Idaho Power chips away at solar incentives. Here’s why, and what it means for customers

Installing solar panels will likely make less sense for large businesses and farmers after a recent Idaho Public Utilities Commission ruling.

Effectively, the December PUC order creates uncertainty about the future value of solar electricity produced by private solar panel owners in the farming, industrial and large commercial sectors. At some point in the future — it could be as soon as a year from now or as long as five years — Idaho Power will start compensating people less for the electricity they generate.

Until Idaho Power establishes that new rate, and possibly after, fewer people will buy solar panels. The state’s solar industry could be in trouble.

Joey Richardson, a project engineer at Gietzen Solar in Buhl, said he thinks Idaho Power wanted to create this period of ambiguity to disincentivize new solar purchases.

“I think they’re pretty much killing the solar industry until they figure out what the new program is going to be,” Richardson said. “It was a big win for Idaho Power and a huge loss for companies like mine.”

Idaho Power: Today’s rates penalize nonsolar customers

Idaho Power compensates people for the electricity they produce with solar panels but don’t use. Say a farmer has solar panels that she uses to power some of her irrigation pumping needs. If she’s irrigating her fields on a sunny day, her solar panels offset the cost of running electricity-hungry pumps. That saves her money in the long run.

But there’s another benefit to having solar panels.

Say it’s a sunny day in winter when the farmer doesn’t need to run any heavy equipment. In that scenario, she can send the electricity she doesn’t need back to the grid, and Idaho Power will give her credits for that energy. So some of the time, she’s saving on her energy costs because Idaho Power is reducing her bill.

Right now, the utility credits the farmer at the retail rate — the electricity she makes is worth the same amount as the electricity she buys.

But the utility wants to change that, to pay her less for her electricity, because it says the system isn’t fair.

Idaho Power says that as more people use solar, consumer rates go up for people who do not use solar panels. More people producing their own electricity means fewer electricity buyers. But the utility has fixed costs — such as maintenance and infrastructure needs — that don’t drop just because it loses business.

Jordan Rodriguez, an Idaho Power communications specialist, said people who don’t have solar panels are subsidizing those who do, because those fixed costs are being spread across fewer people. Those cost-shifts grow as more people buy panels, Rodriguez said, so the company needs to compensate solar panel owners less.

Decreasing solar incentives

In its request to the PUC, Idaho Power asked for two changes.

The more important of the two has to do with changing solar power credit rates. Here’s what’s going to happen as a result of the PUC’s decision: Any farmer, industrial operation or large commercial business that applies for solar panels after Dec. 1 of this year will, at some unknown date, no longer be compensated at the retail rate for their produced, but unused, electricity.

In other words, solar panels are going to be worth less.

People who already have panels — or applied for them before Dec. 1 — will be grandfathered and credited at the retail rate for the next 25 years. Idaho Power asked for a 10-year grandfathering window, but the PUC called that time frame unfair and tacked on an extra 15 years.

Richardson said the problem isn’t so much that Idaho Power will change the rate, although he wants the new rate to be fair. He said he knows that compensating people at the retail rate is a thing of the past — Idaho Power is simply following the leads of other states in that regard.

The current uncertainty is the problem. The PUC could have ruled that Idaho Power has to grandfather new solar panel owners until it settles on a new rate. Instead, the grandfathering period has ended, leaving a period of uncertainty until Idaho Power brings a new number before the PUC.

Richardson noted that it’s going to be nearly impossible to sell a farmer on solar panels until the ambiguity ends and new rates are established. Farmers need to know the numbers before they make a big investment.

“I think probably 99% of people are going to say, ‘No, I can’t invest millions of dollars if four years down the road the value of my exported energy is going to be different,’” Richardson said.

Residential solar panel sales fall

The PUC granted Idaho Power permission in 2019 to study a similar rate change for residential and small commercial panel owners. The same ambiguity there led to fewer people buying panels.

For example, in 2019, Gietzen Solar sold 35 residential solar systems. In 2020, it sold 13. Richardson said some of that was due to COVID-19, but most was because of the ambiguity, which cost him at least two dozen sales.

And a homeowner might be willing to invest in solar panels even if it takes an extra decade or more to pay them off. Farmers and other bigger operations have to pay a lot more attention to their nearer-term bottom lines. Electric costs can sometimes make up a full third of some farmers’ expenses. Richardson said an average irrigation solar setup uses 30 times the amount of electricity as a typical home.

Gietzen Solar relies on Magic Valley farmers and larger operations. They make up about 75% of Gietzen’s business, especially lately. Idaho solar has been growing exponentially. At the end of 2019 irrigation solar had 2.47 megawatts of capacity. By the end of May that was up to 16.4 megawatts.

Gietzen was able to get a bunch of projects in before the Dec. 1 deadline. Richardson said they might have enough work from those grandfathered projects to keep them going a while. But if there isn’t a new rate program in place when those are done, he said the company will have to rethink its entire business plan to stay afloat.

Idaho Power: Consumer-generated electricity is expensive

Idaho Power plans to completely shift away from fossil fuels by 2045. To do that, the company needs to invest in more clean energy, predominantly solar and wind. For instance, within the next few years the utility will start buying electricity from a 120-megawatt solar farm coming near Rogerson.

If Idaho Power needs to find new, green electricity sources, it would seem beneficial to have more people install solar panels. But Rodriguez said the electricity it gets from consumer-generators is expensive.

The Jackpot solar farm will sell Idaho Power energy at well below the retail rate — less than 2.2 cents per kilowatt-hour — Rodriguez said.

Electricity prices fluctuate, but that’s roughly one-fourth to one-fifth of the retail rate.

Pro-solar groups told the Times-News that Idaho Power’s cost shift claims are either false or exaggerated. But the utility has some electricity users on its side.

Lynn Tominaga of the Idaho Irrigation Pumpers Association said that his group isn’t “super enthusiastic about solar right now.”

Irrigators use about 12% of Idaho Power’s electricity, Tominaga said, so they also pay 12% of Idaho Power’s fixed costs.

More farmers using solar increases costs for farmers without solar, Tominaga said. But at the same time, more solar-powered irrigation decreases the amount of electricity farmers use, so in theory that should lower the 12% figure.

If Idaho Power adjusted that fixed cost percentage every year, then more farmers using solar would lower everyone’s fixed cost rates, not raise them. But the utility hasn’t adjusted that fixed rate in a decade, Tominaga said.

Sierra Club rejects subsidy argument

Idaho Sierra Club Director Lisa Young said she doesn’t buy Idaho Power’s argument that Idahoans without solar panels subsidize those who have them.

“From our perspective, the data shows that that’s not true,” she said.

Young also said she doesn’t agree with Idaho Power’s assertion that customer-generated electricity isn’t worth the retail rate. And she noted that solar irrigation capacity is only 0.7% of Idaho Power’s current system load, so even if the electricity weren’t worth the retail rate it still seems like the utility’s response to agriculture solar is harsh.

Idaho Power will have to conduct a study to guide its request for a new solar compensation rate. The PUC will then make a decision based on the results of that study.

“When the data analysis is done, we believe that it will show that the value of the energy that’s provided back to the grid is being adequately represented and that there’s no additional cost on other customers,” Young said, “in fact there are benefits.”

Idaho Conservation League Energy Associate Ben Otto said this move is a big blow to Gem State solar power.

“We were excited to see Idaho farmers and businesses investing in their own facilities and investing in their own clean energy,” Otto said. “And now it’s going to be much harder for them to (do that).”

This story was originally published December 29, 2020 at 4:00 AM.