In recent media coverage of House Bill 227, we have been told that, from a utility perspective, proposed legislation before the Kentucky General Assembly does not end net-metering as we know it.
“Alternative facts” are not useful in setting public policy and tend to foster division, particularly when this is not a partisan issue.
Under current law, private solar generators receive a credit at the retail rate for any excess solar power they generate and send to the electric grid — a credit that under current legislation can never be cashed in but only used at a later date by the system owner.
Under HB 227, that rate changes to only a few cents per kilowatt-hour (kWh). The difference? Roughly a 70 percent decrease in credit for most ratepayers that will most certainly end net metering in Kentucky.
Advocates of HB 227 say this change is justified because a few cents per kWh is the current “market rate.” Calling a few cents per kWh the market rate is disingenuous. We only need to look at Duke Energy for an excellent example.
Duke has just invested approximately $14 million in seven megawatts of solar in Northern Kentucky — more than three times the amount of privately owned, net-metered solar energy generation in its service territory.
Duke will receive a 30 percent federal tax credit and accelerated depreciation for the purchase and installation of this array. A utility tax credit worth millions of dollars for these large projects are described by HB 227 supporters as “subsidies” or “handouts” when private citizens receive them.
Duke’s submission to the Kentucky Public Service Commission suggests the array will produce around 13 million kWh per year. A typical solar array has a 25-year warranted life. Duke appears to be paying double the market rate for solar production generated at its new utility-scale solar array.
Under HB 227, utilities are asking for regulators to allow them to pay their private customers just over three cents per kWh for their solar production while at the same time building a solar array that will require all Duke customers pay far more per kWh for solar generation.
It seems pretty clear who (customers) will be subsidizing whom (Duke) under HB 227.
HB 227 is not simply an anti-solar bill. It is an anti-free market bill that is designed to ensure that private generators of solar energy become subsidiaries of their monopoly utility. Utilities may keep caps in place on the amount of solar a customer generator can install as well as the percentage of solar that will be allowed on the grid.
If fairness is the goal, caps are not necessary.
The bill continues to block efforts to offer leasing and power purchase agreements to solar customers, including those who are younger or don’t have the up-front money to invest in their own power production.
These changes to financing practices would also allow solar installers to compete via a business model similar to that of utilities by allowing system financing over long durations, a model common in other states.
The success of the solar industry in driving solar costs lower over the past decade has been largely due to free-market principles. We are willing to embrace fair credits for production that recognize both the benefits of solar to utilities and the rightful costs they need to recover.
We also are willing to embrace utility rate-making reforms to make actual costs and values more transparent. We are not willing, however, to let monopolistic utilities swindle Kentucky consumers and effectively destroy private solar production in our state.
The state’s utility monopolies remain entrenched in their position and unwilling to compromise to produce a fair, free and competitive future energy market for all Kentuckians.
Matt Partymiller is president of the Kentucky Solar Industries Association.