Many Mainers have received pamphlets in the mail and seen advertising on social media asking them to subscribe to local solar farms to save money on their electricity bills. It’s all part of an effort stemming from 2019 legislation to boost solar development in the state and work toward clean energy goals.
But the state’s role in incentivizing solar development has been the subject of much debate. That’s because, to keep electricity bills lower for people who subscribe to community solar projects, the people who don’t subscribe pick up the cost.
As a result, the Legislature changed the rules for solar programs twice in the past two years. Now, it is poised to make further changes in the coming weeks that could possibly reduce the cost for ratepayers by overhauling the billing structure for future projects.
Community solar projects are smaller scale, no more than 20 acres in size, and typically sell power to those nearby, such as residential owners and commercial properties. The idea behind them is that people can still participate in solar even if they can’t or don’t want to install solar panels on their roofs or property.
Community solar farms fall under what is called the distributed generation system, which refers to energy projects that feed power directly into utilities’ lower-voltage power lines, which are also called distribution lines.
A group of industry executives and policymakers is recommending that the state reduce costs for ratepayers, however, as some say people with low and moderate incomes are being forced to carry an outsized burden under the current community solar rate structure. The Distributed Generation Stakeholder group, tasked by state law with recommending how people should buy into community solar projects, presented its recommendations on Jan. 6 to the Legislature’s Standing Committee on Energy, Utilities and Technology.
“It is inequitable,” said William Harwood, Maine’s public advocate for utility customers and a member of the stakeholder group. “The program disproportionately hurts low-income people who aren’t participating in community solar.”
The recommendations come as developers have proposed a large and growing number of community solar projects across the state, though the agency regulating energy in Maine does not track how many have come online.
Up from about 325 megawatts in 2021, Maine is currently generating 555 megawatts of solar energy through both smaller-scale distributed projects and larger utility-scale projects, according to the Governor’s Energy Office. That is enough to power more than 72,000 Maine homes, based on calculations by the Solar Energy Industries Association.
How community solar works now
People currently buy into community solar this way: Participants who subscribe to a share of a local solar farm receive a bill credit for the excess energy produced by their share of the project once it comes online. The customer’s utility, such as Versant Power or Central Maine Power, issues the credits, which translate to discounts on electricity costs.
For example, if community solar participants received $10,000 worth of credits on their bill in one month, and they subscribed to purchase the credits at a 15 percent discount, their net benefit for that month would be $1,500.
The arrangement is called net energy billing, or net metering. In the past, net energy billing was mostly used for rooftop solar panels to offset costs for homeowners through the production of excess power. But under the 2019 legislation, this rate structure was also applied to community solar programs to further incentivize them and prompt similar benefits for participants.
With the rising costs of electricity, subscribing to community solar can be an attractive proposition, especially as it requires no installation or extra costs for participants. Approximately 23,000 utility customers are currently participating in operational net energy billing programs, most of whom are community solar customers, according to the stakeholder group report.
But under the current rules for community solar programs, utilities — which are responsible for the poles and wires — are not picking up the cost for subscribers’ discounted electricity. Rather the utilities pay the solar developers whatever the natural gas-driven retail price of electricity is on a given day, Harwood said.
Then the costs are passed on to customers who do not subscribe to community solar projects.
Since 2021, the Legislature has changed the net energy billing programs for community solar twice: first, to limit the number of participating solar projects, and, second, to reduce the compensation paid to developers.
But the community solar projects that applied under the 2019 program are grandfathered in under the initial rate structure. Of the qualifying net energy billing solar projects, many haven’t begun operating yet, so the long-term effects on customers who do not subscribe to community solar are not yet fully understood.
‘Jumpstarting Maine’s solar industry’
The incentives have led to a boom in solar development.
“The program has been successful in jumpstarting Maine’s solar industry,” said Rebecca Schultz, a senior advocate for the Natural Resources Council of Maine. “Through these projects you can create an avenue for people who can’t put rooftop solar on their houses because they either can’t afford the upfront costs for rooftop solar or don’t own their roofs.”
Some say the community solar program will help reduce overall long-term costs as the state transitions from fossil fuels to clean energy.
“Community solar is putting downward pressure on prices by reducing the load, which also reduces our share of regional costs,” said Phil Bartlett, the chair of the Maine Public Utilities Commission.
Others argue that the existing program for community solar does not distribute costs fairly.
“Net energy billing is not equitable because customers who are enrolled in these programs get an above-market rate for the excess electricity that is produced,” said Judy Long, a spokesperson for Versant Power. The company is a member of the stakeholder group.
Mainers who are wealthier tend to participate in community solar projects and therefore benefit the most from net energy billing, not low-income residents, Harwood said.
One solar developer, BlueWave Solar, believes that the long-term benefits of community solar are equitable, but it is harder to determine what the value of the projects are for those who are directly participating versus those that aren’t, said Alan Robertson, the company’s managing director.
“We’re decreasing the load on the grid by distributing energy to the local grid,” he said. “We are also doing infrastructure upgrades to accommodate our projects, such as upgrading power lines and substations that don’t just benefit us directly but could actually benefit others down the line.”
While developers pay the costs associated with upgrades to connect to the grid, they do not necessarily benefit all customers, Long said.
“The upgrades protect other customers from the impacts of having these large units on the distribution system, which was not built to transfer large amounts of two-way energy flows,” she said. “It makes it more safe and reliable.”
Many of BlueWave Solar’s community solar projects have been approved for net energy billing and are being developed. As long as the company is able to start up the projects by 2024, it will qualify for the rate structure defined by the first version of the program and not the next one that will require approval by the Legislature.
Robertson cautioned, however, that some of the approved projects may not come to fruition. They will depend on whether there are upgrades to the grid to add more capacity, an issue that has already posed challenges to some seeking to set up rooftop solar.
A pitch for the next community solar program
The stakeholder group is proposing to eliminate net energy billing for community solar projects. Instead, it put forward three alternatives. The Governor’s Energy Office is supporting one recommendation that would mirror how power is typically purchased. The model is estimated to reduce rates slightly for all customers on average, according to the group’s report.
Under the proposal, a solar developer would deliver its power to a utility such as Versant Power or CMP, which would purchase it wholesale. The utility would directly pay a developer for the power instead of the developer having people subscribe to the incentivized program and shifting costs to other customers. There would be no need for bill credits.
Wholesale rates already apply to larger, utility-scale solar projects in the state.
“The biggest difference between this proposed successor program and the initial program for community solar is that it is not requiring solar developers to recruit a bunch of people to pay for their project,” said Ethan Tremblay, an energy policy analyst at the Governor’s Energy Office. “The rate savings could benefit all ratepayers.”
Some of the benefits would stem from not having to pay for fossil fuel-associated energy costs, according to the Governor’s Energy Office. Solar power now tends to be cheaper than electricity generated by fossil fuels.
Electricity generated from solar on average nationally costs between 3 and 6 cents per kilowatt hour, while electricity generated by fossil fuels costs between 5 and 17 cents per kilowatt hour, according to the National Renewable Energy Laboratory.
The stakeholder report also recommended putting federal incentives toward encouraging solar development on contaminated land, such as brownfields sites and landfills, and to build up Maine’s ability to store solar energy, so it can be used more when the sun isn’t shining and reduce costs.
Harwood said he believes the proposal is a step in the right direction.
Versant Power also supports transitioning Maine’s distributed generation program to a primarily wholesale power purchase agreement model, Long said.
Robertson, with BlueWave Solar, said the proposal has created a good framework for the next program because it factors in the ability of community solar developers to get supplemental federal tax credits through the Inflation Reduction Act. However, if those tax credits don’t come to fruition as planned, the wholesale rate would not be financially viable, he said.
“We are collectively — developers and the state government — waiting with bated breath for the federal guidance on supplemental tax credits,” Robertson said.
