Maine is poised to make history this week on solar energy. Over the last year, the Office of the Public Advocate has facilitated regular meetings of local businesses, public utility representatives, lawmakers, researchers and citizen action groups to recommend legislation for increasing solar energy capacity in the state, while also protecting reliable, cost-effective electricity delivery.
Like any great compromise, it is unlikely that any one stakeholder will be completely satisfied with the result. However, the collaborative efforts have yielded a bill (LD 1649) with enough political will to pass both the Maine House and Senate.
Maine could enact LD 1649 this week, or it could allow the governor to veto the bill and negate the six-month-long stakeholder-engaged process. Solar energy has the potential to expand access to low-cost electricity for all Mainers, improve the environment and grow the local economy. Through my research at the University of Maine and experience as a citizen of Bangor, I have encountered many statements about solar in Maine that simply are not true. Let me dispel five of these myths:
Myth 1: Solar doesn’t work in Maine.
The great thing about solar is it works anywhere. As long as there is sunshine, even with clouds, solar can work. More sunshine (i.e., in California and Arizona) will produce more energy over time, but there are actually some efficiency gains in colder climates because solar panels lose energy in heat. Maine’s solar resource is nearly identical to Massachusetts and Vermont, two states with very active solar industries and programs. In fact, there is more sunshine in Maine than one of the global leaders in solar energy installations – Germany.
Truth: Solar works in Maine.
Myth 2: Solar is expensive.
It is true that there is a large upfront cost associated with solar energy. A residential solar energy system in Maine costs around $18,000. That is an expensive price tag for the majority of people, and most people do not have that type of money lying around to pay it in one lump sum.
However, the federal government offers a 30-percent discount on the cost of solar through a tax credit, dropping the price closer to $12,000. Still a lot of money to pay up front. But when you factor in the value of solar energy produced each year — around $900 per year — the system pays itself back in approximately 14 years.
That’s a long time to get your money back, and that doesn’t even factor in your preference for getting money now rather than later (time value of money) or the money you could have made by investing that money in something else (opportunity cost).
However, the conservative estimate for the lifetime of a solar energy system is about 20 to 25 years. In reality, solar energy systems have continued operating well past 40 years. So, after paying the system off, it will still produce a value of $5,000 to $20,000 or more over the rest of its lifetime — more if retail electricity prices rise (which is what the U.S. Energy Information Administration projects), less if electricity prices drop.
Truth: Solar is expensive in the short term, but it saves money in the long term.
Myth 3: If the state supports solar energy, poor people will pay through higher electric bills to subsidize the solar panels on rich people’s homes.
As demonstrated in No. 2, solar is expensive up front but saves money over time. While it is true that you need to have some wealth to be able to afford to write a $12,000 check, and you need to pay enough taxes to be able to take advantage of the 30-percent federal tax credit, there are other options for people who are not in either situation, including loans, third-party power purchase agreements and community solar farms.
Efficiency Maine Trust offers five low-interest loans to help Mainers make efficiency improvements and add renewable central heating systems to their homes. Their loans also apply to solar energy installations.
The U.S. Department of Energy encourages states to provide low-interest loans for renewable energy, including solar energy, through its Property Assessed Clean Energy programs. It is up to individual states to determine how and for what these programs are administered.
If Maine wants to make it easier for lower-income homeowners to access solar energy installations, we could add solar to the list of eligible energy improvements currently covered by Efficiency Maine loans.
But, not everyone owns a home. How do renters access solar energy? PPAs allow third parties (such as banks, developers, installers and wealthy investors) who have the upfront cash and the tax appetite to pay for a solar system to be installed on any property (such as a home, business, church or school) and sell the electricity back to the owner of the property at a reduced rate compared with the retail electricity rate. The third party can afford to offer a reduced electricity rate because solar saves money over time, and the third party can roll those long-term savings, as well as the tax credit, into their electricity pricing.
A landlord can pass these savings on to his or her renters either directly (if the renter pays the electric bill) or indirectly through reduced rent (if the landlord pays the electric bill). Businesses can pass these savings on to consumers through lower priced goods. Churches, schools and other community-serving institutions can pass these savings onto the people they serve by offering additional programs, funded by the energy savings.
Anyone (the rich, poor, homeowners, renters, business owners, non-profit institutions) can take advantage of solar through community solar farms. A solar farm is a single system of solar panels that is larger than a typical residential system but smaller than a utility-scale solar power plant. A developer, utility, municipality or any group of residents pay the upfront cost of the system and share the benefits (energy savings over time) either directly through shared ownership or indirectly through subscriptions.
The proposed legislation makes a crucial change to encourage community solar growth in the state: It removes a cap that currently prohibits more than 10 people from sharing a single solar farm. This cap prohibits solar farms from being developed large enough to achieve the economies of scale (reduced costs) that similar projects in Massachusetts and Vermont are able to achieve.
Finally, the solar legislation does not propose to raise electricity prices. Electricity prices are projected to increase over time with or without solar. There is some concern that the proposed legislation could lead to higher prices because it requires electricity providers to enter into long-term contracts at a price they fear may be greater than the fair value of solar energy. If that happened, there could be a case to raise electricity prices to cover the additional cost of solar to the electricity provider.
However, that is very unlikely.
First, as electricity and fuel prices continue to rise, solar becomes an asset to the electricity grid – a generation source with a predictable cost (no fluctuating fuel prices) that reduces the need for new power plants and transmission lines. In addition, the legislation includes several fail-safe reviews by the Public Utilities Commission to revise the policy if it becomes a problem.
Finally, the proposed statewide target for solar installation (248 megawatts over five years) is not enough for the intermittent nature of solar to cause significant costs to the electric grid. Intermittent renewable energy generation (such as solar and wind) can supply up to 10 to 20 percent of total electricity generation without requiring major upgrades to the electric grid, and even when upgrades are needed, the benefits tend to outweigh the costs. To put this in perspective, the proposed 248-megawatt solar target is less than 6 percent of current Maine electric generating capacity.
Moreover, advances in “smartgrid” and battery technology over the next five years will likely make it easier for the grid to accommodate intermittent renewable energy generators.
Truth: Solar can benefit everyone.
Myth 4: We should be technology agnostic; solar should not get special treatment through state subsidies.
The reality is all energy is subsidized. Oil, gas, coal and nuclear have enjoyed far more subsidies in their much longer lifetimes than solar or any other renewable energy technology ever has. And, despite relatively low fuel costs, fossil fuels continue to be subsidized directly and indirectly through tax breaks, and government research, policies and programs that remove barriers to fuel exploration and extraction.
The federal tax credit for renewable energy systems is very small compared to all of that. But, more importantly, the proposed legislation does not offer a state subsidy for solar. It enables a system through which anyone can invest in solar and be credited by the electricity provider for the excess energy they produce that the electricity provider then sells to its customers. Currently, Maine allows this through net metering. The proposed legislation replaces net metering with a long-term contract system.
The intended effect is to continue to compensate Mainers for the electricity they are sending to the grid through their distributed solar energy systems while also reducing current uncertainties associated with net metering: It may discontinue (consumer uncertainty); electricity prices may increase to a point that the electricity provider is overpaying the consumer for the solar energy (utility uncertainty).
There is disagreement among different stakeholders as to whether long-term contracts are an improvement over net metering or a poor replacement. There is disagreement about what a fair compensation price should be. But it is not a subsidy. It is a mechanism for allowing any Mainer to be compensated for the electricity they produce through their solar energy system (whether they own it, lease it or subscribe to a solar farm).
In addition, removing the cap on community solar is also not a subsidy. It reduces the restrictions on all Mainers’ ability to invest in solar.
Truth: All energy technologies receive subsidies from the federal government in one form or another, and the proposed legislation is not offering a state subsidy for solar energy.
Myth 5: We should be focusing on transportation and heating, not electricity.
It is true that most of our fossil fuel use in Maine is not from electricity. Nearly 50 percent of our electricity generation comes from renewable energy (biomass, hydropower and wind). The rest is mostly from natural gas. The big environmental and energy security culprit is the oil used for home heating and transportation.
However, Efficiency Maine Trust offers rebates for heat pumps, which improve efficiency and shift heating loads from oil or natural gas to electricity. In addition, solar thermal energy can be used for water heating and space heating. Solar space heating really only makes sense in new construction, but solar water heating is cost effective and can help save fuel-associated water heating of all fuel types.
Finally, as the cost of electric vehicles continues to decrease and electric vehicle charging stations become more mainstream in Maine, a significant portion of our transportation energy use could shift from oil to electricity over time. In the near term, yes, there are bigger issues associated with transportation and heating than electricity. But in the long term, solar energy can be a solution to these issues as well.
Truth: Solar electricity can help offset transportation and heating fuel use through heat pumps and electric vehicles, and solar thermal energy can reduce fuel use in water and space heating.
Sharon Klein is an assistant professor in the School of Economics at the University of Maine. She conducts research and teaches two courses on comparing the technical, economic, environmental, and social costs and benefits of a variety of energy options, including solar energy. She is an active member of the National Community Solar Partnership and has an appointment through the Maine Agriculture and Forest Experiment Station to study the costs and benefits of different renewable energy options in Maine. More information about her work can be found here.
This post originally stated that Efficiency Maine did not have loans for solar energy projects. It does, and the piece has been corrected to reflect that.