Opinion: Cut down on solar subsidies
As the former chairman of the Michigan Public Service Commission, I observed renewable energy sources, especially solar, gain momentum nationwide. And with more and more customers opting to install private rooftop solar panels on their own homes, solar power has become a crucial part of the United States’ energy mix.
However, the subsidized pricing scheme that incentivizes some customers to adopt solar panels in most states is outdated, regressive, and sorely in need of an overhauled regulatory approach. I am glad to report that Michigan is one state that is making necessary adjustments, led by its forward-looking legislature and Public Service Commission.
Recently, Michigan shifted away from an old net metering policy which allowed customers with private solar panels to sell the excess power they generate back to energy companies at above-market rates, significantly reducing their electricity bills. This subsidy to solar customers also effectively allows them to sidestep the cost of maintaining the energy grid, a fixed cost built into all customers’ energy bills.
With the energy industry rapidly changing, this maintenance cost recovery is essential to keeping the lights on, increasing reliability, strengthening resilience, and continually modernizing the grid for customers.
The reality is that not everyone can afford to install private solar panels, and as a result, net metering policies disproportionately subsidize customers who are able to invest significant money up front while reaping financial benefits in the future.
While these generous incentives were helpful in the early days of private solar adoption, over time the costs to manufacture solar panels have plummeted while solar customers have been allowed to pocket the difference and take advantage of the energy grid that they are still connected to at all times – benefiting from the grid when the sun isn’t shining at the expense of lower income customers that continue to pay for the grid.
Michigan’s recent change to an inflow/outflow model still compensates rooftop solar users for the energy they sell back to the energy grid, while allowing the rates to recognize the imbalance that exists with the market value of the energy being provided.
It’s the responsibility of the Michigan Public Service Commission to ensure that every customer is receiving the fairest energy rate possible at all hours of the day – and this model change works to accomplish equity by taking modest steps to level the playing field among energy customers and ensuring that the cost of energy from private rooftop solar is more in line with the actual market value of the energy.
I encourage Michigan lawmakers and regulators to stay the course, remain forward-looking, and continue to support the investment and transformation of Michigan’s energy grid in a way that is fair and transparent for all energy customers, and continues to move us towards a cleaner energy future.
John Quackenbush is the former chairman of the Michigan Public Service Commission.