As Colorado awaits important updates to its net energy metering rules this year, Glenn Vaad, a long-time public servant and member of the American Legislative Exchange Council (ALEC) is sworn in as Public Utilities Commissioner. The appointment is not without some controversy, but no one can predict the outcome of Febrary hearings on the matter, to be decided sometime mid-year. Declining soft costs could make net metering rates a moot point.
As Colorado’s net energy meting (NEM) policies await important regulatory decisions in 2014, the state got a new Public Utilities Commissioner on Tuesday. Glenn Vaad, a Republican and former Colorado State Representative, took the third of three seats on the Colorado Public Utilities Commission (PUC). He will serve along side two Democrats, Pam Patton and Joshua Epel.
The PUC is slated to make important rulings on the future of Colorado NEM rates sometime in mid-2014, following what are likely to be contentious public hearings on the matter early in February. The NEM debate in Colorado represents one of most-watched energy policy developments in the state, and parallels similar battles elsewhere such as in Arizona and California.
Vaad’s new post at the PUC is being criticized by renewable energy advocates because of his membership in the American Legislative Exchange Council (ALEC), a juggernaut of conservative agenda pursuit. Some fear that Vaad will join with ALEC’s broad efforts to discourage distributed rooftop solar.
Regional utility giant Xcel Energy modestly promotes utility-scale renewable energy but is trying to slow the growth of distributed solar. Xcel and its Colorado subsidiary, Public Service Company of Colorado (PSCo), have proposed cutting NEM credits from 10.4 cents to 4.5 cents per kWh in Colorado.
Xcel says the new number is supported by a study it did in-house to determine the avoided cost to the utility represented by distributed generation. In other words, Xcel wants to pay a wholesale — not retail — rate for electricity that feeds into the grid from rooftop solar. The PUC would have to approve this change. Framing the NEM debate in terms of avoided costs seems to be a preferred strategy among utilities that want to hamper distributed generation that’s outside of their control.
Xcel has submitted that anything more than the 4.5 cents per kWh is an unneeded subsidy to solar rooftop owners and would hurt other Xcel ratepayers in the long run. An independent review by Crossborder Energy of Xcel’s proposal disputes Xcel’s findings. Current NEM policy confers $13.6 in net benefits per year to the Xcel’s Colorado system, according to Crossborder.
Source for tables: Crossborder Energy, Benefits and Costs of Solar Distributed Generation for the Public Service Company of Colorado
Even the proposed policy change — roughly a cut of six cents per kWh to the NEM credit — won’t shut down the distributed solar industry in Colorado. A recent study by IHS claims that attacks to net metering credits nationwide would have negligible impact on distributed solar markets. This is due to declining hardware costs as well as significant opportunities to reduce soft costs that will continue to make solar competitive.
Consider this list of U.S. soft cost reduction opportunities from the Rocky Mountain Institute published in December 2013:
Receiving an extra six cents per kWh you feed into the grid helps pay off your initial solar investment more quickly. But, by significantly reducing costs of installation up-front, the initial investment could be reduced enough to make the arguments over a six-cent credit cut moot.
For its part, Xcel sees tiny power plants (rooftop installations that produce surplus electricity) increasingly popping up in its territory. About 10% of solar rooftops in Colorado actually produce more electricity than is consumed beneath. But within the current model of power generation, Jane Homeowner is free to install sizable arrays and expect payments from Xcel. Xcel is trying to dis-incentivize such behavior by reducing NEM credits, because its business model is threatened as more and more installations come online.
In the long run, something has to give. As rooftops increasingly acquire solar, serious consideration will have to be given to how the grid is maintained while ensuring Xcel’s remaining customers face reasonable electric rates. In the meantime, it seems Xcel is intensely defending its territory instead of pursuing a new, perhaps win-win paradigm for distributed generation.
How Vaad will approach these issues as a PUC Commissioner is uncertain. In a recent press release Vaad said, “I look forward to diving into the often complex regulatory issues facing the [PUC] and helping to negotiate the right balance between energy development and the environment,” closely echoing the PUC’s mission statement.
Colorado law stipulates that no more than two people from the same political party can serve on the PUC. Gov. John Hickenlooper (D) nominated Vaad to a three-year term, following the resignation of then-Commissioner James Tarpey (R) late last year. Commissioners Patton and Epel are serving four-year terms that began in 2012 and 2011, respectively.