To figure the fair compensation for customers providing solar power to the grid, start with the average price that customers pay for power, testified Edward Rutter in an Indiana rate case. Then subtract the fair share of the cost of the distribution grid that’s used to move the solar power.
The resulting value is 13¢/kWh for residential solar generation in the southern Indiana region served by Vectren, he calculated, compared to the 3¢/kWh that Vectren proposes to pay.
Rutter, a former accountant, recently served as chief technical advisor with the Indiana state agency that represents ratepayer interests. The Indiana Distributed Energy Alliance sponsored his testimony.
Vectren is the first of five Indiana utilities to propose new rates for distributed solar generation, under a 2017 state law that calls for replacing net metering compensation, says an Alliance statement.
$540 million per year
Rutter highlighted a Lawrence Berkeley National Laboratory study, requested by the Indiana legislature, which found that high levels of distributed solar power in Indiana would reduce utility costs statewide.
The study, included in a state task force report, showed annual statewide savings from high levels of distributed PV ranging to more than $540 million in 2040, relative to a base case:
The savings are mostly from reduced generation costs. The values do not include the cost to solar customers of a solar installation; rather, they show the value provided by solar customers to all customers in the state.
Rutter testified that the savings represent an 8% reduction in utility costs statewide. He originally suggested that Indiana regulators could allocate those savings 50/50 between the distributed solar generators who create the savings, and all other customers. Solar generators would receive a fair price for their solar power, while all other customers would receive lower bills. But in subsequent testimony filed after further data became available, Rutter testified that the 13¢/kWh value is “more accurate.”
The 2017 Indiana law to replace net metering was “premature,” Rutter said, “in not having this comprehensive study” from the national laboratory, “to understand the benefits and costs associated with distributed energy resource deployment, particularly rooftop solar.”
In related work, the national solar association SEIA determined that in Michigan, distributed solar power provided to the grid has a value of 24¢/kWh.
Other advocacy groups contesting Vectren’s proposed 3¢/kWh compensation for distributed solar power are Citizens Action Coalition, Environmental Law and Policy Center, Vote Solar, Solar United Neighbors, and Solarize Indiana.
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