Arizona’s changes to net metering could derail the state’s rooftop solar market

Image: Wing-Chi Poon - Own work, CC BY-SA 2.5, https://commons.wikimedia.org/w/index.php?curid=437172

The Arizona Corporation Commission (ACC) has decided to drastically reduce its export rates  — what the utilities pay solar users for excess energy — to mitigate a utility-alleged “cost-shift” to non-solar ratepayers.

The two-day hearing adjourned at 9:25 pm ET, after almost 30 hours of public testimony, with a vote of 4-1 to implement significant changes to Arizona policy. The export rates were only one piece of this, and solar advocates are already suggesting that this could devastate the rooftop-solar industry in the state.

Commission Chairman Doug Little celebrated the end of a three-year, often-contentious value-of-solar docket, saying he hoped never have to do anything like it again during his time on the body. Around 30 groups took part in the deliberations, including solar advocates Vote Solar and The Alliance for Solar Choice, along with electric co-operatives, the state’s utilities.

The bruising battle seemed as if it would go on forever, even after the ACC ordered an evidentiary hearing in November 2015 to determine the value of solar based on discussions between the groups involved. That excruciating process led to last night’s vote, seemingly putting to rest once and for all questions about the future of net-metering in Arizona.

As pv magazine reported in October, the decision will value distributed solar based on the price of utility-scale solar generation, as evaluated each year with a five-year horizon.

In addition to the drastic reductions to the amount of money utilities will pay solar users for their excess energy, the commission also found that:

  • declares that distributed-generation (DG) rooftop solar customers are considered a separate class of customers, with their status to be determined in each individual utility rate case moving forward, subject to a “fully vetted cost-of-service analysis” conducted by the utilities;
  • establishes the resource-comparison proxy (RCP) — essentially the cost of utility-scale solar — as the basis for the initial DG export rate in rate-cases currently being adjudicated by the commission, with export rates in future cases being determined either by the RCP method, the avoided-costs method (ACM) or a combination of both.
  • grandfathers current residential rooftop-solar customers in at the current rates for a period of 20 years from the date of interconnection;
  • “grandfathers” new customers into initially established rates for a period of only 10 years; and
  • eliminates “netting” or “banking” exported DG kWh once the new export rates are set.

After the vote, Commissioner Bob Stump said the ACC’s decision reflects the solar industry’s own rhetoric about self-reliance and independence and frees the solar industry from continued dependence on subsidies from non-solar users who, in his view, have picked up the tab for solar users’ “self-consumption.”

It should be noted that sixteen states have commissioned cost-benefit analyses on whether having solar consumers on the grid has a negative effect on non-solar customers. All have found that the “cost-shift” argument to be almost entirely illusory.

Louis Woofenden, engineering director for Net Zero Solar, a Tucson-based solar installer, said the rates as passed could end up with a 30-percent drop from current retail rate for exports and then a 10-percent step-down per year thereafter.

“This could be a horrific deal for solar,” Woofenden said. “Even before changes to net metering, many of these rate changes will push simple payback will likely to be significantly more than 10 years. Most potential solar adopters won’t install at that payback rate.”

“I’ve done some analysis on this in the past but have not run this with the new numbers,” he added. “But if what they approved comes to pass, it’s going to hit all installers from large to small.”

Woofenden said that while the decision will hit large installers the hardest, it will be a challenging environment for small installers too.

“This is going to hurt a lot of small businesses in Arizona, and I have no doubt there will be job losses associated with this decision,” Woofenden added. “It’s about small business, and job losses.”

Woofenden added that he will be interested in what large national installers like SolarCity and Sunrun say over the next 24 hours.

Both Vote Solar and The Alliance of Solar Choice (TASC), solar advocates who attended the meeting, were uncomfortable with calling this decision a compromise, saying the deal was simply cut between the utilities with little or no input from them.

“I flew here all the way from Baltimore to attend this meeting in the spirit of compromising with the Arizona utilities,” said Anne Hoskins, executive director for TASC. “I feel the voices of rooftop solar advocates haven’t been heard in this decision. I hope that in future discussions, we’ll be included more fully.”