Who Gets To Harness The Power Of The Sun In Kentucky?

Mar 18, 2019

As coal plants retire and the price of renewable energy gets cheaper, solar power will increasingly energize the country.

So in Kentucky, when you hear words like "net metering" and "distributed generation" it's easy to miss the big picture in the fight over solar power.

It's not that the terms are inaccurate, it's the jargon. It is the speed with which journalists (myself included) and lawmakers race down the rabbit hole in an attempt to make sense of a particularly nuanced issue.

One way to frame this is to ask a question: In Kentucky, who will harness the power of the sun?

Will it be homes, businesses, churches and schools with rooftop solar panels feeding excess power back into the grid? Or will it be utilities with vast tracts of land generating solar power at economies of scale?

These questions are particularly important given that:

The latest battle over the future of solar played out in the Kentucky Legislature. A measure passed last week in a late night vote will change how rooftop solar owners receive compensation for the excess power they put back on the grid.

The House voted for the measure after stripping it of protections favored by the state’s solar industry.

How Net Metering Affects The Growth Of Solar

Net metering allows rooftop solar customers to receive a credit for the retail value of the power they put back on the grid. Rooftop solar advocates say lowering that credit impacts the rate of return small businesses and homes receive for putting solar panels on their rooftops.

Utilities say that credit is unfairly high and should be closer to what it costs them to generate the power wholesale — a substantially lower sum.

States have taken several approaches to net metering. The bill that passed Kentucky's General Assembly last week is unique in that it leaves the decision for this credit in the hands of utility regulators.

Still, advocates for rooftop solar tend to see these kinds of bills as a way to stunt the growth of private solar so utilities can buy time to transition to renewables while remaining profitable.

"A lot of us see it, as at least in part, some delay tactics, stall tactics on the part of the utilities while they further work to influence the regulatory environment that would not only allow them to play in, but own the game," said Chris Rohaly, president of Green Alternatives Inc., a solar installer in Indiana.

For example, Louisville Gas and Electric and Kentucky Utilities spent more than $162,000 lobbying state officials in 2018, making it among the top spenders on lobbying last year, according to the Kentucky Legislative Ethics Commission. Utilities as a whole spent nearly $500,000 lobbying for various issues including legislation similar to SB 100.

Meanwhile, in the weeks leading up to this year's legislative session, Louisville Gas and Electric began asking companies in Kentucky and surrounding states for proposals to provide between 10 and 200 megawatts of renewable energy. The utility unveiled its first 10-megawatt solar array at the E.W. Brown power plant in 2016.

However, Chris Whelan with Louisville Gas & Electric says the utility is supportive of solar, but isn't looking to replace its fossil fuel dependent energy mix with renewables.

"Most of our fleet right now is coal and natural gas and we need baseload generation," she said.

Instead utilities and proponents of ending net metering say private solar has grown to the point where utilities no longer need to "subsidize" the industry.

"As that technology got better and better, and the cost of other types of electric generation got higher, the cost disparity between solar and other types of generation became narrower and narrower," said Brandt Hershman, a former state senator and sponsor of Indiana's net metering law. "And so it was no longer necessary to provide a very lucrative incentive."

In order to better understand how Kentucky's rooftop solar bill could affect the industry, it’s worth looking at what has happened in other states.

Rooftop Solar In Indiana

The impacts of net metering laws vary from state to state, according to Ed Gilliland with The Solar Foundation, a nonprofit research group.

Nevada, for example, dropped net metering completely, went to wholesale prices and lost a couple thousand jobs, Gilliland said. The job losses caused a political backlash and the state reinstated another law that led to something close to net metering, he said.

The worst outcome for rooftop solar customers would be to get paid wholesale prices for the power their homes and businesses feed back into the grid, Gilliland said. That would be devastating for the solar industry.

The way Kentucky’s bill is written, it would be up to Kentucky's utility regulator, the state’s Public Service Commission, to choose the rate solar customers will pay when they feed energy back into the grid.

That rate may be below the retail price, but would not be as bad for the industry as paying the wholesale price, Gilliland said.

Next door in Indiana, Hoosiers passed their own bill in 2017 phasing out net metering. It includes a multi-year phase out of net metering that ends in 2032. After that, rooftop solar customers will receive a rate that’s 25 percent above the wholesale cost of the power; so it's more than the wholesale cost, but less than the retail cost. (And by the way, both sides admit the 25 percent number is arbitrary.)

Indiana solar installer Chris Rohaly said customers rushed to purchase rooftop solar before the bill took effect. Then, crickets.

"Yea, we saw sales, even inquiries, drop like a rock the first half of 2018," Rohaly said.

Rohaly is quick to say there were a lot of variables at play. First, there was the talk of tariffs on imported solar panels. Then, Rohaly said a lot of people believed incorrectly they were no longer able to connect solar to the grid at all.

But the ship has begun to right itself now. Rohaly said he's spoken with a number of other solar installers in the state and all of them have seen traffic pick up in recent months.

The latest job numbers from The Solar Foundation show that even with the legislation taking effect, Indiana still saw a 12 percent increase in solar employment from 2017 to 2018.

But Rohaly still sees hardships ahead. He's having a tough time selling solar panels in some limited cases where net metering is no longer applicable. The problem is that it’s hard to offer financial guarantees to farmers and businessmen who want solar panels without net metering.

Rohaly said it's difficult to give customers enough information that makes them confident enough to buy.

"If I look forward at my commercial business, it's a tough sell in areas where I don’t have net metering," Rohaly said.

Hershman, the lawmaker who passed Indiana's bill, has a different take. He said his bill had a negligible effect and that tariffs were the biggest problem facing the solar industry in Indiana.

"Part of the reason behind our effort was to make sure we were encouraging renewable power, but doing so in a reasonable way that did not shift costs onto other consumers," he said.

The Drumbeat Of Progress

Across the country, new solar installations are expected to increase 14 percent this year because of lower equipment prices, Reuters reported last week. Despite the Trump administration's tariffs, industry analysts found prices for panels have decreased.

Those technologies benefit utility-grade solar and rooftop solar alike, but Rohaly said the market is already responding to the end of net metering with products and technologies that are "more immune to policy." Among them is battery storage technology that will allow solar customers to use more of the power they produce without having to send it to the grid, he said.

"A year ago, if we were having this discussion, all my battery costs were high enough it was a special case kind of sale," Rohaly said. "But now it’s getting a lot more realistic."

But not all solar installers feel the same. Matt Partymiller runs Solar Energy Solutions and is president of the Kentucky Solar Industries Association. He said battery storage is still out of reach for many solar customers because of the expense.

Without the storage capacity, and with customers receiving a smaller rate of return on their excess power, it's residents and small businesses that will lose out, he said.

Still, Partymiller sees private solar as the future of power in the state.

"Solar power is now. Private owner power generation is the future. Solar will happen in Kentucky," Partymiller said.

This story first appeared on WFPL. For more stories like this, visit wfpl.org