$olar Industry Wins State House Fight to Protect Windfall Profits

Solar power diehards in the Democratic Party have won their fight to protect a program that subsidizes large solar facilities through electric rate increases on Maine residents and businesses.

The fate of that program, known as “community solar,” along with its funding mechanism, Net Energy Billing (NEB), was one of the last major pieces of business before the State Legislature this year.

Community solar and NEB had become increasingly controversial after the Office of the Public Advocate (OPA) released estimates showing the arrangement would cost Maine ratepayers $220 million by 2025.

Those increased electricity rates, though collected by Maine’s power utilities, would actually be funnelled into mostly out-of-state solar firms, many headquartered in Washington, D.C. and Massachusetts.

Throughout the session, there appeared to be a broad bipartisan consensus that the legislature made a big mistake in 2019 when it expanded Maine’s small-scale distributed energy program to include these much larger facilities.

But lawmakers were divided over the remedy.

Conservatives and many Democrats backed LD 1347, a bill that began as an outright ban on NEB but was later amended to include more moderate restrictions.

However, the solar industry and some Democratic lawmakers favored LD 1986, a sort of fall back position for solar developers that would mostly preserve profits while recognizing the need for some reform. That bill would have instructed the Maine Public Utilities Commission to investigate the issue and report back to lawmakers.

Supporters of LD 1986 argued, in part, that it would be unfair to rugpull the solar industry. That is, to incentivize them to come to Maine with subsidies only to remove those subsidies after businesses had made investments in the state.

On Thursday, Democrats in the State Senate voted overwhelmingly to kill LD 1347 before passing LD 1986, and the House followed suit, marking a major political and financial victory for out-of-state solar interests.

There is no consensus as to whether LD 1986 will reduce ratepayer costs in the short or medium terms, a subject over which lawmakers and advocates disagreed pointedly.

The plan the OPA had backed also had support from a bipartisan coalition, including far left Democrats and conservative Republicans. There was also disagreement about how much this plan would slow rate increases; however, it would have set a hard cutoff date later this year for new entrants into the program.

Rep. Steve Foster (R-Dexter), the Republican lead on the Energy, Utilities, and Technology (EUT) Committee, was the original sponsor of LD 1347, and he cooperated with Democrats on a series of amendments aimed at garnering bipartisan support.

Sen. Nicole Grohoski (D-Hancock) and Rep. Sophie Warren (D-Scarbrough), who worked with Rep. Foster, both spoke passionately in favor of LD 1347, calling the rate increases unjust and lamenting the corporate windfall profits reaped by corporations at the expense of Maine residents.

In the solar industry’s corner were Sen. Mark Lawrence (D-York) and Rep. Stanley Zeigler (D-Montville), the EUT chairs, along with Rep. Walter Runte (D-York).

All three advocated forcefully for the bill that eventually won out as a matter of meeting Maine’s emission reductions targets.

Public Advocate Bill Harwood, who was often seen at the State House advocating for a reform that protected ratepayers, wasn’t optimistic Friday morning when the dust had settled.

“OPA respects the decision of the legislative majority and fervently hopes that LD 1986 will reduce the high cost of the [Net Energy Billing] program, thereby giving ratepayers the rate relief they so desperately need,” said Harwood.

“We will have to wait to see if it works. If it does not, OPA will continue to advocate for meaningful reform of the NEB program,” he said.

THE NET ENERGY BILLING SCHEME

Net Energy Billing (NEB) used to only apply to small-scale rooftop solar setups. The idea was to allow homeowners and businesses with solar panels to “sell” surplus electricity into the grid. But in 2019, lawmakers expanded NEB to include projects up to 5 megawatts.

To put that into perspective, Maine went from subsidizing roof-sized solar setups to subsidizing solar facilities that can cover 15-20 football fields. The amount of energy the vast solar facilities generate is correspondingly larger, and the law requires Central Maine Power and Versant, Maine’s top power utilities, to purchase that energy at an above-market rate.

The 2019 law placed few limitations on where the solar facilities could operate and how they could manage subscribers. For instance, the law allows a developer to build a solar facility most anywhere in the state of Maine, regardless of whether it makes sense from a grid management perspective, and then collect “subscribers” from anywhere in the state.

While lawmakers at the time said the change was about incentivizing renewable energy infrastructure, the Legislature set off a gold rush. By the end of 2022, solar developers had built out a whopping 295MW of solar capacity, according to ISO New England.

Under the law, anyone who can buy land in Maine, stand up some solar panels, and then recruit people to fill out an online form to “subscribe” will have a guaranteed buyer for their energy. That promise was open ended, which triggered a rush of investment from out-of-state firms that had already capitalized on similar programs in other jurisdictions.

To make matters worse — or better, depending on your perspective — the law requires Maine’s largest utilities to purchase solar-generated power at an above market rate that’s tied to the cost of other generation sources. So when the price of natural gas rises, as it has in recent years, so does the price paid for solar, even as the costs remain the same.

Sen. Grohoski laid bare how the program increases the cost of electricity as part of her floor speech. In many cases, Maine ratepayers are paying 4-5 times that actual cost of solar-generated power, she said.

The OPA estimates that just 15 percent of the hundreds of millions of NEB dollars is or will be used to lower rates for residents who sign up as a “subscriber” to a community solar project.

The rest flows to the solar industry.

According to a Maine Wire review of Public Utility Commission records, 88 percent of the companies registered as community solar participants are located outside of Maine.

Rather than fund the subsidies using taxpayer dollars or debt, lawmakers effectively turned Maine’s electricity transmission companies into bill collectors for the solar lobby.

To account for the expensive electricity they are required to purchase from solar facilities, CMP and Versant extract money from Maine ratepayers through their normal bills using a line item known as “stranded costs.”

In other words, the money flows from the majority of Maine ratepayers, through CMP and Versant, and to the solar industry, with a small share going toward discounts for 40,000 to 50,000 subscribers’ bills.

Those payments aren’t the only income source for the solar industry due to Maine’s environmental laws, either.

Power generated at the facilities earns the operator Renewable Energy Credits (RECs) which the firm can then sell in a managed market to a power company that burns fossil fuels.

The scheme is like buying indulgences from the Catholic Church in order to offset your sins, except you’re buying the credit from another firm’s low-emissions energy to atone for your carbon emissions.

The end result is more money for the solar industry, but the emissions reductions benefits, at least on paper, typically flow out of state, as the prices RECs fetch are typically higher outside of Maine.

MAJOR SOLAR LOBBY VICTORY

The distinctions between the two bills may seem wonky or esoteric, but the difference for ratepayers versus the solar industry can be judged by how hard the solar industry fought to kill LD 1347.

In the runup to Thursday’s vote, pro-solar groups published op-eds with Maine’s biggest newspapers. Environmental interest groups, like Maine Conservation Voters, pushed their email subscribers to pressure lawmakers. And lobbyists from various solar trade groups were busily jawboning lawmakers at the State House.

The Washington, D.C.-based solar firm Arcadia paid lobby shop Cornerstone $12,500 from February to June.

And the Washington, D.C.-based Coalition for Community Solar Access had Maine Street Solutions, LLC on retainer, spending nearly $5,000.

The Maine Renewable Energy Association spent $9,000 lobbying the legislature this year, though not all of that was dedicated to solar issues.

That amount spent lobbying in defense of the solar subsidies is trivial compared to the potential profits.

Arcadia solar, for example, has told the Maine Wire they have over 10,000 customers in Maine and manage 130 MW of power here.

Using some very rough estimates, we can project that 130 MW capacity of solar, in Maine, over the course of a year, will produce somewhere between 130MWh to 160MWh worth of electricity. (Again, rough estimates based on Maine being a relatively poor state for solar.)

At $0.20 per kilowatt hour, again another estimate based on what the OPA and lawmakers have said about the cost per KWh of energy, that works out to somewhere between $25 million to $32 million.

The OPA estimates that 15 percent of that will be returned to solar “subscribers,” but the rest flows to the developer, which in this case is a D.C.-based firm that boasts customers in every state.

The point of the rough math exercise is to show not only the return on investment from paying some lobbyists in Augusta, but also to show how placing consumer protections in the program can potential slash solar firm’s windfall profits by millions of dollars.

If, for example, electricity from community solar were to be priced more competitively, say $0.10/ KWh, then Arcadia and every firm operating in the space is looking at a 50 percent haircut.

How big will the solar industry’s losses be under LD 1986? The only way you’ll know for sure is by keeping an eye on your electric bills.

Read more Maine Wire reporting on Net Energy Billing and Community Solar:

• Out-of-State Firms Reaping Windfall Profits on Maine’s $220M Per Year Community Solar Program
• Electric Rate Increases for Subsidized Solar Will Hit Mainers’ Bills in July
• GOP Wants Limits on “Net Energy Billing” to Rein in Electricity Rates