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Electricity: Can State Regulators Find a Solution to the Net Metering Wars?

by Bob Shively, Enerdynamics President and Lead Instructor

How utilities compensate customers for solar power is becoming one of the most contentious energy issues around the nation.

 

Suppose you decide to install a solar photovoltaic (PV) system on your home. Unless you decide to also put in a big battery system and maybe a backup generator, you will want to remain connected to your utility so that the utility provides power during the night hours, on cloudy days, and other times when your home usage exceeds the output of your PV system. And, during hours when your PV system output exceeds your usage, you will also want to sell power back into the utility distribution system. 

 

 

 

 

The key question for you and the utility is what price you should be paid for solar output. Choices include:

 

  • the retail rate that you pay for power that you buy from the utility
  • the wholesale cost that the utility would otherwise incur to generate or buy the power that would be needed if you didn’t have your solar system
  • some other price that is set based on the “true” value of your output to the utility

 

This chart illustrates a summary of the options:

 

 

 

 

 

In 43 states plus the District of Columbia, net metering is the current policy. But numerous utilities have asked their regulators to look at the issue, and many have suggested either eliminating net metering or continuing it with a significant monthly fixed charge added to solar customers’ bills. 

 

 

 

 

 

As discussed in a recent blog post by the Rocky Mountain Institute titled “Why the Net Energy Metering Debate Misses the Point,” solar advocates tend to support net metering as a means to foster continued growth of rooftop solar and argue that it compensates customers for the benefits solar delivers to the system. Many utilities argue that it allows solar customers to avoid paying for their connection to the grid and contend that utility-scale solar is more cost effective. In states where residential rates are much more expensive than commercial rates, net metering also fosters residential solar development even though development on commercial buildings is often more cost effective.

 

One concept is to move to paying solar customers a price based on the net value of solar (VOS) power.  This would pay for the benefits solar brings to the system less the costs it puts on the system. Many states have initiated proceedings to try to establish the VOS. But this is difficult as there are numerous assumptions input into any calculation, and to be truly accurate, calculations need to take into account the differences in value at different locations on the grid.

 

The State of Maine recently did a VOS study that came up with a rate as high as $0.33/kWh, much higher than the retail rate of $0.13. A group of Maine legislators proposed an alternative to net metering that would create a centralized standard buyer agency, which would contract to buy the output of roof-top solar. Solar from commercial and industrial customers would be paid an amount set in a competitive reverse auction where customers proposing solar projects would bid against each other, while residential projects would be paid through a declining block methodology.[1]

 

The standard buyer would then resell the solar power in the competitive wholesale marketplace (selling all products including capacity, energy, renewable credits, etc.) and, by tracking the revenues received, will over time discover the true value of the solar power. 

 

Whether Maine’s proposition or some other idea will prove acceptable to the various stakeholders around the U.S. remains to be seen. But, if nothing else, Maine is providing an innovative idea to try to break the deadlock.


 

Footnotes:

 

[1] For more details, see Maine lawmakers proposed groundbreaking way out of net metering wars, available at: http://www.utilitydive.com/news/maine-lawmakers-propose-groundbreaking-way-out-of-net-metering-wars/400074/

 

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