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Clean Energy / News & Views / MPSC Releases Draft Report on Solar Working Group

MPSC Releases Draft Report on Solar Working Group

They see little, if any, effect on rates from modest additions of sun power

Solar power | June 14, 2014 | By Jim Dulzo

About the Author

Jim Dulzo is the Michigan Land Use Institute’s senior energy policy adviser. Reach him at jimdulzo@mlui.org

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This is Part 9 of our ongoing coverage of the MPSC’s solar working group. See the entire series here.

While solar panel prices fell by 75 percent over the last 11 years, electricity prices for Michigan's investor-owned utilities, including DTE Energy and Consumers Energy, increased by 100 percent.
While solar panel prices fell by 75 percent over the last 11 years, electricity prices for Michigan's investor-owned utilities, including DTE Energy and Consumers Energy, increased by 100 percent. (Chart: MPSC)

Solar advocates and staff from Michigan’s two largest utilities are mulling over a draft report that suggests ways the state could start catching up with the nation’s accelerating, jobs-rich boom in roof-top solar energy without raising customers’ rates significantly, if at all.

Michigan Public Service Commission officials released the draft, which summarizes the work of the agency’s Solar Working Group, to group members on June 10 for their technical comments.

Although the report’s current version makes no recommendations, it does confirm that DTE Energy and Consumers Energy could use already-collected but unspent renewable energy surcharges, originally earmarked for now-completed wind power development, to pay for electricity from new rooftop systems at a rate that would encourage more home and business owners to invest in the technology. 

The MPSC assembled the SWG in early February to look for ways to move beyond both utilities’ initial customer-based rooftop solar pilot programs. The pilots breathed life into the state’s struggling solar installation sector for four years. But, despite their remarkable popularity, both companies want to drop them permanently when they expire later this year.

Solar advocates mounted legal actions against the planned expirations, so the agency formed the working group to look for ways to keep solar development moving forward in Michigan.

The report recounts, but does not critique, the presentations that advocates and utilities made to the group over the course of six meetings. It offers a menu of possible next steps, yet does not recommend how, or even whether, to proceed.

During the working group meetings, DTE staff repeated said they only would support new customer-owned solar development that was "voluntary," meaning programs not using the utility's own resources. They said they wanted to protect their customers from higher monthly electric bills. Consumers Energy did not state a position, saying it was attending the SWG meetings to listen and learn.

While MPSC staff cannot legally, at this point, order the utilities to adopt any of the options listed in the report for developing more rooftop solar, a careful reading reveals that the agency sees little, if any, technical or financial reason preventing the state’s two biggest monopolies from doing so.

Upon its release, neither the advocates nor the utilities reacted publicly to the 45-page draft. Both camps have until June 20 to file technical comments before the agency issues a final report on June 30.

Left Behind

Meanwhile, as both camps do their homework and the utilities’ pilots approach their planned sunset, the U.S. solar sector continues its rapid rise.

Nationally, Forbes magazine reports that the industry is headed toward another record year. In first-quarter 2014, solar installations posted an 80-percent increase over first-quarter 2013, which was itself a record year. The sector now employs about 143,000 American workers, according to a solar industry trade group quoted in the article.

“Early next year,” Forbes added, “the country should pass the 20,000 MW mark for total installed capacity—a figure which would have been undreamt of just a few years ago.”

Unlike Michigan, most other Midwestern states are contributing to that boom.

Minnesota, Wisconsin, Illinois, Indiana, and Ohio have each installed more solar power than Michigan’s current grand total. Ohio, for example, had four times Michigan’s capacity more than a year ago.

Some states that are ahead of Michigan are not resting on their laurels. Illinois, for example, just authorized its utility commission to do what the MPSC draft tacitly suggests: spend $30 million of already collected, but unused, renewable energy surcharges to develop more renewables, especially solar. Advocates there estimate this could facilitate up to 5,000 new solar systems.

And Iowa, already a wind power giant, also recently decided to accelerate its solar power development. In a recent near-unanimous vote, lawmakers renewed and tripled the state’s solar tax credit program after its initial $1.5 million fund was quickly exhausted.

Working group participants—including the Environmental Law & Policy Center, the Ecology Center, the Michigan Environmental Council, Sierra Club, 5 Lakes Energy, and California-based SunRun—pointed out at the meetings that, as in those states, accelerating solar in Michigan would create good-paying in-state jobs, cut panel owners’ power bills, hedge against volatile power plant fuel prices, and reduce climate-changing and health-impairing power-plant emissions.

But two national organizations that spoke to the working group, the Edison Electric Institute and Hispanics in Energy, joined DTE in arguing that solar is too expensive, would push up rates, and be unfair to customers without panels.

Three Options

The draft report does not directly confirm or rebut those, or other, claims. In fact, its first half simply recaps and summarizes the many subjects the working group meetings covered.

Those include the designs of DTE’s and Consumer’s expiring solar pilots and their use of lotteries, community solar projects, different “Value of Solar” calculations, rate setting methods, new program suggestions, “dynamic pricing,” the value of solar’s positive environmental effects, and rooftop solar’s possible effects on low-income or panel-less households.

The draft confirms that solar power is tremendously popular in Michigan, that many ratepayers want more solar energy in their electricity mix or on their roofs, and that the lottery systems the utilities use to select “winners” from the avalanche of applicants for their solar programs is slow, unpredictable, and costly to installers. 

It also confirms that the price of solar power is falling in Michigan, even without the strong, widespread growth that would further lower hardware and installation costs.

The heart of the report, however, is its description of three possible options the utilities could use to pay customers with rooftop panels for their electricity.

For each option, the agency used 50 megawatts of new solar as a goal for each company, which would roughly quintuple the generating capacity their expiring pilots developed.

One option uses an upgraded version of the current, state-mandated net metering law. It essentially runs customers’ power meters backward when their panels produce more electricity than their building is using, but caps payments at the amount of power the customers themselves actually use.

The draft says this would be, policy-wise, the quickest, least-complicated way of expanding rooftop solar.

A second option uses the relatively new Value of Solar rate-setting approach, a major working group topic. VOS pays less than net metering’s retail rate, but has fewer limits on how much power can be sold back to the utility. Computing a new Value of Solar rate for panel owners, the agency observes, would take some time and require more information from the utilities than the SWG had access to.

A third option would use elements from the first and second schemes.

All three options would, in different ways, pay a customer 15 cents for each kWhr of solar power produced, allowing a 10-year return on investment. That is not as profitable to panel owners as the best-paying phases of the utilities’ expiring pilot programs, which offered either rebates on installation costs and/or above-retail rates for solar electricity.

But each is more financially attractive than Michigan’s net metering provisions, which all utilities must offer their customers but have not spurred strong interest in homegrown sun power development. In fact, the draft report points out, since Michigan’s net metering law took effect in 2008 it has facilitated less than 10 MW of rooftop solar panel installations.  

Although DTE, in particular, insists that adding more solar that pays better rates would cost ratepayers too much money, the draft points out that both utilities still have millions of dollars of renewable energy surcharges in their coffers that they collected but did not need to spend to meet the state’s 2008, 10 percent renewables mandates. The surpluses occurred because the cost of wind power development turned out to be far lower than either company first predicted.

Those unspent dollars, the report says, likely could entirely pay for expanded, 50 MW, customer-based solar programs by each utility.

The draft also looked at the possibility of expanding programs such as DTE’s Green Currents or Consumers’ Green Generation programs, which allow customers to buy “blocks” of clean energy at an above-retail rate. MPSC staff said it sees little interest in such programs today; customers now prefer purchasing a more “tangible” asset, such as their own solar panels or a share of a community solar program—another approach to expanding customer-owned solar that the report briefly mentions.

MPSC also considered several third-party leasing arrangements for rooftop system, including a utility-owned approach, as well as crowdfunding, and concluded that they are legally complex and likely not the quickest, best next steps to take.

The draft’s conclusion added some urgency to the discussion. It noted that if either utility wants to expand their customer solar programs and get the best bang for their own and their customers’ buck, time is of the essence: The 30-percent federal tax credit for solar panels, considered a major driver of the nationwide rooftop solar boom, expires in 2016.

Jim Dulzo is the Michigan Land Use Institute’s senior energy policy specialist. Reach him at jimdulzo@mlui.org

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