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Amid utilities’ resistance, proposal would clear way for financing rooftop solar

Cody Van Ginkel, right, an electrician at Arch Electric, helps Matt Simonson, a lead installer at Arch, with a solar-panel inverter in the electrical room of the Westlawn Gardens management and maintenance building in Milwaukee in February 2019. Draft legislation now before state lawmakers would clarify that so-called third-party leasing arrangements are legal in Wisconsin and require utilities to connect such projects to the electrical grid. (Coburn Dukehart / Wisconsin Watch)

Energy News Network

After years of regulatory uncertainty, a new proposal in Wisconsin would finally clarify that utility customers do not need to own solar equipment to have installed it on their rooftops.

The draft legislation would authorize an arrangement known as third-party solar, in which a company installs panels for a customer and then either leases the panels or sells the power or net-metering credits to the property owner.

The system is allowed in most states and is a popular way to help homeowners and businesses avoid the steep upfront costs of solar. It also allows government and nonprofit entities like schools, churches, and hospitals to make use of tax incentives that they couldn’t otherwise benefit from.

Such arrangements are not explicitly prohibited in Wisconsin, but developers have been reluctant to enter into them since the utility We Energies halted a third-party-owned installation in 2018 for the city of Milwaukee, arguing that the solar developer would be acting as a public utility.

Two Republicans are sponsoring the draft legislation, LRB 1550/1, which would specify third-party ownership is legal and mandate utilities connect such projects to the grid. The proposal is backed by the Wisconsin Conservative Energy Forum. The executive director of the group, Scott Coenen, describes his goal as wanting to provide more options.

“This is really a conservative argument around financing and consumer options, it’s a very pro-consumer bill,” said Coenen. “We shouldn’t be outlawing financing options for someone who wants solar.”

State Sen. Robert Cowles, R-Green Bay, and Rep. Rachael Cabral-Guevara, R-Appleton, began circulating their bill for other sponsors this month. The legislation could be introduced this fall, according to advocates working with the lawmakers.

At least 29 states specifically authorize or allow third-party-owned solar, according to the organization DSIRE. DSIRE’s map lists Wisconsin’s status as “unclear,” but Jim Boullion, RENEW Wisconsin director of government affairs, said the group’s analysis shows Wisconsin is the only state where no type of third-party ownership is possible.

“As far as we can tell, no other state has passed proactive legislation or regulations banning all forms of third-party financing,” he said.

Last summer, two other Republican legislators introduced a bill to clarify that third-party ownership of community-solar installations is legal. That legislation, SB490 and AB527, is now in committee, and is backed by the Wisconsin Conservative Energy Forum, environmental groups and builders and real estate trade groups, and opposed by utilities and energy cooperatives.

Stuck in a gray area

(Map courtesy of the U.S. Energy Administration)

Solar developers and advocates have long sought a clear statement from regulators, legislators or the courts confirming that third-party ownership is legal.

After the city of Milwaukee contracted Iowa-based Eagle Point to build and partly own a 1 megawatt installation on six city buildings, We Energies refused in 2018 to connect the system to the grid and argued in letters that Eagle Point was trying to act as a public utility.

Eagle Point sued We Energies and the state Public Service Commission, demanding it take a stance on the issue, but a circuit court dismissed the case. The PSC has not acted on repeated pleas calling on it to clarify the legality of third-party ownership.

“Everybody is kind of pointing fingers at each other to figure out this issue — ‘we’re not the ones to resolve it, you have to resolve it,’” said Coenen. “Policymakers want to step up and bring some certainty to this market.”

Continuing pushback

In emailed answers to questions, We Energies spokesman Brendan Conway said, “This proposal is bad policy that will shift costs to customers across Wisconsin who can’t afford or choose not to have solar panels. That’s why labor unions, business groups and utilities are all opposing it. This cost shift is not theoretical, it is happening.”

Utilities nationwide have invoked the cost-shift argument to oppose the proliferation of small solar projects, arguing that once solar panels lower a customer’s bills, those customers are not paying their “fair share” to keep up the grid.

When asked whether third-party-ownership would lead to a different kind of “cost-shifting” than the spread of solar more generally, Conway did not directly answer but said, “We do not oppose rooftop solar, we interconnect on average more than one residential or business project a day. At the same time, it’s important to note that cost shifting is happening with those projects. People with rooftop solar do not pay their fair share of the poles, wires and other costs to serve them, yet they benefit from our reliable grid.”

He added that We Energies is not opposed to the leasing of solar panels, saying, “What we do oppose, and what is illegal, is unregulated rooftop solar companies selling power to customers.”

Michael Barnett, project engineer at the architectural and engineering firm HGA, said many of his clients, including health-care organizations and government agencies, would like to obtain solar through third-party ownership but have been unable to do so.

“Because of the ambiguity there is a lot of hesitation to pursue it, and there’s not a lot of people out on the market offering it because they might not be able to complete the project” in the face of utility challenges, he said.

He said the financial incentives aren’t the only benefit of third-party ownership; his clients would also prefer another company manage and maintain the installation.

“These health-care organizations, especially now with COVID, their focus is really on their patients,” Barnett said. “To go out and figure out how to get solar, they’re just too overwhelmed. Project managing a solar installation takes time away from projects related to patient care.”

In 2018, We Energies introduced a program called Solar Now where customers can get monthly payments by letting We Energies place its own panels on their property — an arrangement often referred to as Rent-a-Roof. Solar and consumer advocates said the arrangement denied customers market choice and didn’t let them fully benefit from solar.

“Utilities are basically owning the panel on your roof and getting their monopoly return on that,” said Content. “If you are shopping for a furnace, or shopping for a car, there are lots of lease options available where you can rent instead of own. (Third-party ownership) is just giving customers more optionality for solar.”

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