Will Indiana’s Solar Market Fall Further in 2024?

Indiana’s solar market witnessed a stark decline in 2023, a trend stirring strong concerns among solar contractors. This article explores the factors contributing to the decline and provides insights into what the future holds for solar contractors in Indiana, especially in the residential sector.

Indiana Solar’s 2023 Decline: A Closer Look

The Senate Enrolled Act (SEA) 309 brought a shift from net metering to the excess distributed generation (EDG) tariff in July 2022, triggering a difficult period for Indiana’s solar market. It led to a dramatic fall in solar installations, from 7.4 MW in the July 2021-June 2022 period to just 2.4 MW in the subsequent year​​.

The Citizens Action Coalition (CAC) of Indiana has reported a 67% decrease in distributed solar installations. Their Program Director, Ben Inskeep, explained the effects of SEA 309 in September, when he appeared on the Local Energy Rules Podcast:

“First, it reduced the compensation rate, so it phased out net metering and replaced it with what we call an excess distributed generation credit rate or EDG tariff. And (what) that compensation rate specified in the statute is you look back at the previous year’s wholesale market prices applicable to the utility. So you look at the LMP prices in MISO, for instance, and you calculate what that average is, and then you give that as the compensation rate plus a 25% bonus tacked on – kind of waving your hand of, well, we know there’s some other benefits that solar provides above just whatever the wholesale market price is, but we aren’t going to bother to figure out what the right number is, so let’s just tack on 25%.

The second thing it did was it created this very unpredictable credit rate. So that rate is not a long-term rate. It changes every single year. Every single year. Utilities look back, what were the wholesale prices last year? They do this calculation. That’s the new rate going forward for one year.

So as somebody who’s maybe wanting to install solar, you really have no idea what the payback period is going to be. You don’t even know what you’re going to get paid next year for any extra energy you put on the grid. 

And then the most consequential aspect of this law is the third point, and that is excess distributed generation ultimately became determined to be measured on an instantaneous basis, and this was something that wasn’t clear in the statute. It was kind of a vague wording, and so this took going all the way to the Indiana Supreme Court to adjudicate and it had a really profound impact. So the statute says when you’re figuring out what is excess distributed generation, what is the amount that you’re going to be crediting this wholesale rate plus an extra 25%? You need to look at the difference between the kilowatt hours you send to the grid and the kilowatt hours you take off the grid, right? You do this calculation. Sounds an awful lot like net metering, right? It sounds like you’re taking the difference between what you’re giving to the utility and what you’re taking off the grid. And so if you calculate that over a monthly period, that would be very similar to net metering. 

Utilities interpreted it as taking the difference not over the monthly period, but rather thousands of times per second. So on an instantaneous basis if you will. So if you’re exporting anything to the grid that’s getting credited this very low credit rate, if you’re taking energy off the grid, they charge you this very high retail rate. So at first the IURC upheld the utilities version. We and a number of other groups took that to court and the appeals court actually agreed with us and overturned the IURCs decision, the Indiana Utility Regulatory Commission, which is our public service commission in the state of Indiana. But then that was challenged at the Supreme Court who ultimately upheld the utilities interpretation. 

So long story short is now customers are getting paid a much lower credit rate for any extra energy they generate and share with their neighbors, and that credit rate is extremely unpredictable changes every year. So it’s a pretty decent rate right now because we had super high wholesale prices last year when we had the invasion of Russia into Ukraine and energy markets spiked across the country, but then prices are low now in the wholesale power market, so we’re expecting that credit rate to crater again next year and then move unpredictably year to year after that.”

Prior to the changes brought by SEA 309, Indiana solar customers were compensated for surplus generation in a way that made solar investments financially viable. However, the new EDG tariff, coupled with instantaneous netting, drastically reduced the compensation customers would receive​.

The decline coincided with general inflation strain, including rising electricity prices. Indiana’s average monthly residential electricity bill has more than doubled since 2004, from $70 to nearly $150. With a proposed 23% increase by the Indiana-Michigan Power Company (I&M), this trend may intensify further, only growing the energy cost burden for Indiana residents.

The Future of Indiana’s Solar Market in 2024

Looking ahead to 2024, the Indiana solar market faces continued challenges. While there’s a projected 10% growth in the U.S. solar industry, Indiana’s market dynamics might differ due to local policy and economic factors​​. Large-scale solar projects, like those that led Indiana to rank third in the nation for new installations in Q3 2023, offer a ray of hope. However, these developments may not sufficiently compensate for the decline in the residential sector​​.

On a broader scale, the U.S. solar industry is showing signs of robust growth, with a 35% year-over-year increase in new electric generating capacity as of Q3 2023. However, factors like elevated interest rates and policy changes in states like Indiana are expected to drive further decline in the residential solar segment.

With the residential sector being particularly affected, solar installation businesses face uncertain times ahead. Contractors may need to adapt their strategies to navigate a market that is less incentivized and more cost-sensitive.

Securing Income with a Solar Lead Provider

Indiana contractors seeking stability are encouraged to reach out to reputable solar lead generators like Grid Freedom.

With our assistance, you’ll be able to lock down profitable sales opportunities with customers who have previously been screened and selected based on their readiness to go solar. We deliver informed, financially-capable customers, set up with their first appointment to discuss installation. Our process ensures you get the shortcut you need to close all the sales you need, in spite of the market’s downturn.

Grid Freedom is trusted as the best solar leads company for contractors who want simplified but certain customer connections. We require no contracts, subscriptions, or extra fees, and allow you to source leads according to your evolving needs.

Learn More About Our Pre-Booked Solar Sales Opportunities