September 5, 2013
Massachusetts

Solar subsidies raising concerns

BY: Bruce Mohl | CommonWealth Magazine | September 05, 2013 | www.commonwealthmagazine.org

The state’s two leading utilities are raising concerns about the high cost of the Patrick administration’s new plan for subsidizing solar power.

In comments filed with the state Department of Energy Resources, National Grid and Northeast Utilities said they support the development of solar power but fear the administration’s proposed plan would hike ratepayer costs dramatically at a time when cheaper renewable alternatives to solar are readily available. National Grid is predicting the cost of the state’s renewable energy subsidies, which are borne by ratepayers, could hit $1 billion by 2020, with half the money going to solar.

The utility filings highlight a strange phenomenon: A debate over the future of the state’s solar subsidies is taking place largely out of public view and being conducted primarily by a handful of solar developers, environmentalists, and utility officials. Attorney General Martha Coakley, who represents ratepayers, didn’t file any comments on the Patrick administration’s latest solar proposal, but in filings earlier this year she urged that any decision be postponed until a solar cost study is completed.

Solar development is soaring in Massachusetts, fueled by state and federal subsidies and declining equipment prices. Gov. Deval Patrick announced in May that the state had reached his goal of 250 megawatts of solar power four years ahead of schedule. Growth quickened after that, as developers raced to take advantage of existing subsidies. The avalanche of solar development proposals prompted state officials to adopt emergency regulations covering the phase-out of the existing solar subsidy program and to begin drafting a new regime to help the state reach the governor’s latest goal of 1,600 megawatts of solar by 2020. (That’s about the same amount of power as the coal-fired Brayton Point Power Station currently produces.)

The administration’s new solar plan, outlined in a PowerPoint presentation, attempts to minimize ratepayer costs by reducing solar financial incentives over time and steering fewer subsidies to larger projects. The plan allows solar subsidies to fluctuate with supply and demand in the marketplace while maintaining a floor beneath which the subsidy price will not fall and a cap it won’t exceed.

Most of the public comments filed in response to the plan were submitted by solar developers and focused on nitty gritty regulatory matters. The cost effectiveness of the program received little attention, although a few groups talked about the importance of solar in general terms.

“Solar has a value that goes beyond the cost of electricity,” said Rob Sargent of Environment Massachusetts in his filing. “On peak demand days over the summer, when everyone is cranking their air conditioning, there is plenty of sunlight shining on our rooftops that we can capture to meet this demand. The price of solar is falling, and the policy DOER is proposing will guarantee long-term commitments, helping the industry and lower the cost of financing. And these benefits are only compounded by solar’s environmental and health benefits.”

The Solar Energy Business Association of New England said continued state support for solar is needed to combat rising carbon dioxide levels and global temperatures. The association condemned the “amount of disinformation and misinformation about the cost of solar power,” adding that “solar power is now cost competitive and saves ratepayers money in markets around the world.”

Ron Gerwatowski, senior vice president at National Grid, the parent of Massachusetts Electric, said solar is the most expensive renewable energy option available at more than 40 cents a kilowatt hour. By contrast, he said, onshore wind projects have recently been priced at a fixed price of 10 cents per kilowatt hour for the next 15 years. He also said the Massachusetts solar program is far more expensive than similar programs in Rhode Island and New York.

“While National Grid is a strong supporter of advancing renewable technologies, our best estimate of the solar carve-out program as proposed suggests a cost that calls into question the scale and overall affordability of this goal, as well as the cost effectiveness of the program itself,” Gerwatowsky said in his filing.

Gerwatowski predicted the state’s two primary subsidies for renewable energy will cost National Grid electric customers more than $500 million per year by 2020. He said the cost to ratepayers statewide will exceed $1 billion, with nearly half of that amount related to solar.

Northeast Utilities, the corporate parent of NStar and Western Massachusetts Electric, is also warning about substantial growth in customer costs as a result of the proposed solar subsidies. Northeast officials applauded Connecticut for introducing more competition into its solar subsidy program, yielding prices that are about 60 percent less than those in Massachusetts.

“The competitive pricing available in Connecticut demonstrates that DOER’s push to maintain floor prices has greatly overcompensated many solar projects in Massachusetts, at the expense of Massachusetts customers,” the officials said.

Transcanada Power, which sells electricity in Massachusetts, said state officials should seek legislative approval for expanding solar subsidies. The company noted the existing solar subsidy program was never specifically authorized by the Legislature.

Gerwatowski of National Grid also raised concerns about the state’s net metering program, which requires utilities and their customers to pay those who produce renewable energy the retail price for power rather than the wholesale price. He said the program is not sustainable for medium- and large-size solar projects.

“Net metering operates much like a regressive tax, where the customers who cannot afford to install solar generation pay more to subsidize those customers who are able to afford an investment in solar,” he said.