FTC convened a workshop this week to discuss issues related to solar distributed generation. The workshop included a review of the current state of the solar industry. Stakeholders representing utilities, solar DG providers and academicians discussed their perspectives on the correct methodology for compensating solar DG consumers, including current net metering requirements, the "value of solar" approach and the LMP + D (location based marginal price plus distribution value) approach to valuing distributed energy resources being considered in the NYPSC's Reforming the Energy Vision proceeding. Another panel explored competitive issues in solar DG, including the appropriate role of utilities in the marketplace, barriers faced by solar DG providers, and what regulatory and antitrust tools and remedies may be appropriate. Mention was made of the SolarCity case and the state action doctrine issue raised in that litigation. The workshop concluded with a consumer protection panel examining how consumers gain access to information to understand the options, costs and benefits of solar DG.
FTC also issued a list of questions for consideration and comment which it says will support FTC's advocacy and consumer education efforts. The issues identified for comment are as follows:
Current State of the Solar Industry
"How much solar electricity was generated in the U.S. in 2015? How does that compare to 2005? 1995? How much solar generation can reasonably be projected for 2025?
• Is the growth coming primarily from solar DG? Is growth in solar DG being driven by residential, commercial, or community installations? Are utility-scale installations of solar generation growing as well?
• How does the cost of solar DG compare with the costs of other sources of generation, including utility-scale solar installations?
• What are the cost components of solar DG? How fast is the cost of solar PV panels decreasing? What about installation costs? Are those costs likely to continue decreasing?
• Does DG impose additional costs on the grid because of, e.g., changes in how the grid is used, integration costs, and/or overloading of local circuits? How can we calculate these additional costs?
• Does DG save costs compared to other sources of generation because DG is placed more closely to the point of consumption? How can we value these cost savings?
• What other benefits does solar DG provide to the grid? For example, does solar DG improve power quality, reliability, and/or resiliency? How can we value these benefits?
• What are the environmental benefits and costs of solar power?
• What are the subsidies for solar DG at the federal and state levels?
• What other technologies (e.g., battery storage of solar-generated electricity) are relevant to the future of solar DG?
Net Metering: Pricing Solar DG at Retail
Is net metering good policy? At the retail rate? At a different rate?
• Does retail net metering result in cross-subsidization? For example, if the fixed costs associated with building and maintaining the electricity grid are incorporated into the price per kilowatt hour (volumetric pricing), do non-solar customers end up cross-subsidizing solar DG customers because the latter do not pay a full share of fixed costs when they choose to rely on self-generation?
• Does cross-subsidization of one form or another always occur when retail rates are based only on volumetric charges and are time-invariant? Does cross-subsidization caused by net metering differ in any way from other forms of cross-subsidization inherent in regulated retail rates?
• Does it make sense for PUCs to target net metering for reform, or should they focus on reforming retail rates more generally to better reflect the varying costs of supplying electric power?
• Is there a way to prioritize among various reforms? Potential reforms may include a “value of solar” tariff; dual metering/net metering at something other than the retail rate; fixed charge reforms; smart meters/time-variant pricing.
• Does the analysis change when the distribution utility is vertically integrated? When the utility is investor-owned, municipally-owned, or a co-op? When consumers have retail choice? When retail pricing is time-variant?
• To what extent does the optimal approach depend on penetration levels for solar DG?
• Should environmental externalities affect retail pricing?
Is solar DG a competitive threat to distribution utilities? Does this depend on whether the distribution utility owns generation assets?
• How does regulation affect entry decisions by solar DG firms? What regulatory policies support or discourage entry?
• Are there barriers to entry not related to regulatory policies? If so, is antitrust enforcement an appropriate tool to address them?
• If regulatory policy affects entry conditions, is there a role for antitrust enforcement or competition advocacy to encourage entry? Is antitrust an appropriate tool to police efforts by utilities to maintain or strengthen regulatory barriers to entry from solar DG firms? Can such efforts by utilities be characterized as exclusionary conduct under the antitrust laws? Or is regulation the preferred tool to shape electricity distribution going forward? Are regulated distribution utilities protected from antitrust suits through any immunity or exemption? Should they be?
• Should utilities be permitted to offer rate-paying customers utility-supplied solar PV panels or access to community solar installations? Does it make a difference if, instead, it is an unregulated subsidiary or affiliate of a regulated utility that is offering the solar PV panels? Are anti-discrimination rules for utility affiliates effective in achieving a competitive landscape?
• What is the state of competition among solar DG firms? Are there geographic areas where competition is particularly lacking between solar DG firms?
• What is the state of competition between solar DG firms and regulated utilities? How is competition affected by whether the utility offers distribution service only, electricity supply only, or both?
• How is this competition affected by the fact that regulated utilities earn revenues that are based, in part, on regulated rates of return?
• How do consumer protection issues such as comparative price information or disclosures of regulatory risk affect competition among solar DG firms and competition between solar DG firms and utilities?
Consumer Protection Issues
How do consumers obtain information about installing solar PV panels?
• What information is most important to consumers’ decisions to install rooftop solar?
• What information is available about regulated retail electricity rates? What are solar DG firms telling consumers about expected future retail rates?
• Who typically assumes the risk that regulators in a given jurisdiction will change net metering and/or reform compensation rates paid for solar DG – consumers or solar DG firms?
• Do consumers understand the payments they will make for solar PV panels and electricity, based on whether and how they finance or lease a system, or obtain a power purchase agreement? Do consumers understand whether their payments may escalate under some agreements?
• Do consumers understand any permissions that may be needed to install rooftop solar?
• Do consumers understand the implications of having rooftop solar if they sell their homes, including disclosures to prospective homebuyers? Do solar DG firms make disclosures about how a home sale may affect the consumer’s contract for solar generation? Should they be required to make such disclosures? Do the disclosures vary depending on whether the consumer purchased or leased the solar PV panels or used a power purchase agreement, and depending on the specifics of how the consumer is compensated for the electricity he or she generates? If so, how and why?
• Do consumers or solar DG firms bear the risk of structural damage to homes from solar panel installations? What is needed for clear and conspicuous disclosures about damage or loss relating to rooftop solar?
• What gaps are there in information for consumers and businesses that are considering rooftop solar?
• Is it standard practice for solar DG firms to retain renewable energy credits (RECs) when selling or leasing solar PV panels to consumers? Do solar DG firms make disclosures to consumers concerning the sale of RECs on a secondary market? Is information about RECs material to a consumer’s decision to install rooftop solar?
• What types of disclosures are solar DG marketers or others providing to consumers? Are marketers using a standard format for such disclosures? Have standard disclosures to consumers been developed by solar DG firms or others? If so, are there any additional disclosures that would be useful to consumers?
• Do solar DG marketers or others use robocalls to promote solar PV panel sales to consumers? If so, are there practices that raise issues for consumers?"
Comments on these issues are due August 22, 2016. The full text of the Notice of Workshop is available on the NEM Website.