It may not be as sexy as the oft-celebrated feed-in tariff (FIT), but net metering is the policy that’s driven U.S. solar photovoltaics (PV) growth to date. A simple billing arrangement that lets a customer’s electric meter spin backwards, net metering ensures that participating customers receive credit for electricity their systems generate during daytime hours, when they might not be home. And now, in the largest of those markets – California – this workhorse of the solar policy world is under attack by the state’s investor-owned utilities (IOUs).
While growing numbers of clean energy advocates trot out some impressive statistics about the virtues of FITs, the fact of the matter is that net metering has been the prime driver behind solar PV and small wind installations in the U.S., with 43 states currently offering this policy to help consumers extract the greatest value from on-site power in which they have often invested their own hard earned capital. In essence, net metering allows a customer to barter with their host utility with solar PV installed behind the customer retail meter. To utilities, however, net metering is perceived as a threat, and they have been relying upon an outdated cost analysis as the reason-du-jour to lobby against continued customer access to net metering.
A new study by the consulting firm Crossborder Energy of the alleged “cost shift” impacts of net metering on those customers in California who enjoy net metering with solar PV (and the vast majority of customers that do not have solar PV) sheds some important light on this topic. Interestingly enough, the study focuses on the Pacific Gas & Electric (PG&E) service territory, since that is the region where past studies have indicated that 87% of the net cost shifts occurred. Nevertheless, a recent radical restructuring of PG&E’s rates, which lowers the rates for highest demand customers, radically shrinks the perceived negative impacts of net metering on overall customers. The end result? The study shows a cost shift of $.00064 cents/kWh; in other words, virtually nothing. Furthermore, the study confirms no significant cost shifts in other IOU service territories or for commercial customers.
The Three Solar States
To better understand the dynamics of net metering, the Crossborder Energy study breaks down three scenarios (or “states”) that a customer with on-site renewables enjoying net metering are in during different times of the day:
- The “Retail Customer State.” The sun is down and there is no PV production and all energy flows into the house from the utility grid. The customer is a regular utility customer just like everybody else.
- The “Energy Efficiency State.” The sun is up and there is some PV production, but not enough to serve all instantaneous loads. Here the customer is served both with power from the solar system as well as with power flowing in from the grid. In this state, the renewable distributed energy generation (RDEG) serves as a means to reduce the customer’s load on the grid, in the same fashion as a more efficient air conditioner.
- The “Power Export State.” The sun is high overhead and PV production exceeds the customer’s instantaneous use. In this state, the solar power flows into the house to serve the entire load, with the excess power flowing back out to the neighborhood grid. These exports run the meter backward, providing the solar customer with compensation from the utility for these power exports in the form of bill credits that can be netted against the customer’s imports. In essence, this is a bartering deal.
It is this last “power export” state that is what makes customers smile, but utilities frown.
Another overlooked benefit of net metering is that the output from RDEG reduces the IOU’s retail sales, because the solar customer serves its own load. Since California utilities operate in a market where revenue is decoupled from sales, this drop can be viewed as a benefit to the utility since it reduces the utility’s own obligations under the state’s aggressive Renewable Portfolio Standard (RPS). Given the challenges with siting and building transmission to large scale wind, geothermal and Concentrated Solar Power facilities for utilities such as San Diego Gas & Electric, this is an important point that many microgrid advocates such as General Microgrids have been making.
California boasts the most accommodating net metering policies in the United States for consumers, offering this bartering value proposition to virtually all forms of renewable energy. Along with a new policy of paying behind-the-meter solar PV generators for excess generation beyond annual consumption, the state has also adopted virtual net metering for low-income multi-family residential buildings and complexes. This program allows customers that might not otherwise be able to receive the benefits of on-site generation to join together to install a larger solar PV or other renewable energy system that can serve the group.
To accommodate locations with multiple generation sources — but served through a single point of common coupling — California also allows net metering for what it calls “multiple tariff facilities.” Under multiple facility net metering, billing credits are based on the proportional contribution of the energy production (in terms of kWh) of each net metering-eligible generator over the applicable billing period. This is an important policy for facilitating RDEG aggregation platforms such as microgrids, in the sense that it allows for such aggregation platforms to utilize multiple forms of generation and/or fuel sources in the most cost-effective manner.
As reported previously, 2011 was a banner year for solar PV in California. And the state ended the year on a high note, with a record amount of installations and reservations for behind-the-meter, rooftop systems – RDEG that has been stimulated, in part, by net metering. To pull the plug on this option now would seem foolish, given the updated economics.
Tags: Digital Utility Strategies, Distributed Renewables, Energy Efficient Buildings, Renewable Energy, Smart Grid Practice
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