IREC studies net metering in competitive electricity markets

Latham, N.Y., December 17, 2010 — The Interstate Renewable Energy Council released a new report, “The Intersection of Net Metering and Retail Choice,” which provides an overview of policy, practice and issues, detailing the methodologies states use to accomplish “net metering” in competitive electricity markets.

Net metering is a policy that enables an electric customer’s meter to spin backwards and is considered one of the most important, cost-effective policies to help owners of solar photovoltaic and other renewable systems recoup their investment.

As of this month, 43 states plus the District of Columbia have enacted or adopted net metering policies, including most states with electricity competition.

In regulated states, net metering is a fairly straightforward process, involving a transaction between a utility and customer. In complex competitive markets, however, retail choice providers and distribution utilities must communicate in order to provide net metering for their customers.

Furthermore, every state has a different set of laws and regulations that make it difficult for retail choice companies working in multiple states at once.

As a result, restructured states have yet to see a significant number of retail choice customers with net metered systems, despite the fact that several of these states have some of the best net metering policies in the country. This report aims to provide clarification on how net metering works in these complex environments.

Carrie Cullen Hitt, President of the Solar Alliance, commented, “The administration of net metering can vary by market. This study provides a much needed in-depth comparison of the differences across competitive and regulated electricity markets.”

Justin Barnes and Laurel Varnado of the North Carolina Solar Center produced this report for IREC, relying on input from state regulatory commissioners and industry professionals.

“It seems to us that this discussion has flown largely under the radar in many states, but we expect it to become increasingly important in the future as the number of both net metering customers and competitive supply customers increases,” said Justin Barnes, who works for the Database of State Incentives for Renewables & Efficiency (DSIRE). “We hope this report can serve as a reference for stakeholders of all types, and that it helps promote a productive dialogue to the ultimate benefit of all those concerned.”

For this report, the authors studied different facets of crediting mechanisms, and defined five different theoretical models describing different ways competitive suppliers and utilities provide net metering options for their customers. They then provided case studies to illustrate the models.

“Net metering is a really effective policy that has been widely implemented for over a decade,” said Laurel Varnado, one of the report’s authors. “Now that we can look back at the experience and policy options of restructured states, we start to form a general picture of the methods used to accomplish net metering, as well as some of the challenges that go along with these choices.”

Following a brief discussion of unresolved policy concerns, Barnes and Varnado propose initial recommendations based on their research. “Our intent is to define the current methods and set the stage for further discussion that may later inform best practices around this issue,” said Varnado.

IREC has been a pioneer in interconnection and net metering issues since 1997, when fewer than 20 U.S. states had implemented net metering, and the concepts of distributed generation and clean energy were neither widely recognized nor publicly appreciated. To help states keep pace with these opportunities, IREC first developed its model rules in 2003 in an effort to capture best practices in state net metering policies.

The IREC is a non-profit organization accelerating the use of renewable energy since 1982. IREC’ s programs and policies lead to easier, more affordable connection to the utility grid; fair credit for renewable energy produced; best practices for states, municipalities, utilities and industry; and quality assessment for the growing green workforce through the credentialing of trainers and training programs.

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