Solar power is about to become a lot more expensive for Hoosiers as net metering expires

For the first time in a long time, the future of rooftop solar in Indiana is now more uncertain than ever. 

Solar power is about to become much more expensive for Hoosiers as a state policy meant to help boost the renewable energy in the state expires on July 1. Once that deadline passes, Indiana utility customers will no longer be allowed to participate in what is called net metering when they install solar panels on their roofs. 

Without that policy, consumer advocates worry what this will mean for the future of solar and residents’ ability to access it.

“If I could use one word, I would say 'uncertain',” said Kerwin Olson, executive director of consumer advocacy group Citizens Action Coalition. 

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“I don’t think it’s accurate to say it’s the end of the road, solar will still be going up,” he continued. “But what this will do is put solar out of reach for so many that don’t have the financial resources — just furthering the divide in my view.” 

What is 'net metering' and how does it help Hoosiers?

Net metering is a mechanism that was meant to help incentivize homeowners to install solar by making the investment more economical. In essence, it credits homeowners for excess energy they generate and send back onto the grid. 

This reduces their overall electricity bill at the end of each month and lessens the burden of cost of installation over the long-term. But in Indiana, it’s phasing out. 

In 2017, the Indiana legislature passed a bill phasing out the program over several years: Senate Enrolled Act 309. Anyone who installed solar by the end of that year were grandfathered in to the full net-metering credit for 30 years, or until 2047. Those who installed solar panels after that will receive the credit until 2032. 

Those utility customers are credited at the retail rate — or the same rate they pay for electricity. That makes it an even 1:1 swap. 

But for anyone who installs solar energy after June 30 this year, they will no longer be eligible for the retail credit for their solar energy. 

As the deadline has approached, there has been a lot of interest from homeowners, said Zach Schalk, the Indiana Program Director of Solar United Neighbors, which helps Hoosiers go solar. It’s also been challenging, he added: Every utility has set different requirements for what Hoosiers must do by July 1 in order to qualify.  

“We’ve been trying to bang the drum of the countdown for potential solar customers,” Schalk said. “But as it comes closer and closer, it’s become more and more difficult.” 

Advocates worry net metering's replacement won't fairly compensate Hoosier customers

Now that net metering is coming to an end, it is being replaced with a new structure that many advocates claim does not fairly compensate customers. 

Each utility had to submit a proposal to the Indiana Utility Regulatory Commission to create what is called an “excess distributed generation” or an EDG tariff for what customers will now receive for energy they send onto the grid. So far, four out of five utilities have gotten the thumbs up for their plans. Duke Energy’s is still pending. 

The rate that customers will receive for the excess energy they generate will differ for each utility. But regardless of provider, it will be a “dramatically lower rate” compared to what they’ve earlier adopters received — often around three or four cents compared to the retail rate of around 15 cents.

What advocates say is more troubling, however, is the change in how these credits will be calculated. 

Under net metering, the difference between energy consumed and energy produced is measured at the end of the month. That’s because when the panels are producing doesn’t always line up when the homeowners are at home and drawing energy. 

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So, for example, if someone consumed 1,000 kilowatt-hours of utility energy and sent 850 back to the grid, they would pay for 150 kWh at the retail rate. At 15 cents per kWh, that comes to about $23. 

But utilities have changed to what they are calling instantaneous netting, which no longer settles at the end of the month. 

Instead, it charges customers for all the energy they use at the retail rate. For 1,000 kWh, that would be $150. The utilities then give the homeowner a credit for the energy they send back at the lower rate — or about $25 for 850 kWh at a 3-cent rate. 

Taking the difference, customers would be left paying nearly $125, plus their fixed costs. 

That’s a nearly $100 swing on their utility bills. 

“We prefer to call it 'no netting', because there really is no netting that’s happening,” Olson said. “There is never a situation where no netting works in customers’ favor.”  

The utilities say this change just reflects what was laid out by the legislature. AES Indiana said instantaneous netting “ensures customers are paying for and being compensated for energy in real time.” And CenterPoint Energy said it balances the interests of all of its customers. 

CenterPoint was the first utility to put this new structure in place, having reached a certain threshold as part of the law that allowed it to implement early. Their new EDG tariffs went into effect last year. 

Bills from a few customers show that even though they sent more energy onto the grid than they used over the course of the month, they are still facing bills of more than $100.

New pricing model for electricity users being challenged

CenterPoint’s new EDG tariff is being challenged by multiple groups — including Olson’s and the state’s consumer protection agency. The Court of Appeals agreed that the new netting methodology goes against current law and that the IURC should not have approved it. 

The utilities, along with the Commission, have taken this issue to the Indiana Supreme Court. The high court has accepted the case and is scheduled to hear oral arguments on the case in September. 

All this uncertainty is not changing interest in solar panels, Schalk said. He said they are continuing to hear from Hoosiers who want to learn more. 

They worry, however, that these changes will slow actual adoptions and put rooftop solar out of reach for many families, businesses, churches, municipalities and schools. Solar systems may no longer make financial sense by as much as doubling the payback period for the installation, according to analysis by the Citizens Action Coalition. 

“That was the whole idea of net metering, to create a piggy bank, if you will,” Olson said. “But that piggy bank has been taken away.” 

For those who are still able to move forward, those customers likely will have to install smaller systems that do not cover as much of their energy usage or provide as much excess clean energy to their local community. 

Advocates say the expiration of net metering is a disconcerting step, coming at a time when the region’s grid operator has predicted some shortages in supply and that rolling blackouts could be possible, though very unlikely. Research has shown that rooftop solar can help strengthen the reliability of the grid. 

There have been efforts during past legislative sessions to reverse SEA 309 or extend its deadlines to prolong the availability of net metering. Those bills have never advanced, but advocates are hopeful the state can still put a more inclusive and encouraging solar policy in place. 

The utilities said they cannot predict how the end of net metering will impact solar adoption across the state, but that they stand by their new tariffs and believe that they comply with the current law. They said they want to ensure they are balancing the interests of all customers.

Call IndyStar reporter Sarah Bowman at 317-444-6129 or email at sarah.bowman@indystar.com. Follow her on Twitter and Facebook: @IndyStarSarah. Connect with IndyStar’s environmental reporters: Join The Scrub on Facebook.

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