New Indiana solar law could cripple small businesses and customer savings
(INDYSTAR.com) – Chris Rohaly is no stranger to the sun. His hands have the faint resemblance of worn leather. And there are the lines converging at the crease of his eyes.
You could call the 56-year-old Kokomo resident a farmer. He harvests the sun.
Specifically, he is the owner of a solar energy company. But it’s not his work installing solar panels that has him up before sunrise. It’s the threat of no longer having work that keeps this small business owner from a restful sleep.
“A solid night’s sleep has gotten a lot harder to come by in the last few months,” Rohaly said. “Are we going to be able to satisfy and keep the promises to all these people we’ve committed to by the end of the year? Am I going to be able to grow the jobs for my crew and my business into something more meaningful and permanent?”
The source of Rohaly’s concern — and that of many other small business owners — is Senate Bill 309. The law, championed by the state’s powerful utility industry, phases out net metering, which requires utilities to pay solar users for any excess energy that is created by their solar panels. The program was intended to provide an important incentive for Hoosiers to install expensive solar panels and produce their own energy that is better for the environment.
Rohaly, who is the co-founder of Green Alternatives, Inc., is among thousands of solar providers and their employees, as well as ratepayers, consumer and environmental advocates, schools and municipalities, who are anxiously watching what will happen when the law, passed in May, begins phasing out net metering on Jan. 1, 2018.
The law was pitched as a way to level the playing field between solar customers and the state’s investor-owned utilities, who maintain net metering is an unnecessary subsidy paid for by other ratepayers. But an IndyStar investigation that looked at how such laws have played out in other states and how the law already is having an impact here suggests SB 309 could put an entire industry at risk of stagnation at best — and, at worst, collapse.
Among IndyStar’s findings:
• The phasing out of the incentive robs those considering solar of hundreds, if not thousands, in potential savings over the years. Already, solar companies told IndyStar that some would-be customers have decided to no longer choose the solar option — a decision that could stall Indiana’s move toward cleaner, renewable energy.
• Solar energy is increasing significantly across the U.S., so much so that the federal government says solar installers are the nation’s fastest-growing occupation. But in a state where the governor and the general assembly tout the importance of small business and job growth, SB 309 is potentially a job killer. Fewer solar customers means fewer solar jobs.
• An arbitrary deadline tucked into the law has created a short-term flood of customers trying to reap the full benefits of the incentive before it goes away. Problem is, Indiana’s fledgling solar industry is not able to handle the crush, sending jobs and money to solar companies in neighboring states.
• The utility companies’ concern over a financial impact that net metering will have on other ratepayers has not yet happened and is likely overstated, leading some experts to tell IndyStar that the law was a premature, and perhaps, unnecessary preemptive strike seemingly designed less to protect ratepayers’ wallets than the utility industry’s bottom line.
Indiana’s energy companies see it much differently. They believe the doomsday predictions about the impact of phasing out net metering is exaggerated. And while they acknowledge that net metering is not yet a burden for nonsolar ratepayers, it is prudent to act now before that happens.
“This has been an issue in front of the general assembly for several years now and the perspective in the industry remains the same: Indiana doesn’t really have a problem right now with net metering,” said Mark Maassel, president of the Indiana Energy Association, a lobbying group that represents the utility industry. “But we are in a position to address the subsidies inherent in net metering now.”
While utility officials may disagree with solar companies and environmentalists about the impact of SB 309, all parties agree that solar is an increasingly important source of renewable energy. Solar puts more control back in consumers’ hands over where their energy comes from and how much they pay for it. It puts skilled workers in high-paying jobs in the country’s fastest growing occupation field. It puts fewer pollutants in the air than traditional fossil fuels that are burned for electricity. And solar puts Indiana on the map as an innovative and technology-focused economy.
The argument is squarely about whether net metering is necessary to push solar forward in Indiana.
Rep. Ron Bacon, R-Chandler, who has 96 solar panels on his property near Evansville, believes it is.
“I come from coal country down here, and still my constituents were heavily against this bill, and I even lobbied the governor after it passed that we didn’t want him to sign it,” Bacon said. “We need to incentivize individuals and businesses and schools to be more self-sufficient.
“With 309 we are sending the wrong message, one that we are not for technology growth, expanding small business or a clean environment. The industry is growing rapidly, or right now it is. But what will happen after this policy? We don’t know.”
Riding the solarcoaster
Net metering, in its simplest form, credits customers for excess energy they produce that flows back to the grid — thus helping to offset electricity they consume from the utility at other times.
More than 40 states have some variation of the rule.
Indiana’s policy is more than a decade old, but its most recent iteration was passed in 2011 under former Gov. Mitch Daniels. At that time, the Indiana Utility Regulatory Commission established more groups, such as businesses and municipalities, eligible for net metering. The body also increased the size or capacity of solar systems that could be credited at retail rates.
The IURC oversees the state’s five investor-owned utilities: Duke Energy, Indianapolis Power and Light, Indiana Michigan Power, Northern Indiana Public Service Company and Vectren Energy.
“At the time we, had a net metering rule that was very restrictive and getting D’s and F’s in state rankings,” said Laura Arnold, current president of the Indiana Distributed Energy Alliance, Inc. and someone who has worked in the utility and renewables field for more than 20 years.
“Then after 2011 we went to a solid B grade,” she said, “and people could get the return on their investment.”
Coupled with the decreasing cost of panel technology and rising electricity rates, this policy helped foster a small but growing market and the industry to serve them. In each of the last five years, the number of net metering customers across all major utilities grew by nearly 100 or more and by as many as 250 in 2016, according to reports by the commission.
But then came Senate Bill 309.
The bill, which was signed into law by Gov. Eric Holcomb in May and implemented July 1, set a deadline: Install solar panels by Dec. 31 to be locked in to the current incentive for 30 years. Meaning for every bit of energy a homeowner produces but doesn’t use and sends back to the grid, the utility would credit them at the same price a customer buys electricity.
But for homeowners who miss that deadline, the incentive is reduced. Any homeowner who installs between next year through 2022 will receive that same rate only until 2032. Put another way, a homeowner who installs panels by Dec. 31 receives the incentive for 30 years; a homeowner who installs it the next day would receive the incentive for just 15 years.
All installations that occur after 2022 will receive the wholesale rate — a lower amount that utilities buy electricity for from the market — plus an additional 25 percent.
“Those changes, at best, cut in half a consumer’s available amount of net metering, and throws their return on investment completely out of whack,” said Allyson Mitchell, director of sustainability at Prosperity Indiana. “Just when we were getting to a point where a much greater percent of the population was becoming able to pursue solar, then our state cuts that off again.”
Some installers have crunched the numbers.
For an average residential rooftop solar installation that is a net zero system — meaning it uses the amount of electricity it produces — the owner would pay about $200 a year in net metering and associated fees if grandfathered in to the current rates, according to Alex Jarvis, owner of Solar Systems of Indiana. With the new policy, the same system would cost its owner roughly $450 each year in billing.
That’s a hard sell after Jan. 1, the installer of 10 years said.
That deadline also has had an unintentional effect: It’s created an artificial explosion of demand.
Rohaly said his business is seeing more than double the activity it did this same time last year. Phil Teague of Rectify Solar said the third quarter is often his busiest, and this year it was busier than ever. Jarvis’ small crew has worked 12-hour days, seven days a week in recent months.
Solar advocates, such as Arnold and Mitchell, as well as the installers, welcome this boom in business. Still, they don’t want it to be misconstrued.
“We are riding the solarcoaster,” Jarvis said. “It’s going up right now, but it will go down.”
Lost solar savings
Everyone is along for the ride — including customers.
The utility giants said they were just trying to keep the car from derailing, according to Maassel, to whom the energy companies pointed to speak on their behalf.
There is a fixed fee on every utility bill for infrastructure and maintenance, including solar owners’ bills. Still, Maassel said that amount is not enough to cover those costs — thus this amounts to a subsidy or cost-shifting when nonsolar owners must make up the rest to maintain the grid.
When asked for specific numbers or dollar amounts being shifted in Indiana, however, he wasn’t able to say.