When the California Public Utilities Commission’s NEM 3.0 decision went into effect last year and cut solar buyback rates by up to 75%, we predicted that other states would begin to follow suit by instituting similar policies.
Since then, multiple states have had legislation introduced that would similarly reduce solar benefits for homeowners, including Arkansas, Arizona, Hawaii, Idaho, Illinois, North Carolina, Oregon, West Virginia, and Wisconsin. North Carolina has already finalized changes, and Illinois and Arkansas are now set to do the same within the next few months.
Though each state has their own specific policies and rates, the general consensus of these decisions is similar: base solar net metering benefits on the market cost for energy (the cost the utility pays to produce/purchase electricity), rather than the retail cost for energy (how much you, the customer, pays for electricity).
Keep reading to learn about the new legislation in Illinois and Arkansas, how it may affect you, and how to avoid or mitigate the effects on your solar installation.
Illinois:
In Illinois, the utility splits electricity bills into three sections: supply/transmission, delivery, and taxes/fees. Illinois passed a law in 2021 to incentivize customers to shift to solar energy, which allows customers to receive a 1:1 credit on energy after the final bill has been calculated.
However, a significant update is coming at the end of 2024, when this incentive program will end. As of January 1st, 2025, solar credits will only apply to the “supply” section of the bill.
The market cost for energy, which largely determines the “supply” charges on the bill, is typically much lower than the retail rate.
For instance, in California, the average price per kWh is 35 cents (one of the highest in the States), while the average market cost is only around 4 cents.
While Illinois' market and retail rates are not as drastically different, this change could reduce net metering benefits by around 50%.
Grandfathering Clause
Luckily, if you already have solar, your system is grandfathered into the original program. Plus, there’s still time to install solar before these changes take effect.
Systems that have been installed and have received Permission to Operate (PTO) from the utility by December 31, 2024 will be grandfathered into the current 1:1 Net Metering program for 30 years from the original PTO date.
Deadlines and Documentation
Something to note about this deadline in contrast to the California deadline is that customers will need to have their systems fully installed and approved to be grandfathered in, while California customers only had to have an interconnection application submitted.
This means that your project will need to be fully completed to be approved, adding urgency–solar systems typically take a couple months to install at minimum.
To guarantee utility review of your PTO application before December 31, 2024, all necessary documentation, including a Certificate of Completion (COC) and a Witness Test Request (if applicable) must be submitted by 5pm Central Time on December 13, 2024.
This allows the utility enough time to process the application. If there are errors on the application, missing documents, or any other cause for rejection, the paperwork will need to be resubmitted and there is no guarantee that it will be processed on time.
The New Distributed Generation Rebate:
Customers that are not grandfathered in will be eligible for a rebate program called the Distributed Generation Rebate, which continues to incentivize customers to go solar after the new policy goes into effect.
With this incentive, you will receive a rebate of at least $300 per kilowatt of generating capacity if you install a smart inverter.
Illinois law outlines criteria for smart inverters, and many inverter manufacturers are beginning to obtain the necessary certifications to provide customers with options.
This includes our standard inverter provider, Enphase. The IQ8 microinverters we use are compliant with IEEE 1547-2018 (Illinois' main qualifier for smart inverters).
Planning for Future Increases
If you already have a solar system in Illinois, it may be a good idea to ensure that you have enough capacity for your needs.
Additionally, if you’re planning on replacing gas appliances with electric ones, installing a pool, purchasing an EV, or otherwise significantly increasing your energy usage, you may need to expand your system.
It’s important to note that significantly increasing your system size will void your current NEM agreement–if you do this after the deadline, you will not be able to keep your current benefits.
Arkansas:
Arkansas has also updated its solar policies with key changes, including a new “Net Billing” structure.
Under the current program, there is a 1:1 buyback rate for solar customers, and excess energy credits can be “banked” and carried over to the next billing period. Both of these benefits are going away.
Grandfathering Period
Systems installed by September 30, 2024 will be grandfathered into the current Net Metering program until September 30, 2040, or 20 years from the original install (whichever comes first).
Net Billing
Instead of traditional net metering, Arkansas has moved to the same basic structure as the other states who have already introduced changes: Net Billing.
Again, this means that your solar credits will be priced on the cost that the utility pays to generate or purchase energy, not the cost that you pay to the utility for energy.
In Arkansas, the current retail rate for electricity is about 11 cents, and the market rate is about 4-6 cents (according to testimony from utility officials).
You’ll be paying the higher cost for energy from the grid, but you’ll receive credit based on the low price.
No More Banking
While customers can currently bank energy credits to offset electricity used in future payment periods, customers who install after September 30, 2024 will not be able to do this.
System Limits
Under the new legislation, residents will be unable to install systems over 25kW (about 60-65 panels, depending on the wattage).
Businesses will also be limited at 300kW.
Power Purchase Agreements (PPAs)
One benefit of this new policy is that Arkansas will now allow further options to homeowners, in the form of Power Purchase Agreements and leased systems.
Previously, these were not available in Arkansas, but the new law has changed this. Third-party financing options will now be easier to use.
Improving Your Investment Post-Deadline
Even if you miss the necessary deadlines, you can still save by installing a backup or consumption battery.
While they don’t provide backup during an outage like a true backup battery would, consumption batteries cost less and can still store excess energy, reduce grid reliance, and optimize production for time-of-use rate structures.
Learn more about the benefits of consumption and backup batteries here.
Conclusion
Now is the time to act if you want to install a solar system and be grandfathered into your state’s current net metering program.
Updates like these signal a shift in how utility companies handle solar energy. As solar becomes more normalized, benefits and incentives will reduce to maintain utility profit margins.
Installing solar as soon as possible is the best way to avoid upcoming rate increases, take advantage of current net metering programs, and benefit from state and local incentives before they expire. Get started today and secure your solar savings for the future!
