Here’s why solar industry’s focus will be locked on Nevada today

After convincing Congress to extend a tax credit to the solar industry last week, advocates are shifting their attention to Nevada, where state regulators convene this morning to consider the future of credits for solar customers who provide excess power to the grid under net metering.

A panel of three utility regulators will weigh a lengthy draft order today that would effectively lower the credit rate for future solar customers and eventually for existing customers. At stake is the future of an industry that has brought thousands of jobs to the state. Already, one solar company has said it would cease direct sales and installation if the PUC adopts the order as is.

“If the (commission’s) proposed decision is accepted tomorrow it will destroy the rooftop solar industry in one of the states with the most sunshine,” SolarCity CEO Lyndon Rive said in a statement Monday. “(The) proposed decision is reckless, and I encourage the PUC to reject it tomorrow.”

Solar industry proponents say the initiatives would make it economically disadvantageous for people to either purchase rooftop arrays or lease them from companies like SolarCity and Sunrun.

Currently, a policy known as net metering — which provides monetary credits for customers who power their homes and business with solar energy and send excess power back to the grid — provides incentives for Nevadans to install rooftop arrays. The proposed initiatives would reduce the value of credits available and institute changes in a fixed fee to use the utility grid, which has drawn the ire of solar advocates.

NV Energy, which is regulated by the Public Utilities Commission, argues that fees and a new price structure for credits are necessary to avoid shifting costs to traditional ratepayers.

The utility does not comment on draft proposals.

If adopted, the order would base solar credits on a wholesale rate rather than a fixed retail rate, a new pricing structure that would affect all residential solar customers. The proposal, which can still be modified, changes fees but avoids introducing a new charge NV Energy wanted.

How much the changes would cost per customer is difficult to gauge going into the hearing, because the proposed rule gives NV Energy discretion to calculate the rates based on the PUC’s order.

A new rate structure would take effect Jan. 1.

The draft order represents the recommendations of PUC commissioner David Noble, who is presiding over the case, and it will provide the framework for today’s deliberations. The order, issued yesterday, was over 100 pages and one solar company criticized it for being unclear.

“What is clear is that no one can understand this,” Bryan Miller, the senior vice president for public policy for Sunrun, said in a statement Monday. “This decision should be delayed.”

As the PUC discusses the new rules, here’s what consumers should know about the draft:

What NV Energy wanted

NV Energy has argued that, under the current net metering regime, costs from solar customers were shifted to non-solar ratepayers. To correct this, the utility presented a proposal to the PUC asserting that it was necessary for the commission to allow it to lower its rate for net metering credits for solar customers, and to impose a so-called “demand” charge that would offset NV Energy’s investments in maintaining its system.

What solar companies wanted

Solar advocates, in addition to the state’s two large solar companies — Sunrun and SolarCity — wanted to maintain the status quo, basing long-term net metering credits on the retail rate. They also opposed the demand charge and any attempt to make future net metering rates apply retroactively to existing customers. They said NV Energy’s proposal would cripple the industry.

What is being proposed

• Net metering credits would be based on lower wholesale rates and would gradually be applied to all customers, even those who currently receive a more advantageous credit. The wholesale market rate, based on variables like the price of natural gas and utility-scale solar, would change over time, a spokesman for the PUC said. These rates would be fully implemented by 2020.

• The draft order scraps NV Energy’s demand charge but calls for increasing a fee on a monthly grid charge to cover the utility’s customer services, facility costs and distribution costs. The draft includes a corresponding decrease in the utility charges that are based on energy consumption.

• Customers who use net metering could opt into time-of-use pricing, which allows consumers to manage their costs and consumption according to a cost structure that fluctuates during peak periods. It also could benefit customers who plan to install home storage units in the future.

• Within seven days of the net metering order, NV Energy would be required to calculate new rates for the fees and reduced credits. NV Energy would send them to the PUC for review.

Why it matters for solar consumers

If the proposal is adopted, solar advocates worry the changed fees and decreased credits would make rooftop solar unaffordable not only for future customers but for existing ones. Solar advocates are concerned that the reduction in net metering credits would be sizable.

That change would have an outsized effect on existing customers who are in long-term solar contracts. Many customers expected to receive a larger credit than the one they would eventually receive under the new rate structure. Rather than being grandfathered in, the new rate structure would gradually transition early adopters to the lower credits over a four-year period ending in 2020.

Why it matters for the solar industry

Solar companies see net metering policy as crucial to their existence in states. If net metering incentives are decreased, they argue it will be difficult to compete in the state. SolarCity’s CEO said the company would cease sales and installation if the PUC goes through with the draft, arguing that Nevada would be the first of 44 states to take a step back on net metering policy. Rive, the CEO, predicted that in such a scenario about 5,000 solar jobs would disappear.

Why now

This year, state legislators ordered the PUC to craft long-term net metering rates for small business and residential customers that do not shift costs to other ratepayers. Because of a Dec. 31 deadline established by the law, commissioners must act before the end of the year.