Not a bright idea: Changes to Indiana’s solar policy foolish, misguided

By Sanya Carley and David Konisky

Indiana Senate Bill 309, introduced by Sen. Brandt Herschman, proposes to fundamentally change Indiana’s solar energy policy.

The proposed modifications to the state’s net energy metering program are based on a lack of evidence and faulty logic, and would severely undermine the future of solar power in the state. Indiana legislators should oppose this bill.

A net energy metering program allows a household to install its own solar — or other energy system — and connect this system to the electric grid. In times of excess solar generation, the household can sell its electricity back to the grid at the retail rate of electricity. During periods in which the household cannot cover its own electricity through the solar generation, it can purchase electricity from its standard electricity retail provider.

This program is popular across the states, with more than 40 having a net metering program in place.

Senate Bill 309 proposes drastic changes. This bill would change the rate of reimbursement for solar generation from a retail rate to a wholesale rate. The difference between the two is, depending on location and other factors, roughly a multiple of two to three.

This change would reduce people’s economic incentives to install solar. The bill also proposes to cap the net metering program to 1 percent of an electricity supplier’s most recent summer peak load, and eliminate net metering altogether in 2027. Collectively, these changes would unnecessarily stunt the development of this clean energy source.

Indiana is not the only state to consider modifications to its net energy metering policy. In 2016 alone, 28 states considered making changes. States took several other actions related to solar as well: 35 considered establishing additional fixed charges or raising the minimum electricity bill and 10 considered adding residential solar charges.

These policy challenges are primarily leveled on the grounds that net energy metering customers do not pay the full fixed costs of electricity delivery and, as a result, other electricity customers cross-subsidize those with solar panels by picking up the extra fixed costs.

This argument, is flawed for three reasons:

There is no evidence that residential solar significantly raises the price of electricity;

Solar energy offers benefits beyond those that are typically accounted for in the price of electricity;

Regardless of which of these extra benefits are accounted for explicitly in the price of electricity, the vast majority of benefit-cost analyses conducted on residential solar have found benefits to exceed the costs, for both the solar owner and society at large.

A recent study written by Galen Barbose at the Lawrence Berkeley National Laboratory evaluates the effect of residential solar on retail electricity prices, both at present and under future scenarios with much higher levels of assumed solar penetration. The study finds that the effect is negligible: about 0.03 cents per kilowatt-hour at current solar penetration and between 0.1 and 0.2 cents per kilowatt-hour at higher assumed solar penetration levels in the future. These price impacts are much smaller than a variety of other possible electricity price change triggers such as natural gas price spikes or other policies intended to encourage clean energy development.

Solar power also offers many additional benefits, particularly for a state like Indiana that relies disproportionately on a single source of fossil fuel energy for electricity generation; about 75 percent of electricity in Indiana is generated from coal-fired power plants. Solar power is a clean, renewable source that does not result in emissions of pollutants that threaten human health. In addition, studies have shown that net metering programs create thousands of jobs.

According to one recent estimate from the Solar Foundation, more than 200,000 people (nearly 1,600 in Indiana) currently work in the solar industry. The net metering policy is especially important for Indiana, since the state lacks other common policy measures to encourage solar energy development.

Over the last several years, the majority of states have conducted solar valuation studies. These studies tend to include direct measures of costs and benefits associated with residential solar. Out of 16 recent solar valuation studies recently written or commissioned by utilities, utility commissions, or independent analysts, all found net positive benefits, and 12 of the 16 found net benefits that exceeded the retail rate of electricity.

Indiana is on a slower path than most other states toward developing cleaner sources of energy. The General Assembly should be looking for ways to hasten the development of solar, wind and other sources of renewable energy, rather than considering policies that impede the state’s transition to a cleaner energy future. Indiana Senate Bill 309 is clearly a step in the wrong direction.

Sanya Carley and David Konisky are professors of public and environmental affairs at Indiana University. This was distributed by the Franklin College Statehouse Bureau. Send comments to [email protected].