Federal policy proposals in support of clean energy are often blunt and controversial, relying mostly on mandates or targets that trouble free-market conservatives.
Numerous bills creating a national renewable energy target have been shut down over the years. Recent carbon regulations from the White House that effectively create new clean energy targets for states have also sparked fierce legal opposition from the energy industry and Congressional leaders.
But could a new bill based on consumer choice and market fairness change the framework for supporting distributed generation at the federal level?
Angus King, an Independent Senator from Maine with a background in the energy business, introduced legislation this week that avoids mandates, and instead creates “a broad set of parameters” for valuing and integrating distributed generation on the grid.
The bill, called the Free Market Energy Act of 2015, would direct states to establish unbundled rate structures for distributed resources — opening up the door for time-variant pricing or local tariffs that more accurately reflect the costs and benefits of solar, storage, demand response and microgrids. It would also set standard interconnection policies for these technologies.
“Government policies do not support the free market conditions that allow distributed energy to flourish,” said Senator King in a statement upon releasing the bill.
“For example, expensive grid-connection fees discourage consumers from pursuing newer technologies, while simplistic net metering formulas do not properly compensate grid owners. The result is a slowing in DER innovation at a time when our energy policies should promote appropriately valued consumer-based energy technologies,” he said.
If states do not set up dynamic rate structures and stronger interconnection policies, power companies will be required to purchase electricity from distributed systems under the law PURPA. That law, created in the late 1970s, instructed utilities to enter contracts with independent power plants at the avoided cost of building their own plants — opening up a new market for power procurement at the wholesale level.
Applying the law to the distribution system would mean utilities have to buy power from distributed generation at the full retail rate. That requirement, known as net metering, is already in place in 43 states.
Assuming states don’t unbundle rates, the federal expansion of net metering will likely perturb utilities. The bill would also place a cap on net metering fees of $10 per month — another likely area of concern for utilities worried that solar system owners are not paying their fair share of fixed grid costs.
Finally, the bill would establish state-level “smart grid coordinators” — similar to regional transmission operators — to manage distributed resources on the grid. This could be run by the utilities themselves, or by an independent entity.
While energy experts and advocates digest the language of the bill, reactions are cautious — but generally positive.
“I’d say in general, I could support an arrangement like this,” said Travis Fisher, an economist with the American Energy Alliance (AEA), a nonprofit that has opposed traditional mandates supported by the renewable energy industry.
Although AEA hasn’t adopted an official stance on the bill as an organization, Fisher did say the proposal is sparking conversation among staff. “I like the avoided-cost framework when it comes to solar,” he said.
Debbie Dooley, founder of the Green Tea Coalition, is enthusiastically embracing the legislation. Dooley has been an outspoken advocate for policies that allow consumers to connect their solar systems to the grid and get compensated fairly.
“I think it’s a good bill. Senator King said he’s working with different groups to fine-tune it, and I think it’s something that true free-market conservatives should support,” said Dooley. “I feel very encouraged.”
The big question for conservatives will be how much authority is handed to the Federal Energy Regulatory Commission when it comes to setting rates. There are also questions about the default to net metering under PURPA: should it be valued at the retail rate, or the wholesale rate?
The solar industry’s national trade group is not yet taking a firm stance on the bill. Ken Johnson, the vice president of communications for the Solar Energy Industries Association, said there’s lot the organization can support — along with some unanswered questions about the future of net metering.
“From our perspective, reducing barriers to solar remains a top priority. That said, it’s also important to point out our strong, unwavering support for net metering laws nationwide,” said Johnson.
“While Senator King has laid out a thoughtful, outside-the-box approach, this should not be seen as a potential replacement for net metering. In states that don’t have net metering — or where it isn’t a possibility — Senator King’s approach could open up new solar opportunities. We look forward to working with him on this legislation,” he said.
The bill was introduced this week at the request of Alaska Senator Lisa Murkowski, chair of the Senate Energy and Natural Resources Committee, who’s hoping to pull together different ideas as part of national energy legislation.
With Congress barely able to pass a stripped-down version of an energy efficiency bill, prospects for a comprehensive energy bill are not strong. However, King’s bill is couched in free-market language targeting “personal freedom” and “the right to sovereignty over personal choices” that may appeal to more conservatives in both the House and Senate.
That’s the hope, anyway.
“This is what really makes me feel good: Senator King introduced this bill with a free-market message, not a climate-change message. That shows the message I’ve been delivering since 2013 is resonating on all sides of the political spectrum. I’d like the dialogue to shift more to the free-market choice message,” said Dooley.