Seth Buck, project manager for the construction of the City of Anderson Transit Center, looks over the array of solar panels that cover the roof of the three-story structure. The design also uses ground-source geothermal technology for heating and cooling. Buck says the Transit Center will be completed by the end of August. The Herald Bulletin
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FLORA — Cindy Rohaly, vice president at the solar installation company Green Alternatives, had two clients ready to sign a contract last year to install rooftop solar panels on their homes.
But those customers were scared away from signing after new rate changes and net metering policies approved last year dramatically slashed how much Hoosiers get paid for their excess solar energy.
Literally overnight, from June 30 to July 1, what customers could earn for selling solar power back to the grid dropped by around 70%. The money made from selling that energy is often the only way residents can afford to pay for solar installation projects.
For Rohaly’s two potential customers, the prospect of hugely reduced payouts that tack years onto their repayment plan was too much to swallow, leading two good paying projects to disappear for the Flora-based solar company.
“They decided to wait for now … but I’m hoping people come back around again,” Rohaly said.
GUTTING SOLAR?
Since 2004, the Indiana Utility Regulatory Commission (IURC) has required the state’s five investor-owned, for-profit utility companies to offer net metering to all electric customers. The policy allowed those customers to sell their extra energy back to utilities at the same rate utilities charged customers for electricity.
A bill approved by legislators in 2017 started to phase out that system, with the official end date landing on July 1. Since then, any customer selling power receives only the wholesale rate utilities pay for power, plus 25%. That rate changes every year based on projected energy demand.
For many customers, the new formula means they are receiving far less compensation than nine months ago.
Payback rates took an even bigger hit after the IURC approved a new way of calculating how utilities track customers’ energy production. Before 2021, utilities calculated a customer’s electricity use at the end of the month and then paid them for any extra energy they had generated.
Since then, all five investor- owned utilities have been approved for “instantaneous” metering. The system allows utilities to charge customers the retail rate for power they use from the grid. Energy customers send back to the utility is then bought at the lower, wholesale rate.
Add it all up, and the new, lower rates represent some of the most dramatic cuts to net-metering policies in the country, according to Ben Inskeep, program director of Citizens Action Coalition of Indiana, the state’s largest consumer and environmental advocacy organization.
“We really are an outlier in terms of having really terrible rooftop solar compensation policies in place,” he said. “It’s much, much worse than many states in the country, and it’s worse than any of our neighbors.”
For-profit utility companies for years have fought against robust net-metering policies around the country because they see consumer-generated power as direct competition to their business, Inskeep argued.
With Indiana’s compensation rates now gutted, he worries installing solar will now be out of reach for many Hoosiers.
“This new policy that’s in place in the state of Indiana is going to make it very difficult for solar to pencil out for a lot of folks when it comes to just looking at the economics,” he said. “I’m very concerned going forward about the demands.”
‘A BLACK BOX’
But how much the new metering policies will impact private solar installations is impossible to know right now. That’s because starting this year, utilities no longer have to report how many customers have signed up for net-metering. The IURC previously required they report those numbers quarterly.
“All of a sudden, we’re in a situation where we don’t really have that data anymore,” Inskeep said. “It’s a complete black box right now.”
The IURC, along with state legislators, have the authority to require utilities to report net-metering numbers, but so far haven’t taken steps to do so.
McKenzie Barbknecht, a spokesperson for Duke Energy, the largest investor-owned utility in the state, said given how recent the changes are to net metering, it’s difficult to accurately compare year-over-year the number of customers applying.
Besides changes in metering, the demand for solar generation ownership also has been influenced by other factors including inflation, rising interest rates and supply chain challenges, she explained.
But without reliable public data that’s crucial to good public policy, the ability to determine what factors are impacting the state’s solar industry will be severely impaired, noted Inskeep.
“You need this information just to be able to understand trends,” he said. “What’s the impact of the legislation that passed? Is it having negative impacts to consumers? Hopefully, the commission will consider adopting some sort of transparent reporting so that we can have that visibility.”
NEW RATES, NEW INDUSTRY
The financial incentives for residential solar my have taken a hit, but that doesn’t mean business has slowed down for installation companies like Green Alternatives in Flora.
Vice President Rohaly said although some homeowners are backing off, companies and business are still actively pursuing solar installations thanks to federal incentives and grants that help recoup the cost of the project.
To help woo more corporate customers, her company has also started applying for grant funding through the federal Rural Energy for America Program, which provides guaranteed loan financing and grant funding to agricultural producers and rural small businesses for renewable energy systems.
The program this year increased funding to cover up to 40% of total project costs, up from 15% in 2022. Combined with the increase in the solar tax credit in the Inflation Reduction Act, businesses could see up to 70% savings on a renewable energy project.
“We are seeing a lot more commercial work these days,” Rohaly said. “In the past, it’s kind of alternated. One year will be a good residential year, the next year will be a better commercial year. But I think the trend in general is heading more toward commercial for us than it is residential.”
There’s no doubt, though, that solar companies would benefit from better compensation for consumer-generated power, said Laura Arnold, director of Indiana Distributed Energy Alliance, which promotes renewable energy and distributed energy.
The record-low payouts are locking out many middle-income Hoosiers who want to install solar, leaving only wealthier residents the ability to install green-energy projects, she explained.
“Wealthier customers just think it’s the right thing to do,” Arnold said. “Moderate-and-low-income customers don’t have the same luxury to feel that way.”
Rohaly said she’s frustrated by the state’s decision to gut net-metering rates for residents during a time when more clean energy is needed. Not only does it impede her business, but it also makes it harder for Hoosiers to install projects that help reduce climate change, she argued.
So far, the changes haven’t hampered business at Green Alternatives too much. Rohaly said she can only hope it stays that way.
“I keep thinking that one of these days, all of it is just going to really hurt us,” she said. “But I haven’t seen us lose too much traction yet, so I try to remain optimistic.”
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