A new group chaired by former Arizona Speaker of the House Kirk Adams has entered the net metering solar debate in Arizona. Prosper Arizona, a new advocacy group dedicated to promoting free market principles, released a new ad today titled “Fair.”
Prosper also released the following information on their website about net metering:
What is Net Metering?
Net metering is a term used by the power industry to describe the rates paid by individuals and businesses who generate their own power. For Arizonans, this typically applies to people who have made the choice to install solar panels on their roof (or buy a house with solar panels already installed). Under net metering, solar customers who create more power than they use send their excess power back to the electrical grid. Utility companies pay these customers for that excess power, as they should, in the form of a credit that the customers can use to offset their consumption at other times, such as a cloudy day or at night. In this manner, net metering allows the customer to use the grid as a sort of bank, where they make deposits when they have spare power and withdrawals when they need more power than their solar panels can provide. Overall, this makes good sense in theory because the customer can benefit from lower power bills, the utility can benefit from reduced need to build new power plants, and we all benefit from a more efficient and more free market for energy where individuals can make choices about their energy consumption.
Why is Net Metering an Issue for Arizona?
While in theory net metering makes good sense, the equation is not so simple in Arizona and many other states around the country because of the extensive and varied statutory and regulatory framework surrounding electricity markets. The combination of incentives and subsidies provided under various policies, including the net metering policy controlled by the Arizona Corporation Commission, have resulted in a system that is growing increasingly unfair for many Arizonans.
When net metering was first established in Arizona, the Commission chose to require utilities to compensate solar users at a premium price, much higher than the utility could otherwise buy power on the market, as an incentive to spur solar installations. Combined with plummeting costs for solar panels and new long-term lease financing options for homeowners, this incentive structure has been very successful in building a large community of solar users in Arizona – over 18,000 in APS service territory alone. This success does bring challenges, though, and does come at a cost.
All Arizonans benefit from a reliable electrical grid that sustains our economic and population growth and powers our critical infrastructure, such as water facilities, hospitals, schools, and more. The successful adoption of solar in our community has not lessened the need for a reliable grid, and solar users continue to need access to the grid just like non-solar users. The challenge we now face is that the net metering subsidies designed to spur the adoption of solar are outstripping their benefits, and the situation is only going to get worse unless the policy is realigned to meet Arizona’s current needs.
The more individuals who receive subsidized power, the fewer who remain to foot the bill for the grid. An independent study conducted this year estimated that each new solar installation adds over $1,000 per year to the costs paid by non-solar users, amounting to over $20,000 over the typical life of the installation. With several hundred new solar applications each week (and growing), this is not sustainable, is not fair to non-solar users, and is certainly not the product of a free market.
In a free market, individuals should be able to choose solar, and Prosper is strongly in support of preserving that choice. But utilities subject to the existing net metering policy are being forced to pay their solar users more than five times the market price, and other Arizonans are left paying the bill.
This is NOT about solar. It is about fairness and ensuring reliable power
Solar has a bright future in Arizona. Arizona is number one in total installed solar capacity per capita, and ranks second, behind California, for total installed solar energy capacity. Updating the state’s net metering policy will hardly damage our commitment to solar. Not doing so would do greater damage to our commitment to all Arizonans of a reliable grid and to our future.
Prosper supports policies that encourage a free market approach to Arizona’s electricity sector and are focused on preserving choices, including solar, while still ensuring fair rates for all Arizonans and a strong, reliable electrical grid. Updating the state’s net metering policy passes this test, and the Arizona Corporation Commission would be wise to do so.