Staff Blog: Health care, energy, environment
August 22, 2015 8:00 a.m.
Barry M. Goldwater Jr. has a problem with fellow conservatives and utility executives in Michigan.
Goldwater Jr., 77, told me in an interview this week that he is upset with Michigan Republican legislators who he says want to discard the state’s successful net metering law that has helped to create jobs and a booming yet fledgling industry for rooftop solar projects on residential homes, churches and small businesses.
The son of one of the icons of the Republican Party – five-term Sen. Barry Goldwater of Arizona, Cold War warrior and Republican presidential nominee in 1964 – Goldwater says Michigan conservatives have it all wrong.
Goldwater contends the legislative effort in Michigan to pay rooftop solar owners less for the power they generate and ignore the contributions they are making to increase reliability and electricity on the grid is similar to one playing out in at least 15 other states.
“You might say there is a conspiracy of some sorts,” said Goldwater, who was a U.S. congressman representing California from 1969 to 1983. He served on many energy, science and technology committees during his career.
“Utilities talk with each other. They are on the same page. They don’t like competition and are doing everything to slow (rooftop solar) down,” said Goldwater, who also is chairman of Tell Utilities Solar won’t be Killed (TUSK), a group speaking out against proposed legislation in Michigan, Indiana, Kentucky, Wisconsin, Florida and 11 other states that they believe would gut the rooftop solar market.
TUSK is partially supported by the Alliance for Solar Choice, which includes as members rooftop solar companies such as SunRun, SolarCity, Solar Universe and Verengo.
“My criticism of the utility business and all big monopolies that dominate is they stop progress and defend their position,” Goldwater said. “They spend money on lobbyists and politicians instead of being out front to back future energy sources.”
Goldwater believes the U.S. is “foolhardy to continue to burn scarce resources that will eventually be depleted and pollute the air and water.”
Besides solar, wind, geothermal and hydroelectric, Goldwater said there are many new alternative sources of power on the table and in development to replace fossil fuels. His favorite seems to be hydrogen fuel cells.
“Hydrogen will be a major force. Toyota, GM and other companies are investing in it,” he said. “Today, we are talking about the sun, trying to utilize that as much as possible to replace fossil fuel.”
Back in the 1970s, said Goldwater, Republicans and Democrats agreed to support numerous research and demonstration projects that led development of solar cells and panels, electric vehicles, geothermal energy, and even the “breeder reactor.”
But Goldwater now says some conservatives have lost their way when it comes to renewable energy, and especially rooftop solar projects.
“The question always is: Why would a conservative Republican be supporting rooftop solar? Why? It is a good, clean source of energy. It comes from the sun, so it is renewable,” he said.
But from a conservative standpoint, Goldwater believes rooftop solar is an expression of individuality, freedom and liberty.
“The genius of our founding fathers is their support of individual interest,” Goldwater said. “We advocate as much freedom from government from taxes as possible. Solar energy fits in with that philosophy.”
A few days after Goldwater’s TUSK group came out with a news release criticizing Republican and utility efforts to change net metering laws, Citizens for Michigan’s Energy Future, a utility-funded front group, lashed out at the former congressman.
“(Goldwater) is deliberately misleading Michigan residents about solar energy policies in Michigan,” said CMEF through chief spokeswoman Kelly Rossman-McKinney in a statement. “(He) is the chairman for Arizona-based Tell Utilities Solar won’t be Killed (TUSK), an out-of-state front group making false claims about Michigan’s solar policy in an effort to open Michigan’s market to out-of-state special interests.”
But other conservative organizations in Michigan have come out in support of existing net metering laws and against S.B. 438. They include the Michigan Conservative Energy Forum and director Larry Ward; the Michigan Christian Coalition and leader Keith den Hollander; and the Green Tea Coalition and leader Debbie Dooley.
Legislative efforts to change net metering rules
On Wednesday, the Michigan Senate energy and technology committee plans another hearing on Senate Bill 438, the net metering bill sponsored by Sen. John Proos, R-St. Joseph.
The critical provision in SB 438 would be to eliminate the state’s net metering program and replace it with a program that reimburses customers at wholesale prices - which Michigan’s major for-profit utilities like DTE Energy Co. and Consumers Energy Co. purchase through a regional market at prices below what they sell to customers.
In other words, rooftop solar customers would pay retail prices for electricity and be reimbursed for power generation from solar power on a wholesale basis, which is much lower than they pay the utility at retail prices.
The change from the status quo would essentially create a tax on rooftop solar customers. This tax, say the utilities, is necessary to charge rooftop solar customers for using electricity transmission lines and other infrastructure owned by the utility companies to transmit power to all customers.
Interesting, my reading of SB 438 indicates it also appears to violate Public Act 295 of 2008, which states: “The net metering program shall be designed for a period of not less than 10 years. ...” This means the earliest Proos’ bill could go into effect would be 2018.
The bill also appears to override existing net metering rules without making provisions to grandfather existing customers under the current rules. This would negatively impact customers that have already made an investment with an expected return on investment.
However, representatives for DTE and Consumers, say the companies now support allowing current net metering customers to continue under current law.
There are approximately 1,850 people and businesses who have paid upwards of $35,000 or more for rooftop solar panels and have been approved for net metering energy credits for excess electricity produced. Solar panel installation costs have dropped 50 percent since 2010, which has created an increased demand for rooftop solar the past three years, said solar installation company executives.
DTE and Consumers position on net metering changes
Why do DTE and Consumers support Proos’ bill?
In summary, DTE and Consumers utility officials say now is time to end the subsidy for rooftop solar. They also say the current net metering rules subsidize customers with rooftop solar at the expense of other ratepayers.
Brandon Hofmeister, executive director of policy research and public affairs with Consumers Energy, outlined the utility position for me in a interview.
“Couple points. First, there is no doubt that net metering is a subsidy ... a big one,” Hofmeister said. “Net metering is a concept that is hard for people to grasp.”
Most people believe electricity is a commodity, but Hofmeister called it a service that is provided to customers. It includes power generation, but also the infrastructure – the power grid that includes transmission lines, substations, transformers and meters – to get the electricity to homes and businesses.
“It costs the same to wire your house to the electric grid whether you use 600 kilowatts or somebody with distributed generation (rooftop solar) to avoid those costs,” said Hofmeister, which he said amounts to “well over half or two-thirds of their bill.”
So what would be the change to rooftop solar customers if the net metering bill is approved?
Hofmeister said the difference in retail rate and wholesale rate is very large. Currently, on average, retail customers of Consumers pay about 14 to 15 cents per kilowatt hour for electricity. The wholesale rate is about 4 cents per kilowatt hour.
“The infrastructure costs are baked into the retail rate,” he said. “The difference between the retail and the wholesale rate is the infrastructure costs.”
So, Consumers Energy is saying that the 1,850 net metering customers – or about 400 to 500 in Consumers' territory – are getting a 10 cent per kilowatt subsidy from all other ratepayers.
“We just want a fair system going forward that works as it grows and impacts the grid,” Hofmeister said.
I also reached out to DTE. Spokesman John Austerberry emailed me the following:
“The solar power incentives and subsidies that were designed to spur early adoption of the technology have done their job. Customers, utilities, the solar power industry and state government have gained valuable knowledge in recent years on how solar power fits into the larger energy system.
“Now we need to move to the next phase, where the role of solar power will be determined by the benefits it provides compared to other sources of electric generation. For solar power to compete fairly with other technologies, Michigan’s net metering rules need to be updated to provide the correct price signals to the market.”
Net metering supporters take opposite view of utilities
Opponents of SB 438 have a different story to tell.
They say changing net metering rules under Proos’ bill would eliminate financial incentives residential and small business customers have to invest in rooftop solar. It would change an investment with a 10-year ROI into one with a 20-year payback and virtually stop rooftop solar except for the wealthiest individuals or deep-pocketed businesses.
Mark Hagerty, president of Commerce Township-based Michigan Solar Solutions, said several customers have backed away from rooftop solar installations because of talk of changing the law. He said the vast majority of systems installs are approved for net metering.
Mark Barteau, director of the University of Michigan Energy Institute, said Proos bill that eliminates net metering credit incentives for rooftop solar panels “makes it much less financially desirable for individuals to put solar panels on their houses.”
Sunil Agrawal, president of Nova Consultants Inc., a Novi-based engineering and environmental company, said he supports continuation of existing net metering laws.
“Without it, privately owned renewable projects will be too expensive,” he said
“I have rooftop array on my house,” Agrawal said. “When our array is producing power, it is not feeding the grid. It is feeding my house and my next door neighbor’s house. During the day, where there is a demand for power that helps offset the grid load. This helps the utilities and reduces their costs.”
Agrawal said if net metering changes, utilities will build more large-scale solar plants and smaller operators will go out of business.
“Business will shrink and you will end up with only the 10 megawatt or 20 megawatt utility projects,” he said. “You don’t need large numbers of people to do those larger projects.”
Doug Jester, a principal with Lansing-based 5 Lakes Energy LLC, also threw a monkey-wrench into the argument that charging rooftop customers a retail rate is a fairer method for all ratepayers.
“The proposal in 438 does several things that seem wrong in principle to me. First, it would charge the customer retail price on all of the power they consume and pays them wholesale price on all of the power they produce, even if much of what they produce is immediately consumed on-site and does not go onto the grid.”
Jester said “this is like saying that when you grow tomatoes in your own garden you have to pay your grocery store the difference between the wholesale price of tomatoes and the store’s price for tomatoes, even you don’t deliver the tomatoes to the store and buy them back.”
Even if the utilities are correct on subsidies, Jester also estimated that the effect rooftop solar customers have on total ratepayers is less than 0.01 percent, or 1 cent, on a monthly residential utility bill.
“The utilities are not legitimately worked over cross-subsidization but are trying to protect their control over their customers,” Jester said.
Goldwater, the conservative environmentalist?
Besides supporting rooftop solar on conservative principles, Goldwater said he also supports solar for environmental reasons.
Goldwater said his love for the environment was taught to him by his father.
“I consider myself an environmentalist,” he said. “My father, Sen. Goldwater, raised me in Arizona. We went up in forests and mountains and he often remarked when walking in forests and deserts you are walking with God. He always had a great respect for the environment. The last thing we need to do is pollute air and water with fossil fuels.
Was Sen. Goldwater an environmentalist?
“Oh my gosh, yes. He was at the forefront of protecting the environment,” Goldwater Jr. said.
But the most logical reason Goldwater said he supports rooftop solar is because it is the conservative thing to do.
“We like choice, and the more choices we have, the better we are,” Goldwater said. “If we have a variety of choices, that means more competition and that is good for freedom because it creates excellence at a lower price. The sun is competing with fossil and that is why I am involved as a conservative.”
“I admonish conservatives who fight this on the subsidy issue,” he said.
“I don’t like subsidies. I don’t like them for football stadiums and tax preferences to attract businesses to states. ... I understand it is used. It is called social engineering that is used by the federal government to encourage a behavior in slow in developing.”
But Goldwater said giving subsidies and preferential treatment for investing in renewable energy that empowers the individual, improves public health and the environment are exceptions.
“Worldwide we have seen an increase in renewable energy. Some European countries are way ahead of us. There is worldwide phenomena that is helping the environment and creating jobs.
“Net metering has helped that and it has scared utilities because it is something they don’t own and can’t control and make money off,” Goldwater said.