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Black Hills Energy Proposal May Dampen Solar Financial Incentives

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Solar panels on top of parking garage at Mount Rushmore.
Xanterra Travel Collection

Black Hills Energy wants a new tariff that would charge customers with solar panels the true cost of their energy. The utility says people who generate their own electricity cost the rest of their customers more money. 

Some worry the proposal before the Public Utilities Commission will kill incentives to install solar systems. 

Mt. Rushmore National Memorial has some obvious offerings, and one that’s hidden in plain sight. It’s called the Thomas Jefferson solar canopy and features 975 panels that generate electricity equivalent to the average annual consumption of 40 American homes. 

The solar panels are part of a roof over one of the two parking garages at the memorial. In addition to generating power, the coverings protect cars from hail damage that can come when a storm rolls through. 

“It’s protecting the vehicles underneath it and people especially enjoy that about it in the summertime and it provides more shade for the vehicles as well. So, it’s a really popular place to park—under the solar array.” 

That’s Kevin Crosby, the Sustainability Manager for Xanterra Travel Collection. It operates the concessions at Mt. Rushmore. The company collaborated with the park service to install the solar system. The array powers the refrigerators that keep Thomas Jefferson’s famous vanilla ice cream cool.  

“It provides over half of the power to our buildings here at Mt. Rushmore,” Crosby says. “We save—in a typical year—about $40,000 in electricity bills from this solar array,” Crosby says. “So, it definitely has a payback. But, the main justification for it was greenhouse gas reductions.” 

However, a proposal by Black Hills Energy could wipe out the cost savings Xanterra gets from solar.  

The company wants the Public Utility Commission to approve a new tariff on those generating some of their own power.  The tariff would charge those customers market rate for the solar energy they generate. The utility would buy excess energy for about 25 percent less than its market price.  

Marc Eyre is the vice president of operations for Black Hills Energy. He says the utility provider is committed to renewables. 

“This isn’t intended to be an attack on renewables,” Eyre says. “This is really addressing an issue that we’ve started to see and believe it’s in the best interest to keep rates low. Especially for those who are on fixed or low income.” 

Utility companies like Black Hills Energy, which serves eight states, have two primary costs—energy generation and infrastructure costs. The fixed infrastructure costs do not change, even when consumer demand does. 

It’s the cost of energy generation that can change. South Dakota is one of seven states that do not use a billing technique called net metering. That system credits energy creators for the electricity they add to the grid. That practice reduces a utilities cash flow.  

Eyre says the goal of a tariff is not to discourage solar, but to make sure those customers are paying their share of the fixed costs. 

“We have to be able to provide that service to them,” Eyre says. “Even though they are producing, at times—due to the intermittent nature of that service—at times they’re not and they’re calling on our system to provide that service. There’s costs associated with providing that.” 

The logic of that argument is lost to some people.  

“It’s similar to you and your family build a garden.” 

Jared Capp and Rachel Headley live in Spearfish and specialize in sustainable design and construction. They’re one of 84 Black Hills Energy customers in South Dakota that use solar to power their homes. 

“Build the fence and build the raised beds and run the water lines and plant the seeds and then the grocery store is going to charge you for every pound of food that you produce out of your garden,” Capp says. “It makes no sense.” 

The couple owns a company called Cobblestone. They have a net zero commercial office building under construction in Spearfish. If the tariff passes Rachel Headley says the project is in jeopardy. They won’t be able to afford putting solar on the building and won’t meet the sustainability requirements that are part of their permit with the city. 

Jared Cap and Rachel Headley 

“People want to be more environmental,” Headley says “They want to use more renewables and less non-renewables. We have people that want to be more independent from the grid. We saw what happened when the grid failed in Texas. Either they didn’t have power in all the regions all the way up here. We got a notice that said Black Hills Energy had to spend more money just to get power to us and we had consistent power.” 

Much of their neighborhood lost power during a major storm back in 2013. But Cap and Headley helped power their neighbors by lending their generator to power phones and plug in refrigerators. 

Climate change is likely to create even more extreme weather systems as temperatures rise.  

Lee Delange is the Chief Operations Officer for GenPro, a national solar energy equipment supplier headquartered in Piedmont. The company works on projects from utility scale to residential—from the east coast down to Arizona. 

Delange says he understands a utility company’s perspective. But he says corporations looking to move to South Dakota might have some strict renewable energy standards. He says the Public Utility Commission needs to consider what the market wants, even if it’s more renewables at a slightly higher cost. 

“Can we, in some way, partner with the utility, to create a little better scenario than the one proposed that allow people to adopt that system behind the meter as well?” 

South Dakota ranks second to last in the country for solar capacity. Delange worries this proposal could make that ranking even worse. However, he says he’s glad there’s debate on the issue.  

“So that we can have that conversation and discuss as a state—let’s be honest, if this tariff is passed it’s going to set a precedent for other investor owned utilities, as well as coops, that might steer the ship in the wrong direction ultimately. Let’s dial it back a little bit and talk about some reasonable ways that we can approach this.” 

It could take months before the Public Utilities Commission Rules on the tariff proposal.