Introduction
Arkansas has historically had one of the most consumer-friendly solar policies in the country. Net metering, which allows residents to offset their electricity costs by sending excess power back to the grid, has long been an enticing incentive for everyone across Arkansas looking to install solar panels.
With the introduction of Act 278 in September 2024, however, the structure of net metering has shifted how solar owners benefit from their systems, altering the way credits are applied. For a lot of residents, this means rethinking how they use their solar energy, with a greater emphasis on battery storage and maximizing self-consumption.
How the Distribution and Generation System Worked
The heart of the system was the 1:1 compensation, something that was always factored into solar panel ROI calculations, also known as “retail rate net metering.” For each kilowatt-hour (kWh) of solar energy sent to the electrical grid, you received an equivalent credit of one kWh. In other words, if you produced excess energy during a sunny day, you could use that credit to offset your consumption during the night or on cloudy days.
Key Features of the Previous System
- Retail Rate Compensation: Energy credits were issued at the same retail rate customers paid for electricity.
- Energy “Banking”: Consumers could accumulate excess energy credits indefinitely and use them whenever needed. These credits only expired if the consumer opted to receive payment after 24 months or if there was a change in ownership
- Generous Capacity Limits: The program was also notable for its flexibility regarding capacity limits. Homes could install systems up to 25 kilowatts, while businesses had a generous limit of 300 kW. For larger projects, there was even the possibility of systems between 1 and 20 megawatts, although these faced some additional regulations.
- Meter Aggregation: Solar users could apply credits to multiple meters, making it easier to optimize solar generation across properties. Being able to generate at home and distribute that generation to other addresses made it convenient to maximize the largest roof and save money on inverters.
What Changed With Act 278
The recent changes in net metering ends many of these much-loved benefits. With the new system, only a fraction of exported energy is credited, with up to 80% of excess energy effectively absorbed by fees and as little as 20% leftover as consumer credit.
This dramatic shift makes solar energy’s ROI calculation very different by encouraging consumers to maximize self-consumption. In other words, using energy when it’s generated. Not only that, but Act 278 brings along several other notable changes as well:
Major Changes Under Act 278:
- Lower Compensation for Excess Energy: The value of exported solar energy is now greatly reduced compared to the previous 1:1 model.
- New Credit Limitations: Energy credits no longer roll over indefinitely, reducing the ability to “bank” solar energy for later use.
- Metering Distance Restrictions: Credits can only be applied within a 100-mile radius of the generating system.
- Increased Distribution Fees: Even if multiple meters are fed by the same system, they are still subject to additional charges.
The shorter version of the story is that residents are now more incentivized to store their own excess energy and use it later, rather than sending excess energy to the grid.
Better Understanding Act 278
The driving force behind Act 278 was a debate over “cost-shifting” in Arkansas’ energy market. Utility companies, including Entergy Arkansas and Arkansas Electric Cooperative Corporation, argued that the previous net metering policy resulted in unfair cost distribution.
Their concern was that solar users were receiving credits based on full retail electricity prices, which included not just the energy itself but also transmission, distribution, and maintenance costs. Under the argument that solar customers weren’t contributing their fair share to infrastructure upkeep, the shift toward avoided-cost rate structures was introduced.
While this change benefits utility companies, it significantly impacts the economics of solar installations, making energy storage solutions more attractive than ever.
The Rise of Microgrid and Grid-Reactive Systems
With new net metering limitations in place, homeowners and businesses are increasingly considering microgrid or grid-reactive systems, both solar installation options that include battery storage to store excess energy for later use rather than sending it to the grid at a reduced rate.
Why Battery Storage Is More Viable Than Ever
- Maximized Energy Use: Instead of losing up to 80% of excess energy to fees, stored energy can be used at night or during peak rate periods.
- Greater Energy Independence: A microgrid setup allows users to rely less on the utility company and avoid fluctuating energy costs.
- Protection Against Policy Changes: Future energy regulations could further impact net metering; owning storage ensures full autonomy over energy use.
Key Considerations for Battery Storage:
- Upfront Investment: While batteries add to the initial system cost, they help capture 100% of generated energy instead of losing it to the grid.
- System Sizing: Properly sizing a battery ensures enough stored energy to meet household or business needs during non-generating hours.
- Installation & Maintenance: Choosing high-quality components and professional installation is the only sure way to maximize efficiency and longevity.
Conclusion: Is Solar in Arkansas Still Worth It?
In short: YES. Despite the changes introduced by Act 278, solar energy remains a strong investment, especially when paired with battery storage solutions. While traditional net metering benefits have diminished, grid-reactive systems help homeowners and businesses retain more of their generated energy and save money on their solar investments, albeit in a different manner.
At AEV Solar, we specialize in designing high-performance grid-connected solar and battery systems, ensuring that customers get the most value out of their solar investments. Whether you’re considering solar for your home or business, our team can help you navigate the latest regulations and find the best energy solution to suit your needs and hit your ROI goals.
