The Michigan Legislature is considering a pair of bills — Senate bills 362 and 363 — aimed at expanding the state’s distributed generation program. Typically, this program focuses on people or businesses who install solar panels on their buildings. If the bills are passed, those enrolled in the program will be paid retail or higher rates for any electricity they produce but do not use.
This program is a bad deal for all other utility customers. They will be forced to pay higher electricity rates to cover the cost of paying its participants. Solar already gets toomanysubsidies.
The bills would expand the program by removing the current 1% cap on participation. State law allows utilities to limit the number of people who can sign up to the distributed generation program. Utilities are allowed to cap participation at 1% of their in-state peak load, averaged over the previous five years.
Utilities can, and do, voluntarily exceed that limit. For example, Consumers Energy has chosen to raise its cap to 4%. But it is not required to go above the 1% cap.
Utilities have typically avoided removing the cap because customers enrolled in the program must be paid retail (or higher) rates for any electricity that they generate in excess of their own needs. That is, customers whose solar panels produce more than they use can sell the excess to the utility. If they are enrolled in the distributed generation program, they must be paid the net metering rate.
As proposed, the Senate bills would remove the cap. Utilities would have to enroll any customer who applies for the program and pay “not less than the full retail rate.”
Utilities would also have to pay “the value of the costs and benefits” that are supposedly added by the customer’s renewable energy generating equipment, which is an extensive list. The supposed benefits include energy generated, generation capacity, avoided line losses, avoided transmission capacity and others. The legislation even claims the catch-all benefit of “any other quantifiable benefits” as being worthy of compensation.
The arguments favoring these bills demonstrate that solar still cannot compete with reliable forms of energy. In one Crain’s Detroit Business piece describing the bills, solar industry advocates at the Michigan Energy Innovation Business Council argue the 1% cap “is probably the No. 1 thing that restricts rooftop solar in the state.”
In other words, they’re saying that Michigan would have more residential solar panels if utility customers paid higher rates so more people would install them.
There’s nothing in current law that restricts solar developers from selling and installing their products on any home in the state today. Any customer who wants solar can easily contact a solar distributor and pay the company to install as many solar panels as he or she desires. What is causing the solar industry to claim it is legislatively restricted is that the state government has not mandated special additional payments for those customers above the 1% cap.
Michigan Energy Innovation Business Council representatives complain that solar is being held back by the lack of above-market payments in the distributed generation program. Incredibly, they argue that the 1% cap represents an “absolute no-go” because “there’s no certainty that there will be a market” for homeowners to install solar panels without these additional payments.
That’s nonsensical. Homeowners across the nation have installed solar without these additional payments. It’s far more believable that solar advocates in Michigan recognize an opening to secure further subsidies as a means of promoting their preferred energy source.
But elected officials should recognize that requiring Michigan utility customers to pay higher taxes and higher electricity rates to subsidize the costs of home solar systems does not foster competition. It’s reasonable to question whether these heavily subsidized residential solar systems are providing any real benefits to the state, the community, or the electric grid.
Jason Hayes is director of energy and environmental policy at the Mackinac Center.
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