Published on April 2nd, 2014 | by Peter Allen19
VOSTs Don’t FIT With Our Energy Future
April 2nd, 2014 by Peter Allen
After suffering nine stinging defeats over the past year and a half, big utilities seem to have learned that trying to stop the rooftop solar revolution by killing net energy metering is like standing in the way of a runaway freight train. That’s because everyone from legislators to lobbyists to consumers can clearly see the fairness and positive impact of these policies. And since net metering makes too much sense, utilities are looking for new and exciting ways to curtail rooftop solar and maintain their exorbitant profit margins.
It started with feed-in tariffs (or FITs). On the surface they seem like a practical sidecar to net metering, but in reality they impose taxes on consumers and allow utilities to maintain their monopolies. Now a new spectre has crested the horizon, this one with an even more obtuse acronym: VOSTs (or, Value Of Solar Tariffs). At their core, VOSTs operate just like FITs, with the same hidden tax problems for consumers. In short, what’s called a “tariff” is really a “tax,” and when it comes to taxes, a good accountant will tell you there’s always a catch. Here’s the catch…
Under net metering, rooftop solar owners generally get retail credit on their power bills for the excess energy they generate and send back to the grid. That means they get to use the power their panels produce, but if there is a surplus, they send that back to the grid and get fair credit for it. The utility sells it to homes and businesses nearby. With VOSTs and FITs, the utility buys all of the power generated by rooftop solar owners, then sells energy back to the same consumers in a separate transaction. The homeowners don’t actually get to use their solar power directly. According to a memo recently filed by law firm Skadden, Arps, Slate, Meagher & Flom, this creates an additional income tax burden on the consumer. It prevents them from receiving the federal investment tax credit for producing their own energy, plus the payments they receive for energy from the utility are taxable.
Unfortunately, the Minnesota Public Utilities Commission recently approved a VOST as an alternative to net metering. This means Minnesota consumers utililizing the VOST would’t actually get to use their homegrown energy as it’s produced, plus they have the tax burden to worry about, and utilities maintain control.
Although this VOST must be at least the retail rate for the first three years of the program, it will be recalculated every year for new customers after that point. This creates uncertainty in the rooftop solar market. While it may create a boom with solar growth in the first three years, we can expect a bust once the tariff is recalculated — at the discretion of the utilities, of course. These same utilities, by the way, are responsible for providing the data used in VOST recalculations. Talk about vertical integration!
In the final analysis, both FITs and VOSTs represent a dangerous overreach by utilities, allowing them to extend their arms behind the meter and disrupt the ever-expanding distributed energy market. But even if solar taxes eventually go the way of the dodo, you can expect Big Energy to devise a new policy acronym with new hidden costs for consumers. It’s the MO for their monopoly industry, and it won’t stop until we all stand up and say N-O.
Image: Rooftop solar technician via Shutterstock
Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.