Westward Group Alternatives Editorial: Expand Alternative Energy with Caution
Consumers should have the chance to produce their own electricity, but other customers shouldn't bear the cost
Lawmakers are considering a package of bills that would expand the state’s renewable energy program in several ways, including making it easier for consumers to be compensated for creating their own solar and other forms of alternative power.
Michiganians deserve as much autonomy as possible in choosing and generating their own electricity. As long as reliability is maintained and the grid is able to handle additional power, government shouldn’t arbitrarily cap participation.
But while greater electricity freedom is a step in the right direction for Michigan consumers, changes to the way electric grids function must be handled with caution. Electric utilities and consumers who rely on traditional electricity shouldn’t be punished in the process.
House Bill 5673 in the state House Energy and Technology Committee would lift restrictions on the number of residents who can participate in the program to create their own power, which is called “net metering.” It would also lift restrictions on the amount of electricity consumers can generate and sell back to energy companies, which makes sense.
But creating a system in which consumers and energy companies both buy and sell power poses new problems. Caps for participation have existed to keep grids secure and to allow alternative energy to be added gradually to mitigate risks for electric power grid operators.
The retail rate consumers currently pay for electricity includes many costs — the actual power being generated, along with fixed costs for overhead, grid maintenance and security and general operations.
When consumers who generate their own electricity are compensated at the full retail rate, as net metering does, those fixed costs get shifted onto consumers who are not generating their own electricity.
Alternative energy users still rely on main utility grids 100 percent of the time, because their supply and demand never fully match. And a patch of clouds for an hour or two might mean a solar user needs to tap into the grid.
They should pay for the overhead and operational costs they incur at a moment’s notice.
A recent California Public Utility Commission study on net metering showed consumers who invested in rooftop solar shift the fixed electric power grid costs to consumers who can’t afford expensive rooftop solar systems, live in multifamily housing or don’t have a rooftop appropriate for solar panels.
This means California customers who don’t use net metering will pay an extra $1.1 billion in shifted costs each year by 2020.
And the majority of solar customers have higher incomes than the average consumer, meaning the fixed utility costs are shifted onto lower-income customers. In California, 78 percent have higher incomes and in Nevada, 73 percent do.
Another bill in the Michigan package seeks to set fair-value pricing based on market demand for electricity being sold back to companies. If consumers produce power at 3 p.m., a high-demand time, they would be paid more than if they produce power at 3 a.m., when there is little demand.
Mandating electric utilities buy back electricity at retail rates, however, ignores the fact that utilities can produce the same product for much less or buy it at a wholesale rate. This increases the overall cost of electricity, which in turn is passed onto consumers.
Alternative energy usage in Michigan increased 18 percent between 2012 and 2013, according to the Michigan Public Service Commission. That trend is likely to increase, and it’s good the Legislature is getting ahead of these issues for consumers.
As lawmakers find ways to expand the state’s alternative energy programs, they must consider overall grid safety and minimize burdensome costs on consumers who can’t afford or don’t want to invest in their own electricity generating systems.