A new bill with bipartisan support in the Michigan legislature could accelerate solar adoption in Michigan -- though pushback from utility companies could kill the bill before it even gains a foothold. And what happens next could impact the long-term affordability and viability of solar energy in northern Michigan.

One key aspect of the solar energy industry is the concept of “net metering” (or, in Michigan, “distributed generation”) where households that generate power through solar panels can sell the electricity they don’t use back into the grid. It allows solar-connected households to benefit from the power they produce during the day, stay connected to the grid for power during the night or on cloudy days, and gain credits from their utility when they produce more energy than needed.

As state law stands, electric utilities are “not required to allow for a distributed generation program that is greater than one percent of its average in-state peak load for the preceding five calendar years.” Effectively, the law allows electrical utilities to put a cap on how much excess solar energy they will buy back from customers each year.

Many states have capacity limits of some sort, but few are as restrictive as Michigan’s. House Bill 4236, introduced in February by Rep. Gregory Markkanen (R) of the 110th district, would eliminate Michigan’s capacity limit entirely.

According to Nathan Bildeaux, founder of local solar innovator Traverse Solar, Michigan’s one-percent cap has the potential to make solar panels “almost useless to the average user.” So far, solar adoption has remained low enough that most Michigan users have not yet lost their ability to sell power back into the grid. As solar adoption grows, though, so does the risk of hitting the cap.

“On average, over the last 10 years, we [in Michigan] generate less than one percent of our energy from solar,” Bildeaux explains. “But at some point, a one-percent cap basically hamstrings everyone who wants to generate solar and sell it back to the grid. Because at some point, the utilities have the right to say, ‘Nope, we’re not going to buy it back anymore.’ And the customers, they’re worried. This topic is something that comes up frequently, because when we do our payback calculations [for how long it will take a solar project to pay for itself], this can affect that. Most of our customers, they would like to pay for their system within the warranty period of the panels. And if we hit the cap every year – and there's the potential that we could, if it stays at one percent and adoption increases – that jeopardizes those payback periods.”

The prospect of hitting the one-percent cap isn’t far-fetched. Several utilities in the Upper Peninsula have started reaching that threshold on a regular basis. And while Bildeaux notes that some of those utilities – such as the Marquette-based Upper Peninsula Power Company (UPPCO) – have “voluntarily increased” their limits to continue serving solar customers, others have cut off their distributed generation programs.

John Roth (R), state representative for Michigan’s 104th District (Grand Traverse County), supports the bill. He says Rep. Markkanen – whose district encompasses the westernmost parts of the Upper Peninsula – brought the bill “because the U.P. has the highest energy costs in the nation.” Both Roth and Markkanen sit on the House’s Committee on Energy, which is currently reviewing the bill.

“We need a vibrant solar energy industry,” Roth tells The Ticker. “We need to make sure that they know that there is a place in Michigan for [those businesses]. And with these caps, there isn't. There is no viable reason they'd want to start a company to do this.”

Tim Arends, executive director of Traverse City Light & Power (TCLP) says municipal utilities (such as TCLP) and electric cooperatives (such as Cherryland Electric) are “specifically exempted” from House Bill 4236. Still, Arends tells The Ticker he understands the concerns that MPSC-regulated utilities like DTE and Consumers Energy have raised about eliminating the distributed generation/net metering cap altogether. TCLP has put its own caps in place for how much electricity it will grant credits for under its net metering program, and Arends views those caps as an important protection for the long-term reliability of the power grid.

“There’s always the fact of the grid itself, and that has to be paid for by somebody,” Arends explains. “[Renewable customers] are not actually literally off the grid. They still rely on the electric utility for that reliability, when the wind’s not blowing or the sun isn't shining. Some customers may be able to produce enough energy to cover their load for the entire year, and not need that electric utility. But what about when they do? There's a cost [to maintaining that grid]. Every electric utility, you’ve got to pay for the lines, you’ve got to pay for the workers. And even most people that are home energy generators rely on this system, even though they're not using it to the degree that maybe their neighbor is. It’s their shared responsibility to pay for that reliability.”

“[The utilities] are very against an unlimited cap,” Roth says. “And I understand that, because they're expected to produce energy for when we have weeks that it’s not sunny or the wind’s not blowing. We know that's an issue, and we always have to have that base energy available. I'm concerned about making sure that we have a good balance.”

Early on, Roth thought discussions between the Energy Committee and the utilities showed promise of a compromise. In exchange for the state eliminating the cap or lifting it to a higher percentage, the utilities would be allowed to charge participating solar customers a small “grid fee” to provide for grid maintenance. But those negotiations went off the rails.

“The energy companies, a couple weeks ago, they blew it all up,” Roth says. “They went and decided to negotiate in the press and tell everybody that we're trying to raise their electrical rates through the roof. And negotiations broke down at that point – though there is something the energy companies worked through the energy chair [into the bill], and they call it their ‘compromise,’ but it actually takes us backward from where we are today.”

He continues: “I don’t believe the bill will pass the energy committee as is. That bill might be dead, and we may have to start over again. But I don’t think we can give up – for the U.P. in particular.”