncertain policy environment.”

PUC's phase-down

According to the PUC ruling, the new rule locks in a phase-down schedule that gradually decreases the amount of credit that new residential customers can receive on the portion of their bill known as T&D, for transmission and distribution.

Customers are locked in, at the year in which they enter, for 15 years. For example, in Year 1, customers will receive 90% of the T&D portion as a credit for each year of the 15 years. For a new customer installation in Year Two, the credit will decline to 80% for T&D. Current solar customers are grandfathered for 15 years. The new rule doesn't affect the credit customers receive on the supply portion of their bills.

In its ruling, the PUC says the credit reduction is justified for two reasons. The cost of solar technology has significantly declined and is projected to continue to decline substantially, mitigating the need for incentives. And it will eliminate the shifting of T&D costs from “net energy billing” customers onto other customers.

“Because the costs of the T&D system to serve NEB [net energy billing] customers are still incurred by the utility, these costs are ultimately paid for by other customers,” the ruling says. “This is what is referred to as a 'cost shift' and there can be no doubt that it exists.”

A contentious issue

Forty-three states have net metering plans, and the Maine PUC rollback is one of many sought around the nation. The debate revolves around the reimbursement that rooftop solar owners receive from public utilities when they send excess energy back to the grid. That reimbursement is viewed by net metering opponents as a subsidy whose costs fall on the shoulders of utility ratepayers.

“There's a lot of emotion on both sides,” says William Harwood, a partner on the Verrill Dana energy team in Portland. “There are some who feel that renewable energy, including solar power, is critically important, and there are others who are very concerned about fairness in our electric rates and who want to make sure that, when we charge consumers, we spread the costs and the burden as fairly as possible.”

Net metering was not a big issue, Harwood notes, in the early years of rooftop solar.

“But as that's grown, net metering has come front and center, and I think a lot of people believe it's not sustainable,” he says. Part of the problem, he says, is that Maine's NEB allows solar owners to sell electricity to the utility for a retail price rather than wholesale, which doesn't allow the utility to fully recover its costs when it resells the excess power into the wholesale market.

“Eventually, what happens is that more people take advantage of the subsidy and there are fewer people to pay for it,” he says.

Utilities incur other costs from NEB, Earl Ritchie, a University of Houston lecturer, wrote last year in Forbes. That includes billing, support services, grid maintenance and other operational functions to accommodate net metering.

“Typically, unrecovered costs are transferred to customers who do not have solar installations by raising electricity rates,” Ritchie wrote.

With low penetration in the solar market, adds Harwood of Verrill Dana, Maine isn't as far along in the problem as other states. “But I think we're going in the direction where we would be well advised to pause and take a look at it.”

Piper of Sundog Solar has his own take. He offers the following example of how the coming phase-down would affect a typical residential customer:

• A customer with a 10.8kW system of 36, 300-watt solar panels will produce 14,862 kilowatt hours per year.  Under net energy billing, the value of that electricity in Central Maine Power territory is $2,229.  Fifty-four percent of $2,229 is the T&D portion of the credit, or $1,203.82.

• If the customer bought the same system without net energy billing, he would lose 10% of the T&D value in the first year under the new rule. That equals $120 less than the current value.

Behind the meter

A phase-down might not sound like much dollar-wise, Piper says. But another aspect of the rule allows utilities to charge solar customers a transmission and distribution fee for the power they produce and consume behind the meter. Together, he says, it's an anti-solar policy that will reduce customer interest.

Piper offers a behind-the-meter example: Presuming a customer uses 8,000 kilowatt hours per year on-site while the sun is shining, they will receive a new fee from CMP for T&D for approximately $658.

“This is occurring while the sun is out and they're using the power at home,” he says. “This little-known aspect of the new PUC rules will be enough to kill the solar industry in Maine.”

Dylan Voorhees, the clean energy director at the Natural Resources Council of Maine in Augusta, explains that currently, the credit is based on the amount of excess energy that the customer returns to the grid. The new PUC ruling bases the credit on the entire amount of energy generated by the customer, including the energy the customer consumes as well as excess energy. But as the credit steps down, that essentially means the customer will be paying the utility a stepped-up T&D charge for electricity the customer generated and consumed.

“The PUC will require a meter on the solar panels and then charge this delivery fee on the power you're consuming in your own home,” Voorhees says. “It's totally unprecedented.”

Says Piper, “That's like, you grow tomatoes in your backyard, and the local market charges you a fee for growing tomatoes. That's the biggest thing that I think will be a problem.”

No clear policy

Sundog Solar started in 2009, growing steadily since then. With 13 employees today, the firm covers mostly midcoast Maine, but installed its largest system to date, 354 panels for 99 kW, at a Ford dealership in Calais. Piper says he's the first in New England to sell the unique Solaria PowerXT, with overlapping cells that reduce wasted space. A 70% decline in tech costs over the last decade, net metering and the 30% federal tax credit have provided strong incentives to bring in customers daily, he says.

Still, says Piper, “We could have grown twice the size, if not more, with the proper support from the state. I've compared our company with a company in New Hampshire, and they're almost triple the size we are in the same time period.”

According to solarforme.org, Maine ranks last in New England in solar energy adoption and it is the only one of the six regional states without a strong solar policy to encourage investments. That's reflected in employee numbers: In Massachusetts, there are 10,000 solar industry workers compared to 300 in Maine.

From a business-planning standpoint, ReVision is sorting out the problem in part by expanding outside of Maine. The company currently has 165 employees at two locations in Maine and two in New Hampshire, and recently signed a lease in North Andover, Mass.

“The reason we signed a lease there is because Gov. Deval Patrick, during his eight years in Massachusetts, launched the most ambitious solar policy in New England. He really launched a rocket ship of an industry in Massachusetts,” Coupe says. “So for that reason, instead of growing more locations in Maine, we decided to open an additional location in Massachusetts, where they have a stable, long-term policy environment and we can plan to run a viable business.”

Legislators have been considering two bills that would roll back the PUC rollback. LD 1373, “An Act to Expand and Protect Access to Solar Power in Maine,” would establish net metering in statute, as well as reestablish Maine's lapsed Solar Rebate Fund for low-income and moderate-income homeowners, towns, small businesses and other institutions.  The bill was carried over until next year.

The bill in committee as of this writing, LD1504, “An Act Regarding Solar Power for Farms and Businesses,” would pause the PUC rule and directs the PUC to perform additional analyses.

For now, providers are working hard to keep up with demand.

“My warehouse is full of solar panels and we've got all kinds of work scheduled,” says Piper. “People want their energy independence.”

Piper is seeing probably 20% more business this year than last year due to the ruling, with more potential coming down the pike.

“Municipalities are jumping on this,” Piper says. “They want to get in before the window of opportunity ends.” That means, by September, Sundog could be facing a problem. “People want their systems before the end of the year, and we're going to be booked.”