Remember 2004? Facebook was a startup. We had flip phones. “Friends” was on the air.
It was a long time ago, and a lot has changed — not just for the internet, mobile phones and Thursday night TV, but for energy infrastructure, development and policy.
In 2004, Kentucky created its current private solar incentives program for what was then a budding industry with few adopters. Other than some small modifications made a decade ago, the underlying structure of the program — and its credit compensation rates for participants — has not changed.
But there have been major increases in solar usage over the years, as well as very welcomed cost reductions for solar installation. Solar installation costs are down more than 70 percent since 2010, and according to the U.S. Department of Energy, “utility-scale solar installations…grew at an average rate of 72 percent per year between 2010 and 2016, faster than any other generating technologies.”
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As solar expands, it’s important that policymakers innovate with it, to ensure that its maximum benefits are realized, and to avoid negatively impacting its growth.
Kentucky’s private solar program currently allows “net metering,” a billing mechanism that compensates qualifying businesses and customers for excess private electricity they generate and put into the grid. These customers are given credits valued at the full retail rate of electricity, which is 300 percent more than the competitive rate.
The full retail rate for electricity includes not just the value of the power, but also fixed costs for the poles, wires, meters and grid infrastructure that all customers – solar and non-solar – use. Without this public grid, private solar customers would not have the ability to net meter.
Over time this incentive structure used to promote private solar deployment has led to sustained economic losses to cover the costs of providing electricity around the clock, costs that have been passed onto other customers, even lower-income households and those on fixed incomes with little room in their razor-thin budgets.
Fortunately, Kentucky now has a chance to address this issue, courtesy of a recently proposed bill from Rep. Jim Gooch, which would protect families, seniors and small businesses from these burdensome costs and ensure that future incentives for private solar deployment are in line with competitive market conditions.
This bill would grandfather in existing private solar customers, through 2042, so no one gets unfairly penalized. It would also continue to reward owners for the excess energy they generate, while aligning incentives with actual competitive electric prices which would ensure fair costs and the reliability of our grid. It will also help solar grow, ensure grid reliability and make sure customer costs are fairly distributed.
Because after all, it’s not 2004 anymore.
Brydon Ross of Louisville is vice president of state affairs for the Consumer Energy Alliance.