Since July, only two customers in the NIPSCO area with 1.2 million customers have installed solar systems under a new net metering regulation. The case was referred to the Supreme Court.
On July 1, 2022, regulators and utilities in the state of Indiana phased out rooftop solar panels.
Regulatory processes led to the phasing out of net metering, a program in which utilities pay customers for their excess solar power generation. Net metering has been instrumental in the adoption of rooftop solar, a technology that supports climate resilience on the grid, launched local businesses and helps residents save on their electricity bills.
Indiana Governor Eric Holcomb signed legislation in 2017 that put the state on track to phase out net metering by 2047. Meanwhile, it allowed utilities to pay solar customers a lower rate when solar penetration reached 1.5% of their summer peak load or by July 2022. Net metered prices are often reduced over time to avoid cross-subsidization of solar owners by non-solar owners to avoid and to retain profits for electricity suppliers. However, national laboratory studies have shown that this results in negligible costs for utilities and may instead result in cost savings until rooftop solar energy reaches 10% of the grid mix.
Indiana utilities wasted no time aggressively slashing net consumption charges. On July 1, 2022, investor-owned utility CenterPoint Energy switched from monthly net metering to a new model known as “instantaneous netting.” With instant billing, customers pay the full retail price for all electricity consumed from the grid, and all solar electricity fed back to the grid is paid at the much lower “excess distribution generation” rate.
Overnight, CenterPoint was approved by the Indiana Utility Regulatory Commission to pay its customers $0.031/kWh for solar power, and North Indian utility NIPSCO was approved at $0.026/kWh. Since then, net meter rates have risen to around four or five cents per kWh as electricity prices rose significantly following the invasion of Ukraine.
The new tariffs changed the estimated typical residential solar payback period from seven to 10 years to 21 years or more, a value proposition Hoosiers could not bear.
The prices are so inedible that only two NIPSCO customers have been installing rooftop solar panels since July 1, 2022, reported Ben Inskeep, program director at Citizens Action Coalition (CAC). NIPSCO serves over 1.2 million customers.
CenterPoint has about 100 rooftop solar arrays, and of the state’s four other utilities, only 124 customers have applied to switch to solar power under the new tariffs, the Indy Star reports.
The Ratemaking case has made its way to the Supreme Court. Solar advocates argue that the 2017 Holcomb Act never contained provisions allowing for “immediate settlement.”
“We prefer to call this ‘no netting’ because there really is no netting,” said Kerwin Olson, executive director of CAC.
The shorter the interval for offsetting excess solar production, the lower the payments to solar roof customers. Analysis by CAC found that once the Investment Tax Credit (ITC) from the Inflation Reduction Act goes to zero, payback periods for solar roofs could exceed 30 years.
The ratemaking debacle highlights an ongoing critical issue for residential solar adoption: uncertainty. Reducing uncertainty has been one of the key motivations behind the industry’s drive to extend the ITC by a decade, rather than incrementally extending it in the past.
“It’s hard to say what your compensation will be going forward — it’s going to change every year,” Inskeep said.
“You make a 25-year investment, but the value is updated annually. You can’t see if your investment is paying off. Utility companies never make large investments in 30-year assets without certainty of that cost recovery. Now they are asking retail clients to take that risk – not knowing when their investment will pay off or if it will never pay off,” he said.
A similar battle between energy suppliers and a coalition of consumer advocates, environmentalists and members of the solar industry is raging in various markets across the country. The nation will be watching the Indiana Supreme Court case and California’s Net Metering 3.0 ruling as waypoints to determine the fate of rooftop solar power.
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