"MILKING SOLAR": Why Indiana’s “Net Metering” Showdown Matters

2/22/2015

SOLAR FLARE

Why Indiana’s “Net Metering” Showdown Matters

An Indiana House of Representatives committee voted to advance a bill this week that would charge smaller solar energy producers a fee for the energy they sell back to their utilities. Reuters reports:

Indiana utilities are pressing state lawmakers to let them charge a monthly fee to customers who sell excess power from solar panels under a bill that has become a focal point in a battle between traditional and renewable energy companies.

An Indiana state House committee on Wednesday voted 9-4 to advance the bill, which would also give utilities some flexibility over what they pay for energy sold back to them. The bill, opposed by clean energy advocates, goes next to the full state House of Representatives.

Thanks to our day/night cycle, solar energy is intermittent. That’s a problem for small producers, especially as demand tends to peak in the evening (as people turn on lights) just as the sun goes down and the ability to produce power ends. Without storage options, small-scale solar producers have to continue to rely on their local utility for their own power.

This relationship is fundamentally different from the one utilities are accustomed to entering into; both parties are buyers, and both are sellers. When the sun is shining brightly and the supply of solar power exceeds the local demand of the producer, it can sell that excess power back to the utility, in many locations at the same rate that the utility sells its power. This process is called net metering, and it’s a massive headache for utilities. As the Economist put it, net metering is a “startlingly good deal for the producer, less so for the company.”

But this isn’t just about which side is getting the better deal. The utility is expected to maintain the local grid to provide power to its customers, but these grids were not constructed with distributed solar power producers in mind. There’s a cost to start sending power in two directions, and in many places the utility is the only one bearing that cost.

Net metering schemes exist in 43 states, but if Indiana’s state legislature rules that smaller producers have to pay a fee for selling their power back to the grid and may not be guaranteed the favorable prices they currently enjoy, other states could take notice.

That could deal a blow to the fledgling small-scale solar industry. As the president of an Indiana-based solar firm put it, the bill “destroys the solar energy industry in Indiana. It takes away any little bit of economic incentive and puts it right into the pockets of the utility company.” But that may not be a sign of greedy utilities jealousy guarding their fiefdom—at least not entirely—but rather an indication that solar’s day in the sun hasn’t yet arrived.

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