It turns out there’s a downside to Maine’s solar power boom — a potential $160 million annual hit for electricity consumers here. And it’s a cost hike that in turn could conceivably slow the state’s efforts to reduce global warming pollution from cars and buildings.
Call it a case of being careful what you wish for. Last year, as part of a broad effort to address global warming, the Legislature proposed and Gov. Janet Mills enacted several measures to boost the state’s solar power sector. They expanded incentive programs that give owners of solar installations credits when they put excess energy onto the transmission grid.
It’s called “net energy billing” and it has sparked something of a land rush, as developers tried to set stakes in likely, south-facing properties all over the state where they could develop projects up to the 5 megawatt maximum allowed.
“Yeah, I think this program has been wildly successful,” says Phil Bartlett, chairman of the Maine Public Utilities Commission, which this month quietly issued an analysis of the rapid solar uptake.
They highlighted a concerning side-effect: If all of the solar power now proposed actually comes online, and its owners receive all those “net energy” bill credits, the state’s two largest utilities could lose revenues of $160 million a year or more.
And to make sure the poles and wires and utility services needed to keep the lights on are maintained and paid for, that bill will be passed on to all their customers.
“I was surprised at just how fast this development seems to be going, and yeah, when you start doing the math it’s a startling impact, we’re looking at a potential increase of over 20 percent in costs,” Bartlett says.
To make up for the utilities’ lost sales and other costs, the commission found that a typical CMP residential customer would pay an extra $89 a year, and an industrial customer with demand for 1 megawatt of electricity would see an $82,000 hike. The hit would be worse for Versant customers — $139 a year for residential customers and $128,000 for 1 megawatt industries.
“This is a classic climate mistake,” says Tony Buxton, an energy lobbyist who represents the Industrial Energy Consumers Group, made up of some of the state’s biggest energy users, such as paper mills.
Buxton says it’s not just that full build-out would cost his clients a formidable amount of money — the hike in electricity bills could, as the commission also points out, work against so-called “beneficial electrification.”
That’s the adoption of comparatively climate-friendly technologies, such as electric vehicles and heat pumps, that are less reliant on fossil fuels and widely considered the next frontier in battling global warming. If electricity gets pricier, he asks, why would consumers switch from gas and oil?
“It is becoming clearer that the problem we have in making progress on climate is not the Koch brothers. It’s us. It’s the failure of climate mitigation advocates to think clearly, and do prudent things,” Buxton says.
The commission calculated that from May through September, the capacity of net energy billing solar projects either already online, holding contracts for future credits or that have applied for credits rocketed from about 166 megawatts to more than 850 megawatts. That would be enough to power more than 800,000 homes.
But many in the industry say the commission is significantly overstating the possibility of that much solar power could possible come online quickly here.
“One cautionary note is that many of those projects will never get built,” says Robert Cleaves, co-founder of Dirigo Solar, which is developing larger-scale solar projects that do not rely on the net energy billing model, but also municipal and smaller-scale “community solar” projects that do. “And the reason is because a lot of them are being developed by folks from away who just have no appreciation for the challenges associated with achieving all of the permits necessary to do the projects.”
Cleaves and others also argue that the grid infrastructure in Maine isn’t capable of handling that much new solar energy supply without upgrades that would-be developers will find cost-prohibitive.
Still, even if the eye-popping $160 million ratepayer hit is a worst case scenario, which the commission report acknowledges could be the case, a substantial cost to ratepayers remains a distinct possibility. One industry expert says experience shows that somewhere between 40 and 50 percent of the proposed projects ultimately will fail.
“Even if that were to occur that would only reduce the impacts from $160 million to $100 million. I mean it’s still a serious issue that has to be addressed by the Legislature,” says Richard Silkman, CEO of Portland-based Competitive Energy Services.
Silkman says it’s likely that over time the transmission utilities will recover lost electricity sales, because manufacturer and consumer investments in beneficial electrification is snowballing. That new demand should enable CMP and Versant to spread their fixed costs over a larger billing base.
He calls the legislation a mistake, but a lesson that can be absorbed in the challenging task of making a carbon-free future.
“We have to start down this path, but if we want to get to the end, we can’t start down it by taking actions that increase costs considerably. Because it will just delay the process and poison us from being able to do what we need to do over the next 30 years,” Silkman says.
Silkman, the Public Utilities Commission and other stakeholders are proposing several fixes the Legislature should consider. In the near term, a cap on new net-energy billing projects could be imposed, with some consideration for existing investments and commitments.
And they are also calling attention to a more clearly successful mandate from the last Legislature: a state procurement of new renewable energy from larger-scale projects not involving net energy credits, which drew bids, mostly for solar, far below what consumers now pay.