By Brian Lock
Something of a scandal happened in Florida surrounding the state’s recent proposed constitutional amendment. Amendment 1 contained language that would have made it easier for Floridians to have solar panels installed on their homes.[i] However, it also contained language that would have given utility companies the right to charge fees, specifically to solar panel owners.[ii] The utility backed amendment drew a lot of criticism and kick-started a vote no campaign when audio from a conservative think tank calling the amendment “political jiu-jitsu” was released.[iii] The amendment did not pass, but this event, and others like it, suggests that states should be wary before implementing strong legislation on this complex matter.
To grasp the impact this kind of legislation can have, one should look to Nevada, where utility companies are allowed to charge the kind of fees that Amendment 1 would have permitted.[iv] Nevada’s public utility commission gave NV Energy permission to charge fees to solar panel owners.[v] Shortly after this change was permitted, the solar companies made cutbacks and started leaving the state despite Nevada being one of the sunniest states in the nation.[vi] Nevada’s backslide in solar panel use occurred because NV Energy started charging enough fees to solar panel owners to effectively eliminate the financial incentive that Nevada had previously created.[vii]
At first blush, the actions of the utility companies in Florida and Nevada are confusing. What could be wrong with a house producing its own energy on sunny days? The answer to that question involves the interplay between a policy called net metering and the nature of energy bills charged by utility companies. According to the Solar Energy Industries Association, net metering is a mechanism that gives credit against future utility bills based on the amount of electricity a solar user puts back into the grid.[viii] Homeowners with solar panels can significantly reduce their utility bills thanks to net metering.[ix] The problem is that utility bills are calculated based on more than just the electricity an individual uses.[x] A significant portion of a person’s utility bill comes from the costs of maintaining the power grid that supplies the electricity.[xi] Utility companies argue that crediting full retail costs of electricity allows those with solar panels to shift grid maintenance costs to others who cannot have solar panels installed.[xii]
Clearly, this conflict creates an issue for legislators. If they give too much leeway to the utility companies, they can stifle the growth of renewable energy. If they give too many incentives for solar panel ownership, this can cause pricing problems for heavily regulated utility companies. With so much uncertainty in this area, lawmakers should be careful about how they regulate the energy industry. Furthermore, the regulations that are created should remain flexible to account for changes in an industry that moves quickly and impacts so many lives.
[i] Nick Stockton, WHY IT’S SO HARD TO GET SOLAR IN FLORIDA (THAT’D BE THE SUNSHINE STATE), Wired (Oct. 16, 2016, 7:00 AM), https://www.wired.com/2016/10/florida-sunshine-state-hard-get-solar-energy/
[iii] John Schwartz, Measure in Florida That Claims to Back Solar Power May Discourage It, The New York Times (Oct. 27, 2016), http://www.nytimes.com/2016/10/28/science/florida-solar-power-referendum.html?_r=0
[iv] Dan Hernandez, Nevada solar industry collapses after state lets power company raise fees, The Guardian, (Jan. 13, 2016), https://www.theguardian.com/environment/2016/jan/13/solar-panel-energy-power-company-nevada
[viii] Net Metering, Solar Energy Industries Association, http://www.seia.org/policy/distributed-solar/net-metering (last visited Nov. 24, 2016).
[x] John Schwartz, Fissures in G.O.P. as Some Conservatives Embrace Renewable Energy, The New York Times (Jan. 25, 2014), http://www.nytimes.com/2014/01/26/us/politics/fissures-in-gop-as-some-conservatives-embrace-renewable-energy.html?_r=0