Sun and Power System

Belmont’s New Solar Tariff

As of November 1, 2015 Belmont residents with rooftop solar will be paid for their energy production under the terms of a new tariff.   After years of turmoil and uncertainty the new tariff will give both residents and installers some certainty about the financial consequences of the decision to go solar and make the decision to put up solar arrays a lot easier.   To find out about solar tariffs in general go here.  To examine the finances of solar projects go here.   But stay right here if you want to find out where the new tariff came from and how it compares to other solar tariffs out there.

In the Spring of 2015 Belmont’s Board of Selectmen appointed a Temporary Netmetering Working Group to come up with a solar tariff that was equitable for ratepayers and that would not discourage the growth of solar in Belmont.   They met 19 times over the summer and came up with a new tariff that pays 11 cents per kWh for energy sent to the grid by solar hosts.  Energy made by solar panels and used on premises will avoid the full retail rate of electricity and is effectively paid 19 cents per kWh.

Prior attempts at coming up with a tariff by the Municipal Light Advisory Board (MLAB) met with widespread criticism from solar advocates.  Prior MLAB proposals considered any value given to solar production (including energy produced and used on premises) beyond the Locational-Marginal-Price  (LMP) to be a cross-subsidy from solar hosts to non-solar ratepayers.  Solar advocates objected to this kind of reasoning on many grounds but especially noted that the MLAB proposals didn’t account for the many other benefits of residential solar production.     Solar tariffs put forward by MLAB would have paid  Belmont solar hosts less than 40% as much as solar hosts in neighboring towns.  The very existence of these  proposals severely curtailed the growth of solar in Belmont.

In this context the Selectmen said they wanted a new tariff that was equitable between solar hosts and non-solar ratepayers and should also pay enough to make sure that the finances of going solar would not discourage future growth.

So let’s take a look at the new tariff.  First the Working Group chose not to impose any fees on energy produced and used on premises.  Such energy does not use the transmission or distribution system and they took the stance that it shouldn’t entail additional costs to the solar host.  MLAB had argued that since solar production is intermittent the distribution and transmission system would have to be ready to provide for solar hosts when their panels weren’t producing and so even self-generated energy production should incur transmission and distribution costs.   Solar advocates had argued that this was unfair arguing that many other non-solar homes also have energy usage profiles marked by intermittency and noting that families who go on vacation are not asked to pay distribution and transmission costs on energy they didn’t use.   The Working Group chose not to ask solar hosts to pay such self-generation fees.

The 11 cent figure for payment for excess generation sent to the grid was arrived at by taking the generation cost from the Belmont Light bill (about 8.9 cents) and adding in the Transmission cost (about 2.5 cents) and coming up with the 11 cent figure.  Such a tariff gives value to solar generation for generation costs, capacity costs (which are included in the generation line-item on the Belmont bill) and transmission costs but does not give value for distribution costs.

A quick review of terms:  The distribution system is made up of the electricity lines and substations within Belmont and are owned and maintained by Belmont Light.  The transmission system consists of the higher voltage lines that go from generation plants throughout New England to local substations and are owned and maintained by other companies.   Reimbursements to these companies come from payments made by utilities (like Belmont Light) to ISO New England—the independent agency that runs the grid.  Capacity payments are payments also made by utilities to ISO New England, so ISO New England can pay generation plants to wait on stand-by for sudden increases in demand.

The Working Group reasoned  that the energy sold by solar hosts to Belmont Light uses the distribution system and so value for distribution costs is not given.  The energy does not use the transmission system so value is given for transmission costs.  Value was given for capacity payments presumably because solar arrays usually produce during times of high system load upon which capacity payments are determined.

That’s it in a nutshell.  The Working Group report is available at the Belmont Light website under the “Leadership” tab.  While neither doing a formal Cost of Service study to look carefully at all the costs of serving solar hosts or a formal Value of Solar study to look carefully at all the benefits of a residential solar production the Working Group took a “on the face of it” approach and came up with the above tariff.   Some criticisms of the tariff are discussed later on but for now let’s see how it compares to other tariffs in terms of how much solar hosts save on their electric bill.    In specific we’ll compare it to 3 other tariffs.  Retail net-metering (the standard in the rest of Massachusetts), MLAB’s phase 2 tariff (excess solar production paid at LMP),  and MLAB’s phase 3 tariff (all solar production paid at LMP).  To keep things simple I’ll use a 2014 yearly average for LMP of 6.5 cents.  I’ll look at a model 5 kw system producing 5.7 MWh  per year. (1 MWh equals 1000 kWh.)  I’ll assume 40% of solar electricity production is used on premises and 60% is sold to Belmont Light.  For more information on solar tariffs in general go here.  Some of these calculations are gone over in more detail here.  So here is a look at yearly energy savings for Belmont’s new tariff compared to the 3 other tariffs.

ONE: Belmont’s new tariff.  40% of 5700 kWh is 2280 kWh, the amount of electricity used on premises.  This production avoids the full retail rate of 19 cents and is valued at 2280 kWh multiplied by 19 cents which equals $433.  60% of the 5700 kWh is sold to Belmont Light at 11 cents per kWh.   This is 3420 kWh at 11 cents per kWh which equals $376.  The sum of $437 and $376 is $809. So $809 is the total yearly savings on the electric bill.

TWO:  Retail Net-metering, the norm in most of Massachusetts.  In this tariff all 5700 kWh are reimbursed at 19 cents/kwh.  5700 kWh multiplied by 19 cents equals $1083 which represents the total yearly savings on the electric bill.

THREE:  Phase 2 of MLAB’s proposal reimburses excess generation at LMP.  I’ll use the yearly average of LMP to keep the calculations simple.   2280 kWh used on premises saves $433 as in the Belmont Tariff.  3420 kWh sold to Belmont Light at 6.5 cents per kWh equals $222.  The sum of $433 and $222 equals   $655, the yearly savings on the electric bill for Phase 2.

FOUR:  Phase 3 of MLAB’s proposal reimburses all solar generation at LMP.  5700 kWh reimbursed at 6.5 cents per kWh equals $370, the savings of the electric bill for this tariff.

In summary the yearly savings are as follows:

Netmetering: $1083

Belmont’s new Tariff: $809

MLAB’s Phase 2: $655

MLAB’s Phase 3: $370

So one can see Belmont’s new tariff while a little better than MLAB’s Phase 2, and a lot better than MLAB’s phase 3, is substantially worse than the Massachusetts standard of netmetering.

The criticisms of the tariff come from both sides.  Former MLAB members still feel any tariff other than Phase 3 above creates cross-subsidies.  Solar advocates, on the other hand, argue that it doesn’t give full value to solar production and point out that many studies that account for all the benefits of distributed solar show that even net-metering underestimates its value.   Others point out that the tariff will especially harm potential leasers.  It is not clear whether solar leasing companies will even work in Belmont under the new tariff.   They point out this will harm low and moderate income families wanting to go solar the most.

And finally it is my opinion that the tariff is fundamentally irresponsible.   This is not because of the reasoning used to reach the tariff which in my opinion was thoughtful—although as solar advocates point out debatable.  It is because that Belmont should be looking to do more for renewable energy not less.   Our utility, unlike the Investor Owned Utilities doesn’t buy either SRECs or RECs.  It is these production subsidies that drive renewable energy in New England.   Without them there would be no solar or wind generators in New England.  Take a look at the economics of solar here and see how the calculations work without SRECs.  If every community acted like Belmont there would be no new renewable generation any where in New England.  Ratepayers in the poorest of communities (Springfield, Lawrence, Chelsea etc.) pay extra on their utility bills to support renewable energy through their utility’s purchasing of RECs and SRECs.  Ratepayers in Belmont pay nothing.   The Selectmen should never have appointed a Net-metering Working Group in the first place.  A town that does so little for climate change action should be thoughtfully considering what more we can do for climate change and not worrying about a small potential cross-subsidy that may or may be incurred by retail netmetering.  We needed a Climate Change Working Group not a Netmetering Working Group.


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