“It’s frustrating,” said one member whose project is no longer feasible, but co-op leaders say old rate unfairly subsidized solar customers.

A northern Michigan electric cooperative approved new distributed solar rules Monday that represent the latest setback for customers who generate their own power in the state.

Cherryland Electric Cooperative, which serves 35,000 members in six counties, lowered its buy-all-sell-all rate for solar to 6.5 cents per kilowatt-hour. It was previously 10 cents per kWh.

“It’s frustrating,” said Gene Garthe, who had been pursuing solar power for his 200-acre, family-owned fruit farm near Traverse City. Instead, he ended up declining a U.S. Department of Agriculture grant that would have helped pay for the project. “Suddenly the economics don’t work.”

Michigan utility regulators approved a new policy this spring to replace net metering for investor-owned utilities, but the debate over how to fairly compensate customers for surplus solar power continues to play out in parts of the state not covered by the rules.

In Grawn, Michigan, where the Cherryland cooperative board met Monday, directors voted to lower the rate and cap projects in the program at 100 kW, changes its general manager said were needed to protect other customers.

But they’re frustrating to members like Garthe, who is also involved with a group called Northport Energy that’s pushing for the nearby Leelanau Township to be powered by 100 percent renewables and serve as a model for other small municipalities. According to group members, their efforts are being stymied by the electric co-op due to compensation rates that would make solar projects uneconomic.

“Our goal is to be 100 percent renewable energy with massive increases in solar,” said Steve Smiley, an advocate with Northport Energy. “We need incentives and programs to do that, not programs that eliminate it.”

‘Reduce the subsidy’

Cherryland was the first utility in Michigan to launch a community solar program. It had a net metering program in place for about a decade, but General Manager Tony Anderson said it has been gradually moving away from that model.

Nearly two years ago, Cherryland reduced its net metering rate to the avoided cost of power “to incentivize people to size to their usage,” he said. Cherryland’s net metering program reimburses members for excess power at 5.6 cents per kWh.

Cherryland and its power supplier, Wolverine Power Supply Cooperative, also started offering a buy-all-sell-all program, in which members purchase their electric needs upfront and sell back their generation to the utility. Initially the rate was 10 cents per kWh. This past spring, the 10 MW program cap quickly filled up due to interest from developers. Cherryland comprises about a quarter of the 10 MW program through Wolverine.

Roughly 50 to 60 members participate in net metering or buy-all-sell-all, Anderson said. The strong interest at 10 cents per kWh led Wolverine and Cherryland to scale back the rates.

“We wanted to keep offering buy-all-sell-all but wanted to reduce the subsidy as well,” Anderson said, referring to the costs incurred by all members to buy that power at 10 cents. “We feel utility-scale solar and wind is a better deal and we need to reduce the subsidy.”

Anderson did not have an estimate on what the current subsidy is by other members. Critics say there is no subsidy due to the grid benefits of distributed generation, and because Cherryland’s retail rates for residential customers is more than 10 cents per kWh.

‘A little frustrated’

Dan Worth, clean energy policy specialist with the Traverse City-based Groundwork Center for Resilient Communities, said Cherryland’s latest buy-all-sell-all plan may discourage local projects.

“We’re a little frustrated,” he said. “I think saying it kills solar is probably too strong, but this discourages a lot of projects, companies and homeowners who were interested in doing solar themselves.”

“There’s nobody interested anymore” in installing their own projects, said Tom Gallery, owner of Leelanau Solar LLC. Gallery is also involved with Northport Energy and has been a Cherryland member for 40 years.

Anderson disagrees that the utility is being unfair to members seeking to install solar, and said “time will tell” on whether it stifles projects.

“The fact remains that in the last 18 months we put 11.5 MW of solar into the Wolverine system that we didn’t have before,” Anderson said. “We’re choosing to celebrate that and not panic about what comes in the future. We’re just trying to run a good business and keep rates affordable.”

Anderson said his role is to balance the interests of members who want to install solar with the rest of the rate base.

“Going forward, we will always need to have a solar program,” he said. “But it has to be fair to every member. We’re trying to find that fairness.”

For those seeking the benefits of solar, though, the fairness appears to have shifted.

“It’s been our goal to be as self-sufficient as possible,” Garthe said of the family farm and Northport Energy. “It doesn’t look like we’re getting a whole lot of support from the electric company.”