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Changing how people get paid for solar power

Jun 12, 2018

Until recently, if a home solar array produced more electricity than the house used, it would go through the meter onto the grid. Residents with solar power arrays got paid for that power at the same rate as the power company charged other residents.  Power that comes in/power that goes out: same price. This even exchange is called net metering.

The Michigan Public Service Commission is ending net metering for new solar installations and ending it in ten years for existing residential solar.

Solar installers are expecting that to hurt business.

“I expect it to go way down. If this goes through and nothing else takes its place, I expect to be installing very little solar in the near term,” John Wakeman said. He owns a solar installation company called SUR Energy in Ann Arbor.

The big utility companies such as Consumers Energy and DTE Energy argue that other customers are subsidizing the customers with solar. They say paying solar customers the retail rate for power ignores the utility companies’ costs of maintaining the power lines and the power plants that provide the minimum baseload required to keep the power operating. 

SUR Energy solar panel installer John Wakeman expects business to decline because of state government eliminating net metering.
Credit Lester Graham / Michigan Radio

Wakeman says those big utilities just see the growing use of solar as a threat to their profits.

“They’ve fought it all along. It’s basically two dinosaur companies that have a lot of inertia and are not built to change and adapt and just want things to remain the same,” he said. 

The Michigan Public Service Commission is now calculating how much less to pay solar power residents for the electricity they generate and part of that involves measuring in flow and out flow of electricity accurately. It’s complicated, but in other states that have ended net metering reimbursement ranges from 95 percent of the retail rate to as little as 75 percent of retail.

Wakeman says that messes up the math when he’s making the sales pitch.

“I sell it basically as a thirty-year investment. And, your return on investment is much lower with this sort of situation,” he explained.

Why are rates for renewable energy being changed?

In 2016 the legislature called on the Public Service Commission to come up with a study on the best way to measure and compensate for power from residential solar. Now that it’s doing that, a bipartisan group of legislators is pushing legislation to make net metering, the even exchange, the law. It turns out that a much broader group than the residential solar folks and environmentalists like net metering. A fair number of farmers have installed solar, wind mills, and other renewable energy to offset their power bills. Farmers have political clout in Michigan that both parties recognize.

Matt Grocoff is with the Thrive Collaborative which designs environmentally friendly buildings. He also owns one of the oldest net-zero energy homes in North America.

Matt Grocoff standing near his house, powered by solar panels.
Credit Lester Graham / Michigan Radio

“Michigan right now is investing in fuel sources that we don’t own. We bring it in from other parts of the country. The one thing we do have is plenty of wind and solar and we’re not investing in that. In fact, we are throwing up barriers to those that’s slowing it down,” he said.

That comes as solar energy in Michigan is growing faster. The solar energy workforce grew by 48 percent in 2016. Now, more than 4000 people work in the industry in Michigan.  Much of that is installing commercial arrays, but also residential. More than 400 residents had solar installed at their homes in the same year.

Grocoff says the elimination of net metering could put Michigan at an economic disadvantage.

“The reality is that solar is becoming one of the dominant energy sources that we have in the United States and across the globe. It’s going to happen anyway. What’s happening is, which state is going to get there first? By Michigan imposing these barriers, it’s slowing things down where we are not going to reap the benefits from this new innovation,” he said.

For now, solar installers are waiting to see what happens and so are the people who are contemplating putting solar arrays on their homes.