When Mom Said ‘Life Isn’t Fair,’ She Meant Net Metering

by Jennifer Van Burkleo, associate editor

“Life isn’t always fair,” our mothers told us. Did they predict net metering, where fairness is debatable, meters spin backward and public utility commissions (PUCs) make the calls in consumer vs. utility? Our mothers also told us it’s seldom acceptable to change the rules midgame. 

Well, seldom has arrived. As of July, 43 states and the District of Columbia have adopted some form of net metering law or regulation for small wind, photovoltaic (PV) technologies, small combined heat and power or other distributed technologies, said Rick Tempchin, executive director of retail energy services at the Edison Electric Institute (EEI).

“Net metering encourages distributed generation (DG) by allowing utility customers to offset their electricity consumption by generating their own electricity,” Tempchin said. “Self-generating customers are typically credited at the utility’s full retail rate for the power they produce that offsets their consumption of electricity normally delivered by the utility.”

Spin Cycles

During conventional electricity consumption, a customer’s meter spins forward at a rate relating to the amount of electricity consumed from the grid. When a net metering customer with on-site generation such as solar panels uses no electricity, the excess electricity generated on-site feeds back into the grid. The meter spins backward, and the customer usually is credited at his or her utility’s full retail rate, Tempchin said. The customer becomes a “net” electricity seller to the utility.

Under California law, the payback for electricity sold back to the grid must equal the cost of electricity consumption from the grid. Put bluntly, California electricity customers cannot profit from net metering, said David Rubin, director of service analysis at Pacific Gas and Electric Co (PG&E).

“Say it is Tuesday, and you are at the movies using little energy,” Rubin said. “The meter spins backward from the solar unit back to the grid, giving credit at the retail rate. Credits are applied to your bill. When you get to the end of your 12-month period, you take a look at all the charges and credits. If your charges are higher than your credits, you pay that amount; if you have a negative number, your bill is zeroed out.”

Net Meter Leader

In the U.S., California is the net metering groundbreaker. The legislature decides whether utilities pay retail or wholesale price. Wholesale prices fluctuate, but retail rates change only when the California Public Utilities Commission (CPUC) changes them, Rubin said.

The CPUC on May 26 voted 5-0 to double the state’s net metering cap of peak demand from 2.4 GW to 5.2 GW.

“They said we’re now going to look at the sum of each individual’s highest demand because of diversity of load,” Rubin said. “CPUC decided that was the right decision. We (PG&E) filed a rehearing along with a couple of organizations, like SCE (Southern California Edison). We think the commission made an error on how this was interpreted.”

Rubin said PG&E supported increasing the cap in 1995 to jump-start the U.S. solar industry.

“We supported that, but it has served its purpose,” he said. “Now it is a matter of deciding what is fair for the solar customers and regular customers that’s the challenge because only solar customers benefit.”

Spincentives

Net metering encourages personal solar generation, but only customers participating in net metering receive credits and avoid paying for whatever grid services they use, EEI’s Tempchin said.

“By not paying their fair share of these charges, net metering customers would make it necessary for their utility to raise rates to make up the shortfall, which would shift the burden of these costs onto customers without net metering,” he said.

PG&E’s Rubin said a discrepancy exists between net metering participants and the rest of utility customers.

“Solar customers are typically wealthier, which isn’t surprising,” Rubin said. “Even with third-party financing-they offer different types of leasing-you still need to be an owner of your home to participate, and you also need to be in your home for a long enough period of time and have a good credit score. That is true across the board. It’s a different dynamic when only the wealthier can take advantage of this.”

The future of net metering depends on many factors, including PUCs, customers and utilities. SCE President Ron Litzinger puts incentives on that list.

“Incentives are required to advance technology, but I struggle with the fact that it will take a substantially different grid to make the technology work,” he said. “It will be expensive, so everyone, including the net metering customer, should pay for that grid. Costly subsidies are not the answer to paying for DG infrastructure.”

Litzinger said the biggest impact is economics, and California has some of the highest rates.

“To meet 2020 goals, SCE sees rates increasing 40 to 50 percent, which is not sustainable,” he said.

PG&E’s Rubin said consumers sometimes misinterpret a utility’s steps to reconcile incentives as anti-solar.

“That can’t be further from the truth,” Rubin said. “We have 4,500 units of solar sold to us under different renewable portfolio standards. We want to see the rooftop market grow. We are mindful of the impact on the other customers. We don’t want to shift additional costs to those customers. We need to dial back the incentives.”

Recent Changes for Utilities

Over on the Atlantic side, Dominion Virginia Power has proposed a new rate incentive to encourage customers to sell electricity back to the grid by installing solar panels. Dominion wants to pay 15 cents per kilowatt-hour over the next five years to small commercial and residential customers who generate solar electricity. Although Dominion already has a net metering program, its leaders hope the Virginia State Corporation Commission permits the change during a September hearing. The idea is to lease rooftops of public facilities and businesses up to 30 MW. If approved, 6,000 homes could be powered by solar during peak daylight hours, according to the utility.

Just up the coast, New Jersey Today reported that the Garden State is the second-largest solar energy producer in the U.S. with more than 10,000 solar industry workers. Recently a bill was proposed that would allow state entities to take part in net metering. The article “Legislature Passes Bill to Aid NJ’s Solar Energy Market” states that “a solar installation can only produce for the building it is attached to” and by aggregating net metering, “school districts, counties, municipalities and state entities can receive credits for this overage of energy produced by its solar panels to pay for energy used by non-connected buildings under their jurisdiction.” The proposal is awaiting governor approval.

As far as wind power, the Department of Energy (DOE) recently reported that North Dakota can supply 36 percent of the electricity for 48 states with wind. The DOE also noted the cost of wind energy has declined 85 percent during the past 20 years.

How U.S. Compares

Other countries are toying with net metering, and some have proposals.

Feed-in tariffs (FITs) are being accepted in Spain, Germany and Ontario, Canada, for example. FITs have two meters; net metering is more basic and uses only one meter. Net metering spins a meter in reverse when a customer generates more energy than is consumed; FITs measure the total amount of electricity used. FIT has a defined price; net metering does not. PG&E’s Rubin suggested a hybrid of the two would be more beneficial.

Ontario permits net metering up to 500 kW, and credits carry over to the following month for 12 months. According to the British Columbia Utilities Commission, customers can receive 8.16 cents per kilowatt-hour when they sell electricity back to the grid.

Denmark has net metering for privately owned PV, according to the International Energy Agency Photovoltaic Power System Programme.

And in France, net metering has been proposed by àƒâ€°lectricitàƒ© de France, the world’s second-largest electric utility. According to the utility, energy sold back to the grid would be paid out at a higher rate than that charged to customers for consumption.

Midgame Rule Changes

Net metering depends on many factors, but there must be change, Litzinger said.

“If we don’t move a balanced way, everything will collapse,” he said.

EEI’s Tempchin offered a couple of those seldom acceptable midgame rule changes.

“It may be possible to credit the net meterer with capacity value in accordance with the historical coincidence between such excess energy and the regional system peak,” Tempchin said. “Alternatively, it may be appropriate to encourage RTO (regional transmission organization) policies that would let on-site generators make more of their capacity available on a firm, callable basis by RTOs, and let any capacity payments be earned from those arrangements. Again, honoring the market structure in which these regulatory policies play out is important to their long-term effectiveness.”

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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