Legislators introduce bills to lift solar cap, restore net metering and establish ‘fair value tariff’ for distributed generation

Current state law requires utilities to purchase excess energy from residential solar owners for any power they send back to the grid up to 1% of the company’s average peak yearly load.

Two bills introduced into the Michigan Legislature Wednesday aim to create more favorable conditions for utility customers who want to install solar panels and sell the excess energy back to the grid.

Senate Bill 362, sponsored by Jeff Irwin D-Ann Arbor, would remove the “solar cap” or cap on participation in distributed generation (DG) programs run by utilities. Sen. Ed McBroom (R-Waucedah Township) cosponsored the bill.

Current state law requires utilities to purchase excess energy from residential solar owners for any power they send back to the grid up to 1% of the company’s average peak yearly load. 

Beyond this point, homeowners are not entitled to compensation for the power they produce, which can extend the break-even time on their investment. DTE Energy will hit its cap this year; Consumers voluntarily increased it to 4% in January.

The bill would also restore net metering, in which the same retail rate customers pay for energy from the grid applies to the energy they sell back. Net metering was replaced with an “inflow-outflow” tariff in 2018, which deducts transmission costs from the price DG customers get for the energy they sell. That change increased the time to recoup upfront investment costs for a typical rooftop solar customer by about 30% compared with net metering.

In addition, the bill would direct the Michigan Public Service Commission to establish a “fair value tariff” for energy produced by distributed generation, accounting for systemic factors like the contribution of distributed generation to peak capacity and transmission costs. 

DTE Energy spokesperson Pete Ternes said the company opposes the cap increase and return to net metering. He said current law requires DTE to purchase any excess energy from private solar customers at above-market rates. 

“This overpayment is a subsidy, and the cap limits how much the rest of our customers have to pay to subsidize those customers who choose to install private solar,” Ternes told Planet Detroit.

John Richter, a senior policy associate with the nonprofit advocacy organization Great Lakes Renewable Energy Association, sees it the other way around. He said that Michigan homeowners and businesses with solar energy systems have been forced to subsidize their monopoly electric utilities.

“When a Michigan utility buys energy from a customer with solar, the utility pays a much lower rate than it charges the customer for the energy they buy from the utility (at night, for example),” he said. “The utility then sells that energy, usually to their next-door neighbor, at the full rate – a 100% markup! This bill would establish a fair-value tariff for the sale of energy to the utility and end the legal limitation on how many customers may do so.”

Michigan Energy Innovation Business Council President Laura Sherman told Planet Detroit that the fair value tariff is needed to establish the true value of distributed generation.

“Let’s take a step back and have the Michigan Public Service Commission do a study, as other states have done, to look at the fair compensation for rooftop solar,” she said. “So look at the energy you’re providing to your neighbor; look at the reduction in the need for the utility to build transmission.”

The bill further updates grid interconnection standards, adds cogeneration and waste heat generation as distributed generation options, and prohibits utilities from charging additional fees to DG customers.

A second bill, SB 363, sponsored by Rosemary Bayer D-Keego Harbor, would delete references to the distributed generation tariff that formed the basis for replacing net metering with the current inflow/outflow model.

“I am hopeful these bipartisan bills will get a swift hearing because bureaucratic barriers to Michiganians producing renewable energy are costing our state economically and environmentally,” Sen. Irwin said. 

Sherman told Planet Detroit that removing the cap will help build predictability for the state’s solar industry.

“When you have this cap, it sort of creates this boom-bust cycle where there’s a possibility – which has happened several times previously –  that you hit a cliff and folks can no longer sign up in certain utility territories,” she said.  “So you have people sitting on a waitlist until the company decides to increase the cap because, in current law, it’s entirely up to the utility.”

Ternes noted that DTE would continue connecting customers under the current distributed generation rate through the end of 2023 as it works through an MPSC directive to outline “other options” for customers outside the distributed generation program.

In March, Irwin and Sen. Ed McBroom (R-Waucedah Township) introduced Senate Bills 152 and 153 to enable a statewide community solar market. Michigan law currently does not provide for community solar, and utility companies are not required to give bill credits to individuals who subscribe to such facilities. As a result, advocates say, Michigan’s solar power market has not reached its potential.

“Community solar will be a job creator across Michigan,” Sherman said. “This will create jobs, support local businesses, and it will help to strengthen our electric grid.”

Similar bills to lift the DG cap and enable community solar have been introduced in recent sessions but have failed to gain traction under a Republican-controlled legislature. Advocates are more optimistic now that Democrats control both chambers of the legislature and the governor’s office.

“We’re in a very different legislature, and we have a lot of new folks,” Sherman said. “We have different folks in the majority, and I think there is a very good chance that we will move on these issues with this legislature. So we’re very hopeful and going to push hard.”

Irwin underscored the urgency of passing legislation to lift the DG cap.

“We will lose good jobs because of this bad law,” he said, ” and it will leave a lasting impact as skilled workers and installation companies leave the state.”


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