Rise in solar power generates interest among Midwest's state legislators
The Midwest is not known as a center of solar energy development, but in fact, electricity from the sun is being generated across the region.
And at the same time, perceptions about solar energy are changing — including which parts of the country can be leaders in further developing and using this renewable power source.
Of the top 10 solar-producing states in the nation, for example, three are in the Northeast, and the Midwest could soon see more growth as well.
Most new solar capacity in this region currently comes from photovoltaic (PV) systems installed on the rooftops of homes and businesses.
These smaller-scale systems are known as “distributed generation” because the power is produced at or near the same location where it used.
Various market forces have driven down the costs of installing rooftop PVs, and various state policies are also encouraging an increased use of solar energy — tax exemptions and deductions, for example, as well as renewable portfolio standards and net metering laws.
Debate in state capitols over net metering
Because solar energy in the Midwest comes largely from small-scale, distributed generation, policies on net metering are especially important.
With net metering, electricity customers who have installed a PV rooftop system can provide power to the grid — and get credit for it.
During daylight hours, if the system is producing excess power (more than the customer needs), the electric meter at a home or office “runs backward” as power is fed into the electric grid. The customer’s utility bill then reflects his or her “net usage” — the difference between what was fed into the grid and the electricity consumed by the home or business (during evening hours, for example, when the PV system cannot produce power).
“Net metering is a powerful incentive to encourage the installation of renewable sources by consumers,” says Sean Gallagher, vice president of state affairs at the Solar Energy Industries Association.
But he adds that these policies also raise another important consideration for state lawmakers: “Is it sustainable for utilities?”
Forty-four states, including 10 of 11 in the Midwest (South Dakota, which gets much of its electricity from hydro, is the lone exception), provide for net metering. But the specific provisions — and their impact on solar development — can vary considerably from one state to the next.
According to the Interstate Renewable Energy Council, Ohio’s net metering rules are among the strongest in the nation. In that state, Ohio solar users get full retail credit for their production and don’t get charged any fees by the utility. These consumers also can receive a refund for accumulated credits over a 12-month period.
In other states, net metering laws are often more limited.
For example, utilities sometimes do not have to credit the full value of the solar power produced; some states, too, place limits on the size of a PV system or do not require certain types of utilities (municipal or cooperatives) to credit customers.
According to the Edison Electric Institute (the trade association for electric utilities), distributed power (including rooftop PV) is not as cost-effective as utility-scale systems.
And the institute warns that net metering policies can lead to a shift in costs — from the consumers with solar panels to those without them. The reason: There are fixed costs (such as for wires and meters) that aren’t accounted for when customers get full credit for the power they feed into the grid.
“There is a big fight [in Minnesota] over cost shifting — whether net metering is essential to solar development in the state, or whether it shifts costs from wealthier customers to other customers,” notes state Rep. Pat Garofalo.
He and other state legislators have been working on a policy alternative.
Under his proposal (part of HF 843), consumers with rooftop PVs would continue to receive payments, but the revenue source would change. Right now, the money comes from other energy customers. The money would instead come from a Minnesota Energy Fund supported in part by a general-fund appropriation.
In addition to providing an alternative revenue stream for net metering, Garofalo says, the fund includes a competitive grant program for innovative projects that advance solar and other energy-related technologies.
Investing in ‘solar gardens’
Across the country, sometimes as a part of net metering laws, states have also been opening up new opportunities for residents unable to install PV rooftops of their own — those who live in apartments, for example, or whose homes are on shaded property.
These individuals are instead able to invest in shares of a solar energy system, and receive a credit on their bill for their portion of the electricity generated by a solar garden.
In 2013, Minnesota legislators passed a measure (part of an omnibus bill, HF 729) requiring the state’s largest electric utility, Xcel Energy, to purchase power from solar gardens.
Energy companies develop and market the solar gardens, and customers can then buy shares. In Minnesota, these shares are valid for 25 years.
Xcel’s program is different from some of the state’s other community solar programs — the utility buys the power from the solar gardens that its customers have invested in.
Several other utilities in Minnesota, including power cooperatives, are also developing community solar facilities.
A look at Illinois’ Clean Jobs Bill
In Illinois, as part of a broader legislative package to promote the development of renewables and increase energy efficiency, lawmakers are looking for ways to expand their state’s use of solar.
State Rep. Elaine Nekritz, one of the lead sponsors of the Clean Jobs Bill (SB 1485 and HB 2607), says the legislation will help her home state “set the table [to meet] the new requirements of the president’s Clean Power Plan.”
That plan, a new federal rule developed by the U.S. Environmental Protection Agency, requires every U.S. state to reduce carbon emissions from power plants between now and 2030.
Illinois’ Clean Jobs Bill would increase the state’s renewable energy requirement — from 25 percent of generation by 2025 to 35 percent by 2030.
This higher standard, Nekritz believes, will help spur more investments in solar and other clean energy sources.
“The development of solar is stalled because the RPS is not working the way we intended when we passed it,” she adds.
Illinois already has a “carve-out” for solar, meaning this energy source should account for a certain percentage of renewable generation.
Under current law, the carve-out is 6 percent; the Clean Jobs Bill raises that solar standard to 7 percent (or 2,000 megawatts, whichever is higher) by 2030.
This provision of the bill calls for (but does not require) three-quarters of Illinois’ solar energy to come from rooftop and community solar projects.
Under the bill, too, PV systems could be placed on a brownfield (vacant, contaminated land) even before the site is cleaned up, and the Illinois Power Agency would be directed to purchase some solar renewable energy credits from brownfield developments.
Over past two years, Iowa legislators have deepened state's solar commitment
Iowa is another Midwestern state where solar power has received increased attention from legislators.
In 2014, legislators tripled the cumulative value of available state income tax credits for solar — from $1.5 million to $4.5 million annually.
Of that higher total, $1 million in credits is reserved for the installation of residential solar energy systems.
This law also allows businesses and other groups with multiple sites to claim credits for multiple solar energy systems, and it increased the cap for individual income tax credits — from $3,000 to $5,000 for homeowners and $15,000 to $20,000 for businesses. And with last year’s passage of HF 645, legislators are trying to encourage utilities to invest in more solar production.
Iowa’s 2015 law raised the state’s limit on tax credits for solar production facilities from 53 megawatts to 63 MW.
State incentives and policies that encourage small-scale solar projects
√ Property tax exemptions — Most states in the Midwest have this type of incentive in place — for example, exempting solar energy systems from property taxes (Indiana, Kansas, Nebraska and South Dakota) or exempting increases in property valuations due to the installation of solar energy systems (Iowa, Minnesota, North Dakota and Wisconsin).
√ Sales tax exemptions — States such as Indiana, Iowa, Minnesota, Ohio and Wisconsin waive the sales tax for purchases of equipment needed to install solar energy systems.
√ Income tax deductions — In states such as Indiana, Iowa, Nebraska and Wisconsin, individuals can receive deductions for installing solar systems and/or purchasing solar equipment. In Iowa, for example, the maximum tax credit is $5,000 for residences.
√ Consumer rebates — These rebates, which usually come from utilities, offset the cost of installing solar energy systems. In its most recent national analysis of state policies, Solar Power Rocks lists Illinois, Minnesota and Wisconsin as having robust rebates in place. Illinois’ program, though, was closed for fiscal year 2016. In Minnesota and Wisconsin, the rebates are capped (depending on the utility) at anywhere from $2,000 to $5,000 per customer.
√ Net metering — The Solar Energy Industries Association describes net metering as “a billing mechanism that credits solar energy system owners for the electricity they add to the grid.” With the exception of South Dakota, every state in the Midwest has a net-metering policy in place. In Ohio, customers receive a credit to offset charges in future months. They also can receive a refund for accumulated credits over a 12-month period.
√ Interconnection standards — Standard, transparent interconnection standards help homes and businesses connect their small-scale systems to the utility grid. In Ohio, for example, the owners of smaller-scale solar energy systems qualify for a simplified review process in advance of connecting to the grid.
Sources: Database of State Incentives for Renewables & Efficiency, Solar Power Rocks, U.S. Department of Energy and CSG Midwest research
Future of Clean Power Plan, and state energy policy, now in courts’ hands
The future of solar energy, other renewable power sources and state energy policy in general is all tied to the fate of a new federal rule finalized in August 2015.
Under the Clean Power Plan, states are required to reduce greenhouse gas emissions from power plants. Compliance plans are due by September of this year, and the mandatory reductions must be met by 2030.
“[It is] the long-term federal policy that is going to drive renewables,” says Sean Gallagher, vice president of state affairs for the Solar Energies Industry Association.
But first, the Clean Power Plan must survive ongoing legal challenges.
In June, the U.S. Court of Appeals will hear arguments in a lawsuit brought by 24 states, including seven from the Midwest: Indiana, Kansas, Michigan, Nebraska, Ohio, South Dakota and Wisconsin. (North Dakota is pursuing separate legal action.)
These states say the U.S. Environmental Protection Agency has gone far beyond the authority granted to it by the U.S. Congress under the Clean Air Act.
Earlier this year, the U.S. Supreme Court agreed to freeze the rule.
A coalition of 25 states and cities, meanwhile (including the attorneys general from Illinois, Iowa and Minnesota), have filed a motion in support of the Clean Power Plan. The goal of the new federal rule is to move away from the use of fossil fuels and to instead rely more on low- and zero-emission sources: wind, solar, hydropower and nuclear energy.
The Clean Power Plan has three steps, or “building blocks”:
• improve the efficiency of existing coal-fired power plants;
• transition from the use of coal- and oil-fired plants to lower-emitting gas-fired plants; and
• expand the use of renewable sources for electricity generation.
Using 2005 emissions levels as a baseline, the Clean Power Plan calls for a 32 percent cut in U.S. carbon pollution by 2030.
Each state’s compliance plan must include interim goals as well as “enforceable CO2 emission limits.” For states that do not provide a comprehensive, enforceable plan, the EPA will develop one for them.
The plan’s mandatory cuts in carbon pollution vary from state to state. These differences are based on each state’s current mix of power sources and an estimate of the “reasonable cost” to reduce