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Support Local, Community-based Solutions

“There are solutions all over the world that are worker and community owned, whether it’s energy, food, or any economic endeavor you could imagine. I want to see that here.”
– A Seat At The Table participant

What does this mean, and why is it important?

A thriving, local, clean energy economy – one where power flows from the bottom up – can produce good local jobs, lower and more stable energy costs, more individual choices and opportunities to be self-reliant, and less money leaving the community.

This is the vision most Kentuckians described when asked what a bright energy future looks like. We want to use less energy overall, and generate more of what we do use from local sources. We want successful worker-owned cooperatives to provide energy efficiency and renewable energy services in our communities. We want access to community solar farms and local revolving loan funds for energy efficiency. And we want more local people to get hired or be able to start their own clean energy businesses, especially young folks, displaced coal workers, and other disadvantaged workers.

A dramatic restructuring of our energy economy is underway in Kentucky and across the country. But it’s not inevitable that these changes will lead us in the direction of our shared vision. We face critical choices. And at every step there are powerful forces pushing hard in the other direction.

Right now, for example, many utilities and energy companies are making a big push for laws and rates designed to protect their interests and profits in this time of change. Utilities in Kentucky lobbied hard for a bill that would have brought our homegrown solar industry to a screeching halt by imposing new fees and restrictions on rooftop solar. (Fortunately that bill did not pass in the 2017 General Assembly.) Simultaneously, some are pushing for new rates designed with a high, flat monthly fee, a feature that makes it hard, if not impossible, for customers to save money on their energy bills by investing in efficiency or renewables.

Elected officials who stand up for consumer choice and a fair, local, clean energy economy will find strong public support for those positions, support that crosses traditional partisan and ideological lines. Most Kentuckians don’t want to be beholden to an electric utility. We want solutions that help us cut our electric bills, create local jobs, and breathe easier. And more and more of us want to be an active part of shaping Kentucky’s energy transition, from the bottom up.

Empower Kentucky Recommendations

  1. At least 1% of electric sales should come from distributed solar generation by 2030.

    To meet this requirement, utilities would purchase distributed renewable energy credits or offer other incentives to encourage Kentuckians to install at least 610 MW of distributed solar capacity by 2030, up from less than 20 MW today. That would be about five times more solar capacity than is currently allowed under the net-metering law, so Kentucky would also need to lift that arbitrary cap.
  2. Remove unfair barriers to distributed renewable energy. This includes:
    1. Allow power purchase agreements for distributed renewable energy systems. Kentucky is among just four states that bans power purchase agreements, 15 states have adopted laws that expressly authorize and regulate these agreements. PPA’s are contracts between individuals or companies who install renewable energy systems and homes, businesses, or schools who buy the energy. Kentucky’s restriction stems from the law that gives utilities a legal monopoly to provide power in their service territory. Georgia recently passed a law making an exception to allow power purchase agreements for residential solar.
    2. Allow virtual net-metering. Virtual net-metering allows an owner of a renewable energy system to assign credit from one meter to one or several other meters. This would let a farmer transfer credit from solar panels installed on their barn roof to their house account. And it would allow credits from energy produced by solar panels on a reclaimed mine site or apartment complex to be shared by multiple customers living nearby.
    3. Raise the limit on the size of net-metered systems from 30 kW to 2,000 kW (2 MW), and remove the cap on total amount of net-metered renewable energy in Kentucky.
    4. Get started immediately by approving a 5-year pilot project to accelerate rooftop solar for Kentucky’s public sector. Kentucky could adopt a policy similar to a law passed recently in Virginia. It allows churches, schools, nonprofits and public agencies to install net-metered systems up to 500 kW and use power purchase agreements for renewable energy on their property. Just a five-year pilot project would help ensure that important community institutions are able to benefit from generous federal tax credits for renewable energy, which start to decline in 2019 and disappear altogether in 2023.
    5. Exempt solar and wind energy systems used to supply energy to taxable property from being assessed for purpose of property tax for 20 years.
    6. Develop a rigorous and transparent method for assessing the full range of benefits and costs of distributed renewable generation, before making any changes to the credit net-metering customers receive for energy provided to the grid. Across the country and in Kentucky, many utilities are seeking to undo the one-for-one credit provided by net-metering policies. They argue that net-metering customers don’t pay the full costs of the energy services they receive, and advocate higher fees or reduced credits to those customers. However, when state public service commissions and many other analysts have looked closely at these issues, it becomes clear that rooftop solar provides many benefits, as well as costs, to utilities and non-participating customers. Any process to set a “value of solar” in Kentucky needs to include the full range of costs and benefits and use a rigorous and transparent method to arrive at a fair determination.
  3. Write new rules to allow independently owned community solar farms and encourage their growth.

    Community solar refers to any solar project whose benefits – including electricity, net-metering credits, or return on investment – are shared by more than one participant. Community solar is a way for people to “go solar,” whether or not their own rooftop is a good site for panels. Community solar offers a way for renters to benefit from solar generation. It also allows households or businesses to lease any number of panels that best fits their energy needs and budget.

    In Kentucky, the only community solar projects now permissible are ones owned by utilities themselves. But other states have adopted policies that allow and encourage independently owned community solar farms, which may be owned by towns, nonprofits, private companies, or group of investors. These community solar farms often provide cost savings to participating customers, and can help build local wealth and assets.

    According to a 2016 study by Deloitte, a small set of state policies are responsible for the rapid growth of true community solar projects, especially virtual net-metering and community solar mandates. Virtual net-metering policies allow net-metering credits from renewable energy produced at one location to be assigned to one or more other meters. Community solar mandates require utilities to accept and administer independently owned community solar projects under a defined set of rules, which vary state to state.

    For example, the rules set forth in Colorado’s Solar Garden Act specify: The law applies only to investor-owned utilities, renewable energy credits from community solar gardens count towards the utility’s renewable energy standard, solar gardens must be 2 MW or smaller, there must be at least 10 subscribers, each subscription must be at least 1 kilowatt (with an exception for low-income customers), subscriptions cannot supply more than 120% of the average annual consumption of each subscriber’s account, subscribers must live with the same county or an adjacent county to the community solar array, and the project must provide at least 5% of panels to low-income customers.

    Imagine what could be possible if Kentucky allowed widespread community solar development. Neighbors in eastern Kentucky could pool their resources to install a solar project on strip-mined land above their homes. Together they could share net-metering credits, renewable energy credits (RECs), and the federal Investment Tax Credit for renewable energy projects. An affordable housing developer could install a solar project to benefit multiple apartments or several single-family homes in a neighborhood.

    Those types of outcomes aren’t yet possible in Kentucky under current policies, but several utilities in the state have recently developed modified community solar projects of their own. Customers of Berea Municipal Utility and East Kentucky Power Cooperative can purchase a long-term lease for one or more panels by paying a one-time per-panel fee. The leases last for 20 years and may be sold or transferred to another customer account within the same service territory. Participating customers receive a credit on their bills for the power generated by their panels. LG&E and KU’s customers, on the other hand, may become “solar subscribers” by paying a $40 one-time fee per panel, plus a monthly subscription fee. In return they receive a credit on their bills for solar power generated from their share of the utility’s solar array. LG&E and KU’s subscribers are not allowed to bank credits if their consumption is less than their solar generation, and the value of the credits they receive isn’t comparable to traditional net-metering.

    These utility-sponsored solar offerings can be seen as a positive development, if the goal is to offer additional ways for Kentuckians to get some or all of their power from solar generation. But depending on their design, they may fall short on other important criteria, like ensuring fairness and equity or building local wealth. Each program varies widely in terms of how much customers pay, how they are credited, and whether they ever come out ahead financially. None of the utility programs has provisions for low-income participation. And, except for Berea’s program, these utility-sponsored solar projects do not offer the same credit for energy generated as traditional net-metering.

    Kentucky should open our doors to true community solar by adopting virtual net-metering and establishing a community solar mandate. These measures would help spur innovation and investment, expand access to low-cost and low-risk energy options, and bring the benefits of solar to many low-income communities.

  4. Ensure community solar farms in Kentucky benefit low-income customers.

    As part of a thoughtful solar policy, Kentucky should require community solar developers, including utilities, to set aside at least 5% of all leases or subscriptions for low-income customers. Project developers could partner with community organizations and agencies and offer subsidies to qualifying customers. In addition, state government should incentivize community solar projects that significantly exceed the required share of low-income participation.

  5. Forgive debt owed to the federal government by Kentucky’s rural electric cooperatives on coal plants retired between 2018 and 2032, up to $1 billion, for every new dollar invested in energy efficiency and clean renewables.

    Kentucky’s co-ops are highly indebted to the U.S. Rural Utility Service (RUS) for loans they received over many years to build a fleet of coal-burning power plants. As a result of those investment decisions, which were encouraged and supported by federal policies at the time, our co-ops and the communities they serve face steep financial challenges.

    The Rural Utility Service should invest in a just transition for our rural co-ops and communities by agreeing to cancel or restructure debt owed on retiring coal plants in return for investments made in energy efficiency and renewables. This approach could inject up to $1 billion in upgrades to housing, public buildings, small businesses, farms, and industries across rural Kentucky. It could generate good local jobs and valuable energy savings throughout the region. And it would help our rural co-ops and communities face a changing energy landscape from a position of strength and resilience.

  6. Support and incentivize rural electric cooperatives and municipally owned electric utilities to expand high-quality on-bill financing programs for efficiency and renewable energy.

    As mentioned elsewhere in this report, a number of Kentucky’s rural electric cooperatives pioneered an innovative and powerful approach to residential energy efficiency upgrades, called How$mart. This program pays the upfront costs for residential energy efficiency retrofits. Those investments are paid back over time on customers’ bills, using a portion of the energy savings.

    This model is now being put to work by co-ops in North Carolina and Arkansas, and it is picking up steam in Tennessee. However, progress scaling up the program here in Kentucky has been slow. To help these programs expand statewide, state government should become an active partner working with our rural electric co-ops and key stakeholders. Support could include grants and incentives, research and analysis, plus coordination with workforce development and job training programs, affordable housing providers, contractors, energy service providers and other stakeholders.

    Kentucky should also assist and encourage our 30 municipally-owned electric utilities to offer their own high-quality, on-bill energy programs. At this time, Benham$aves is the only municipal program in Kentucky. They and other municipals across the state need resources and technical assistance to do a financial analysis, raise low-cost capital, and design and administer effective programs. The Kentucky Department for Local Government and Kentucky Energy and Environment Cabinet should partner with Kentucky Municipal Utility Association, nonprofit energy service providers like MACED, and individual municipal power boards to develop model business plans, offer customized and coordinated technical assistance, and provide a range of financial incentives.

  7.  Local governments should lead by example to advance a just transition to a local clean energy economy.
    1. Set and meet local renewable energy and energy efficiency goals for all public buildings by 2032.
    2. Develop, track and support community-wide goals and plans for energy conservation and renewable generation across all sectors of the local economy.
    3. Offer local incentives for residents and businesses who do energy retrofits or install renewable energy systems.
    4. Establish and invest in a local Affordable Housing Trust Fund to leverage and support greater investments in energy efficient affordable housing.
    5. Offer low-cost financing for local clean energy projects by opting into a program called Energy Property Assessment District, or EPAD. Louisville is among the cities already offering this option. In Kentucky, EPAD financing covers the upfront costs of many energy efficiency upgrades, renewable energy systems, or water conservation measures installed on commercial, industrial or agricultural properties or on multi-family apartments. The investment is paid back over time on the property’s annual tax bill, and the obligation transfers to the next owner if the property is sold.
    6. Require energy information to be disclosed before property is leased, rented or sold. Many cities and states currently require energy disclosure and benchmarking for commercial properties and multi-family units. Maine asks all residential property owners to fill out a disclosure form describing the type of heating and cooling systems used, type of insulation, average energy use and other basic information.
    7. Strengthen and enforce local building code requirements related to energy efficiency, and offer technical assistance, support and accountability to help local builders and property owners comply.
  8. Schools, colleges and universities should also lead the way.
    1. Adopt campus sustainability goals, including goals for reducing energy consumption and increasing the share of electric power from renewable energy. Four colleges and universities in Kentucky (Berea, Centre, EKU, University of Louisville) have already made such commitments public by signing onto a national program. In 2016, after years of student organizing, the University of Kentucky announced its own version of a campus climate commitment, including a pledge to reduce greenhouse gas emissions by 25% by 2025 from 2010 levels.
    2. Offer high-quality education about energy, climate, and sustainability issues across all levels of curriculum. This includes engaging students from elementary school to engineering school (and every level in between) in analyzing information, designing and building projects, and collaborating to solve real world problems.
    3. Create student-led revolving green funds to support on-campus energy conservation and renewable energy projects. Students at Centre College created a model program in Danville in 2016.
    4. Significantly expand the range of educational and job training programs offered by our vocational schools, community colleges and universities to give Kentuckians many pathways to good careers in the booming clean energy economy.
    5. Require all new school buildings, including K-12, to maximize energy efficiency and, to the greatest extent possible, to be net-zero. This means new K-12 buildings should generate as much energy as they use in a year from on-site renewable energy systems.

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