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WKYT Investigates | The value of solar power

Advocates fear that potential changes could discourage Kentuckians from switching to an environmentally friendly power source.
Published: Apr. 5, 2021 at 12:28 PM EDT
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FRANKFORT, Ky. (WKYT) - When Andy McDonald bought a 12.5-acre plot of land in Franklin County over a decade ago, it was his goal all along to continue growing salad greens and to go even greener with his lifestyle.

“Part of the solution to climate change is electrifying everything,” McDonald said on a recent sunny day, standing by the original solar array on his property, installed, he said, before they even had working plumbing there. “We need to get off fossil fuels.”

Now, he operates a “net zero” farm and house - meaning they still take power from the grid when their 29 solar modules are not generating energy, but on an annual basis, they produce as much as they need - and even produces enough from a solar array on the barn roof to power an electric car.

But new territory being charted by a state regulatory commission could map out what the future of rooftop solar power looks like in Kentucky.

At issue: How much customers with their own solar panels are credited for the extra energy they feed back to the grid. Several utility companies across the commonwealth now want to credit those customers less.

If that happens, advocates are worried that an energy source that they believe needs to grow will instead do the opposite. But utilities claim keeping things the way they are will only push higher costs onto other customers.

The potential shift stems from a bill, passed by the General Assembly in 2019 and signed into law by then-Governor Matt Bevin, that changed the rules for net metering - the difference between the dollar value of energy used by a customer like McDonald and how much excess energy he generates, feeds back to the grid and sells to the utility.

Under the new way of doing things, it is up to the Public Service Commission, which regulates utilities across Kentucky, to approve or reject the amount that individual utility companies now want to credit net metering customers for the extra power they generate. Utility companies are “entitled to implement rates to recover from its eligible [net metering customers] all costs necessary to serve” them, according to the text of the law.

Before, it was basically a one-for-one trade. The utility company would buy back the extra solar energy generated at the same rate of the energy they are selling - the retail rate, or what has been roughly about a dime per kilowatt-hour in bill credits.

Utilities have already applied for changes, in the first cases of their kind, that would allow them to credit, depending on the company, just a few pennies per kilowatt hour instead.

“We support solar, we support private generation systems,” Natasha Collins, a spokesperson for Louisville Gas & Electric and Kentucky Utilities, told WKYT’s Garrett Wymer in an interview. “We just want to make sure it’s something that is fair for all of our customers.”

Collins, in addition to a spokesperson for Kentucky Power, another utility company that has applied for an updated net metering tariff, explained that the retail rate credited to net metering customers compensated those customers at a rate higher than what utility companies say it costs them to generate power themselves or to purchase it “wholesale.”

They say that then pushes an “undue burden” of higher costs onto non-net metering customers for the utility companies to offset their costs.

“Reducing the amount that a utility pays for generation from net metering customers reduces the subsidy paid by other non-net metering customers,” Cynthia Wiseman, vice president of external affairs and customer services for Kentucky Power, wrote in an email to WKYT’s Garrett Wymer. “The reduction in net metering rates is also consistent with the integrated resource planning statute which generally requires utilities to purchase least-cost generation.”

Lowering the credit to two cents is “about the same cost it costs us to produce the energy ourselves, and the same cost at which if we had to purchase energy for our customers, that’s about the cost, somewhere around there, we’d be purchasing the energy to serve our customers,” Collins said.

LG&E and KU (both of which are owned by Pennsylvania Power & Light) and Kentucky Power all currently have net metering cases in front of the Public Service Commission. It has been a lengthy process for them as the Public Service Commission navigates new territory that will likely set a precedent moving forward.

Kentucky Power - which serves homes in eastern Kentucky - was the first to try it, when in June it asked for a new net metering tariff to be approved by the PSC as part of its rate case.

In January, the PSC decided all the other parts of Kentucky Power’s rate case but delayed action on net metering. The commission said its members would do more research and consult further with an expert they hired to work with them on the issue.

Kentucky Power now has three days of supplemental hearings scheduled for April 6-8. A final decision on their proposal is expected by a deadline of May 14.

A decision on the LG&E and KU proposals could come soon after that. LG&E and KU - which together serve more than 90 counties across the commonwealth - have a formal hearing scheduled to begin April 26. They first filed in November.

A PSC spokesperson declined to comment for this story because of the active net metering cases the commission is currently considering.

Even if the PSC approves the utilities’ changes as proposed, McDonald and other net metering customers who already have solar panels will not see a change on their bill credits for 25 years. It does, however, impact new customers generating extra energy to sell to the utility company.

Advocates worry that the changes would be enough to dim the value of solar, making it much harder for people to pay it off and likely hindering many homeowners from making the switch to an environmentally friendly power source that they believe should be encouraged.

“It makes the economics really bad for using solar,” said McDonald, who has intervened in the case on behalf of solar industry groups and even provided expert testimony to the PSC on the issue. “It might take two to three times longer to recover your investment, and it’s just really going to discourage many people from doing it.”

A speaker at a recent webinar hosted by Kentuckians for the Commonwealth said the changes would make it difficult for a homeowner to recover the costs from installing a new system within the array’s usable life of 25 years.

Collins, the LG&E and KU spokesperson, urged customers considering purchasing solar arrays to think about their energy use and more closely tailor new solar arrays to offset their own needs to get the maximum value from their investment.

In public documents, an official for the utility company admits that the changes could slow the growth of solar. A KU filing with the PSC states that “it was assumed in the business plan that the average size of solar array would become smaller” if the new net metering tariff is approved.

That would, however, the filing points out, allow more individual customers to install solar panels before the company reaches the legal cap of 1% of peak load, which allows utility companies to stop offering net metering altogether. Under the new tariff, “aggregate capacity does not reach 1% of system peak load by 2050,” the filing states.

Still, advocates say, with environmental problems only growing, it is the opposite effect they want to see. Incentives like net metering and federal tax credits (which were set to expire but were recently extended as part of a coronavirus relief package) have encouraged people to use renewable energy sources, but McDonald is worried that the future of rooftop solar may not be so bright.

“Our concern,” McDonald said, “is that it will smother the market for solar and will basically make it inaccessible for most families and businesses.”

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