Guest Column

Energy subsidies stifle renewable revolution

December 14, 2018
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New and more efficient resources are increasingly producing the energy that powers our homes and businesses. A growing segment of this transformation is private rooftop solar, whose growth has benefited from subsidies and policies funded by taxpayers and nonsolar consumers. These subsidies and policies, however, were developed when private solar panels cost 100 times what they cost today. There also is growing evidence the subsidies are inhibiting the technical evolution of solar energy, causing inflated prices to consumers over what is justified.

Because today’s energy landscape is drastically different than it was decades ago, many states are now revisiting these subsidy policies to usher in changes that modernize and reform customers’ electricity rates — making them more fair for everyone and more oriented to enabling growth of solar energy for our nation’s resource portfolio. As a former state utility commissioner, I have closely followed these policy debates and know that the development in Michigan generally is consistent with the direction being taken by other states.

For example, earlier this year, Michigan regulators swapped out their previous net metering model for an input/output model. This new model recognizes the solar industry matured and merits treatment as a fully competitive source of energy. Most importantly, this input/output model moves modestly toward leveling the playing field for all energy customers. That being said, it still falls short of assuring that all customers pay their fair share of the costs of the distribution system.

The input/output model differs from Michigan’s previous net metering model in that it proposes to lower the price paid for energy exported to the system, albeit at a price that still is being determined and may still be above the market rate for energy. This may still require nonsolar customers to subsidize costs that ought to be borne by private solar customers. That is because the proposed rates perpetuate the enabling of private solar users to circumvent paying their share of the system’s fixed costs and, instead impose those costs on customers without private solar.

The proposed reforms, while more modest than those undertaken in other states, will open more opportunities for more efficient, large-scale solar and wind to be even more competitive and more efficient in reducing Michigan’s carbon footprint.

These changes will help Michigan better manage costs as the state increases its usage of the most efficient and competitive renewable energy sources, such as wind and solar, to power our communities, helping to create a more balanced and less carbon intensive energy mix. Michigan’s energy companies already are taking dramatic steps to reduce carbon emissions and bring more renewable energy to the state.

The steps being taken by the Wolverine State to update its policies, while modest in scope, will help to transform its energy grid and will contribute to a more competitive, resilient, reliable, clean and equitable energy grid across the state for years to come.

Ashley Brown is executive director of the Harvard Electricity Policy Group and is a former commissioner of the Public Utilities Commission of Ohio.

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