Landmark Maine Value of Solar Study Confirms Solar’s Value is Higher than Fossil Fuels
Solar Power | March 10, 2015 | Posted by Fred Greenhalgh
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Maine’s first independent study of solar energy’s value has found that the 25-year value of each kilowatt-hour of distributed solar is worth $0.337 to the grid, or, more than double the retail rate of electricity (Press release).
These findings, which consider avoided market costs and societal benefits in the form of avoided pollution, echo those of similar studies in Minnesota, New Jersey, Pennsylvania, and New York.
In fact, every independent study that’s been conducted finds that solar’s true market value is equal to and in most cases far higher than the compensation solar customers receive as part of net metering agreements with the utility.
Stated simply, the Maine PUC’s value of solar study puts a monetary value to solar’s ability to:
- Generate power during times of high grid stress (summertime peak load)
- Avoid line losses by generating power locally
- Reduce need for transmission infrastructure upgrades
- Reduce a suite of pollutants (CO2, NOx, SO2) emitted by regional power plants
- Disproving the utility argument that solar costs more than it provides in benefits to the system
- Omitting the value of avoided costs of natural gas pipeline buildout or additional distribution lines
Download the whole thing: Maine Distributed Solar Valuation Study (PDF) – A whopping 178 pages!
Value to the Utility vs. The Value to You
Our customers and the thousands of Mainer’s who have made investments in solar energy over the last few years already know that solar energy systems provide substantial environmental and economic return on investment for them individually. What the Maine PUC’s study shows clearly is that those solar investments also generate lots of value for ALL Mainers.
Contrary to the critic’s argument that Maine’s net metering policy is a subsidy that shifts utility costs unfairly onto non solar rate payers, the PUC’s ‘Value of Solar’ study shows that net metered solar systems generate value for all rate payers well in excess of their costs. And so if anything, solar system owners are being under compensated for the value their systems bring to the grid and the report identifies policy changes to rectify that, which has the potential to lead to substantial additional solar development around the State.”
Methodology: Calculating Energy Costs
It’s important to note that the report was not produced or funded by any industry or environmentally-oriented group. Maine’s PUC (2 of 3 of whom are LePage appointees) commissioned this study using a neutral third party.
The basic premise of the report is that solar’s value cannot be evaluated solely against the wholesale cost of polluting sources of energy. Instead, it must be appreciated in its context of our entire electricity system, from the originating power plant through the transmission and distribution system and finally to its end use at a consumer’s home or business. The fact that solar energy is produced and consumed very close to the electric needs it meets is an important part of its value.
Those elements comprise what the authors of the study called the “Avoided Market Costs” – the real, obvious things like avoided cost of generating fossil energy (8 cents per kilowatt-hour), and costs that solar itself incurs, like requiring additional flexibility from the power grid to support its intermittent nature (1/2 cent per kilowatt-hour).
The report takes into consideration solar’s impact on reducing the need to build new transmission infrastructure (1.4 cents per kilowatt-hour) but notably omits assigning a value to avoided distribution capacity build-out (as GridSolar has argued) or avoided natural gas pipeline costs (as we have pointed out, some in Augusta would like to force Maine ratepayers pay for $1.5 billion in new natural gas pipelines). The modeled Avoided Market Cost value of solar, levelized over 25-years is $0.138 per kilowatt-hour.
That reducing pollution has value is incontrovertible. The methodology used to assign a monetary value to a social benefit is trickier. In this study, the authors use region-specific data on common pollutants (C02, NOx, and S02) released by power plants, adjusted to Maine’s typical fuel mix based on time of day and times of the year (since solar is more likely to be reducing power plant use on hot summer days, for example).
The future price of carbon is somewhat uncertain, however the report uses the expected adoption of the EPA Clean Power Plan Section 111(d) of the Clean Air Act to model future costs to meet federal carbon emissions standards. Compliance to existing carbon standards is already worked into the market price of electricity (due to Maine’s participation in the Regional Greenhouse Gas Initiative – RGGI), so the embedded current cost of carbon compliance is removed from the expected future cost.
The study uses an extremely conservative approach towards modeling these pollution standards and does not consider more serious externalities such as anthropogenic climate change. Remember, this study is designed to ascertain solar’s value to utility companies like CMP, not for society as a whole. A similar (but simpler) methodology is used to assign a market value to NOx and SO2.
The per kilowatt-hour health value of reducing this trifecta of pollutants is modeled at $0.199 per kilowatt-hour.
The report’s release does not immediately effect anyone with a solar electric array – solar owners in Maine and New Hampshire remain eligible for 1:1 compensation for kilowatt-hours produced under each state’s net metering laws.
The real impact is that this report sets the context for the upcoming legislative session where several solar bills will be under intense scrutiny. The report itself is the product of legislation passed last year, LD1652 “An Act To Support Solar Energy Development in Maine.” LD1652 not only directed the PUC to conduct the study on the value of solar, but also then directs the State “to encourage the attraction of appropriately sited development related to solar energy” – a job which now falls to Maine’s legislature.
While the report refuses to endorse any particular solar policy, it does compare Maine’s policy framework to the solar policy framework of the other New England States and New York. While certain fundamentals – such as net metering – exist, Maine is far behind other states when it comes to nearly every other aspect of solar policy.
And in New Hampshire…
The Maine PUC’s findings are regionally significant, especially for customers in the New Hampshire Electric Co-op (NHEC). NHEC is currently conducting its own study on the value of solar in its service territory, and it stands to reason their results will be similar to the Maine PUC’s, justifying a continuation of current net metering rules (which may be a bargain for utility companies!).
For those on the fence regarding a solar array, who live in NHEC territory, we understand that current net metering terms will be honored for projects with an interconnect application applied for by May 1, 2015 – it will be to your advantage to get the project started by that date!
What to Do?
This study should send a powerful signal to lawmakers that solar energy is valuable and worth supporting, however, in and of itself it changes nothing. It is up to legislators to enact better legislation and up to their constituents to keep them honest!
If you wish to get involved in grassroots organizing around solar, we encourage you to connect with the Natural Resources Council of Maine, who is exhibiting a lot of leadership this legislative session. We feel cautiously optimistic about solar policy; while we know the LePage administration is firmly opposed to renewable energy, there is broad bi-partisan support in the legislature and a growing body of evidence to support solar’s ability to grow the economy, create jobs, and save middle-class families money in addition to its environmental benefits.