As the new year dawned, advocates of the potential economic benefits of solar energy, particularly in economically-distressed counties in Eastern Kentucky, renewed their concern over a controversial law that could dissuade businesses, individuals and non-profits from installing solar panels.
The impacts of the law, which the Republican-led General Assembly approved last year, have not yet materialized, but critics warn that it will likely lead to fewer savings for businesses that install panels at a time when many businesses in Eastern Kentucky are struggling because of population loss and declining wages among their customer base.
Senate Bill 100, which then-Gov. Matt Bevin signed into law in March, will force state regulators at the Kentucky Public Service Commission to determine new compensation rates that utilities must pay customers who have installed panels.
Under the current system, all Kentucky utility customers with solar panels receive a 1-for-1 crediting rate for each kilowatt hour of energy that they put back into the grid, allowing customers with panels to rack up substantial savings on their power bills.
With SB 100, that could all change. The bill, which took effect Jan. 1, gives the PSC the authority to set rates for each utility, rather than a statewide standard, possibly lowering the amount that a utility must distribute to solar-generating customers.
Customers who already have solar panels will be grandfathered in at the old rates, according to the PSC and a spokeswoman for Kentucky Power.
The brunt of the impact will fall on customers who have not yet installed panels. If rates drop significantly, solar advocates worry that new businesses will be far less likely to install panels.
“The legislation has a potential to create just a morass of confusion, and take a system that’s working fine and just make it exponentially worse,” said Carrie Ray, the energy program coordinator for the Mountain Association for Community Economic Development (MACED).
Utility companies, including Kentucky Power, argue that electric companies incur additional costs that the 1-for-1 rate does not cover, forcing other customers to make up the difference.
Allison Barker, Kentucky Power’s spokeswoman, said the current system “allows those customers to net their bill down and avoid paying their share of fixed costs like poles and wires that are recovered through energy charges.”
“If solar net metering customers are avoiding paying their share of fixed costs, they are effectively shifting recovery of these costs to other customers,” Barker said.
IMMEDIATE SAVINGS
Businesses in Eastern Kentucky that have already installed solar panels report significant savings, even as they pay off the panels.
Print My Threads, a screen printing shop near Ashland, installed 108 panels on the roof of its 9,000 square-foot building for a total cost of about $80,000. A $20,000 USDA grant and $24,000 federal tax credit for installing the panels brought the total cost down to $35,900, which it could pay off with $218 monthly payments.
Its average monthly savings are $517, giving the company about $300 of additional cash flow even as it makes those payments.
Kyle Robinson, Print My Threads’ founder and owner, said the company will use the savings to pay for new HVAC systems to help cool the production area during the summer — on a hot day, the warehouse where workers create custom shirts gets well above 100 degrees.
“Part of the reason for doing the solar was we knew we were going to greatly increase our energy usage, and so the solar is going to offset all of that additional usage,” Robinson said.
In Letcher County, a number of businesses have installed panels of their own or are in the process of installing them.
Among them are a consignment shop near Whitesburg, whose energy bill once ran as high as $2,100 a month, a hardware and contracting company in Isom, and a truck parts store operated by former coal operator James Hubbard.
“It’s very expensive to fool with Kentucky Power,” Hubbard said. “No matter what you do, our rates are very high.”
Hubbard said his business’ electric bill often runs $1,800 a month in the winter and $400 in the summer. With a $500 monthly payment on his 112 solar panels, he’s anticipating an average savings of $200 a month.
Hubbard said he doesn’t bear any allegiance to coal as an energy source, despite his 20 years of mining experience in Eastern Kentucky. He’s seen firsthand the devastating impact of the decline of coal, on his own life and the health of Eastern Kentucky’s economy.
“(Operating coal mines) worked for 20 years, but those last few years were horrific, just watching everything fall apart like a house of cards,” he said. “If we didn’t have the schools, hospitals and government, imagine where our unemployment would be.”
‘I REALLY RESENT IT’
Many of the business owners in Pike County who installed panels see SB 100 as another blow to an already-struggling economy.
While several called lower solar rates “unfair,” others were more direct.
Gwen Johnson, a board member of Hemphill Community Center in Neon, which installed solar panels this summer, called Kentucky Power an “oppressor of the people” for attempting to lower the repayment rates on solar energy, saying high electric bills already make it difficult for businesses and non-profits to stay open in Eastern Kentucky.
“I really resent it,” Johnson said.
The community center runs a bakery that employs people recovering from drug addiction, and hosts a number of events and meetings throughout the week, including Narcotics Anonymous meetings.
Hemphill’s power bill ran $1,600 in the winter and between $500 and $700 in the summer. With the panels, the bills haven’t topped $130, Johnson said.
She said current incentives for solar could allow other small businesses and non-profits to stay open in a region reeling from outward migration and lack of well-paying jobs.
“I believe it’s a big risk to what could be our way out,” Johnson said of the possible changes to solar rates.
Starting Jan. 2, Kentucky Power and other utilities, could initiate rate cases with the Public Service Commission to decide the new solar repayment rates.
The PSC announced in December it will hire an expert consultant to assist in reviewing those cases. The new law says utilities are entitled to “implement rates to recover from its eligible (net metering customers) all costs necessary to serve” those customers, independent of the rate structure for all other customers, according to a news release from the PSC.
Peter Hille, President of MACED, said giving the PSC the authority to adjust rates creates a level of uncertainty for businesses and residents who want to install solar panels, making the investment more risky.
In turn, Hille said the law will deter entrepreneurs from opening solar panel installment companies in Eastern Kentucky, where many counties are scrambling to attract new industries and businesses.
“You’re talking about thousands upon thousands of jobs in the area that pay for themselves, that don’t require some artificial external resource,” Hille said. “That’s an economic opportunity that Kentucky shouldn’t turn its back on.”
