Wolverines Set Shining Solar Example

Last summer, PACE released a report reviewing state solar net metering policies and discussing ideologies that influence some states to over-compensate private solar generators at the expense of every other consumer on the grid. We’ve enjoyed presenting on this topic and appreciate the many positive comments about our report’s readability and usefulness. Combine the strong response to PACE’s report with the uptick in state legislative and regulatory attention to net metering in 2018, and the result is that PACE will update our report later this year.

However, a few recent state developments merit attention before the fall.

First up is the Wolverine State, Michigan. In 2016, Michigan’s legislature enacted PA 342, establishing a new distributed generation program and directing the Michigan Public Service Commission (MPSC) to investigate and rule on costs and tariff design.

While Michigan’s private solar headcount was relatively low (2,155 customers and 2,289 installations in 2015) policymakers could see increased growth over the horizon (2,582 customers and 2,684 installations in 2016 made for 28 percent growth).

After a lengthy and open stakeholder process, MPSC emerged with refreshed policies. The upshot is a move away from retail net metering to “Inflow/Outflow billing.” Since private solar produces almost as many new terms as it does electrons, it’s worth a little ink to explain this commendable approach that attempts to deal with the confusion and inequities net metering often causes.

A MPSC staff report on DG explained “Inflow/Outflow billing”:

“The method separates power inflows from outflows, relying on two distinct and separate sets of meter data to establish consistent and appropriate cost-of-service … rather than netting the two as is done for net energy metering.”

And “[t]he separation of power inflows from power outflows readily allows for rate designs that incorporate traditional cost-of-service study methods, thus ensuring that DG customers are assessed for their fair and equitable use of the grid. It also provides an independent framework for equitably compensating DG customers for excess power injected into the grid.”

In accepting the staff recommendation for Inflow/Outflow billing in its April follow-on order the MPSC observed the following about private solar generators.

“[C]ost and benefit impacts associated with DG customers are not static but can vary based on a multitude of factors including location, utility infrastructure conditions, weather and the number of DG customers on the grid …”

The MPSC further decided that under Inflow/Outflow full retail rates apply to inflow (electrons purchased from the utility) and a rate will be assigned to outflow (extra electrons private solar customers send to the grid). Michigan consumers can continue to provide input as individual utilities address Outflow tariffs to rate cases beginning June 1. Notably, Michigan’s private solar pioneers are grandfathered for ten years.

The MPSC must have gotten something right, because the pro-solar press is exercised, to put it mildly. For example, PV Magazine rated Michigan’s policy shift as a top concern in 2018 and said “[t]his will doubtless wreck the economics of customer-sited solar and kill the state’s nascent distributed solar industry.”

Rather than killing customer-sited solar, the MPSC has provided the rest of the country a fresh approach. Inflow/outflow billing may help consumers see more clearly how a private solar system will perform for their own use and for the community. It may lead to increased AMI deployment. Finally, as more consumers understand solar economics, then more solar electrons may come to the grid from community and utility-scale projects. Add those benefits up and it looks like the MPSC has presented a smarter way forward.