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Net Metering in 2014: Where the First Battles Will Be Fought

Net metering was one of the solar energy industry's hottest topics in 2013 — and barely a month into 2014 it's promising to stay that way.

The group alleged to be behind last year's failed attempts to repeal several states' renewable portfolio standards, the American Legislative Exchange Council (ALEC), has since pivoted to train its sights on what it sees as a more attractive target: net metering policies and distributed-generation solar "freeriders." The Edison Electric Institute takes a less aggressive but similar stance against net metering, arguing that distributed generation solar users take far more from the grid than they give.

Many utilities still aren't sure how to accommodate solar energy, and are actively pushing back against it both up-front with incentives (which also continue to come under fire) and after the fact with net metering. "Utilities move in a herd," observed Karl Rábago, co-author of a recent report seeking to establish common methodologies for calculating value vs. cost of distributed solar energy. "Net metering is an existential threat to their business model."

Yet they all share some similarity of purpose: they "back-walk" into a solar charge based on broad assessments without specific underlying data to support them, Rábago pointed out. Net metering often is calculated to undercompensate for its true value, so incentives have to be crafted to make up for that in addition to their real purpose of market support. In fact solar advocates have been repeatedly showing that net metering and distributed solar generation (DSG) are actually beneficial to utilities.

In just the past few days we've seen evidence that net metering is still a very hot-button issue in several states. Here's a list of the most recent examples where net metering is back in the spotlight — both good and bad — and where the next debates will emerge.

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North Carolina: Back in the Spotlight

The latest net-metering skirmish occurred this week in North Carolina, with Duke Energy officials publicly urging that current "decade-old" net metering policies be readdressed. At the center of the thrust is a desire to change the rules to pay residential solar homeowners wholesale rates of 5-7 cents/kWh, rather than retail rates of 11 cents/kWh. "Why are we paying more? Eventually customers pick up that tab," said Randy Wheeless, PR manager for Duke Energy. "We think we're paying too much, and we think that needs to change."

Duke is looking at examining its net metering policies "holistically" and how they should be addressed in the future, but claimed there's no timetable on when that's taking place or when any filings will be made with the North Carolina Utilities Commission. With only 1,300 homes in North Carolina with net metering, now is the right time to modernize those policies and regulations, he said. He acknowledged that the company's CEO has been "doing media visits" and addressing the net-metering issue, though the topic has become "out there a little more than we probably anticipated." Last year it was "talked about in general terms, but it seems to be getting more specific now."

Actually the company had already decided to undertake two studies to comprehensively understand net metering and distributed solar generation, according to Rábago: an analysis of their impact to its operations, and then a second study to derive the actual economic costs vs. benefits. This week's public statements from Duke, and no evidence of filing any such reports with the state commission, suggest they're jumping to conclusions about net metering's impact.

Critics immediately began lining up against Duke's net-metering statements, with people literally petitioning outside their offices. One suggested that Duke's position to lower its payment to its solar customers will hurt disadvantaged communities the most, and is curiously at odds with how the utility has raised rates three times in the past three years to cover its existing power generation and infrastructure: "How hypocritical can you be?"

North Carolina is no stranger to solar energy controversy. It was at the front of those aforementioned RPS repeal efforts — including a memorably questionable voting procedure. But the state actually has been among the nation's best solar success stories, runner-up to California for most installations in 2013, according to SolarBuzz, most of that growth in the commercial-scale segment. Duke's regulated entity currently purchases around 300 MW of solar in North Carolina, plus it owns about 10 MW of solar from a pilot program a few years ago. The unregulated portion of the business has about 60 MW in the state which it typically sells to co-ops or other municipal utilities, not Duke Energy.

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Colorado: Separate Treatment

Last summer Xcel filed its compliance plan for the current Renewable Energy Standard (RES) with the Colorado Public Utilities Commission (PUC) in which it proposed changes to slash its net-metering payments, claiming an internal study found that distributed solar customers actually rely on its infrastructure more than non-DSG customers, since they need power at night and they need the grid to take away excess generation not used on-site. That of course set off lots of alarm bells in the industry, and launched Colorado to the forefront of states on the net-metering front lines.

Recognizing the complexity and depth of the net-metering debate, the Colorado Energy Office (CEO) last week proposed to separate net metering into its own docket item, separate from RES compliance, a move applauded by solar advocates. That will not only help everyone more clearly focus on hashing out the best ways to estimate costs vs. benefits of DSG and its impact on cost allocations and rate design, but it also will help the newest Colorado utility commissioner time to get up to speed, pointed out Rábago. (That would be the same new commissioner whose appointment created controversy due to alleged "deep and substantive ties" to ALEC.)

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Arizona: Worries Realized?

Arizona became the face of the net-metering debate last fall during two days of heated hearings from the Arizona Corporation Commission (ACC). Arizona Public Service was lobbying for a giant monthly increase in fees for solar homeowners in its ongoing challenge to the current net-metering structure. Solar advocates pushed back to keep current net-metering rules in place with no extra fees. In the end the ACC essentially split the difference, approving a $0.70/kW fee for solar rooftop owners starting this year, meaning an extra $5-$7 per month for an average residential homeowner. While attempting to compromise with a deal that acknowledged the value of distributed-generation solar, while also trying to address a certain level of cost shift it causes, the ACC essentially didn't really make either side happy, and perpetuated the worry that the state's solar policies weren't as stable anymore.

And those worries may now be coming home to roost. A local report found the number of applications for connecting rooftop solar systems to the grid have plummeted in the first part of January, from 150-200 per week in 2013 to just 41. With an average size of 5.5 kW — smaller than the ~7 kW average residential solar systems of recent years, APS points out — that new fee works out to about $3.85/month in extra charges. Still, any thought that the utility can find ways to take a slice of profit out of an investment like a residential solar array — while fighting to take a lot more — makes it a harder decision to justify.

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Who's Next?

Where are the 2014 net-metering fights heating up? Colorado's Energy Office requested a fast-track response by Jan. 31, so look for a decision to address these docket items in the next few weeks — the longer the wait to figure out 2014 charges and fees, the more costs stack up.

Another battleground is in Georgia: late last year Georgia Power shelved its proposed $22/month tariff on solar homeowners, but likely it will return with another version. Rábago points out that solar energy in Georgia contributes just 0.2 percent of statewide electricity generation.

Other states on the net metering radar:

  • In Virginia, Dominion Power's IRP will be examined in the next few weeks.
  • Arizona will be holding workshops over the next year about net metering, ahead of the next rate case in 2015.
  • Florida and Louisiana likely will heat up their net-metering debates ahead of upcoming gubernatorial elections.

Utilities are already budgeting billions of dollars for demand response programs, which essentially is being funded as a resource, Rábago points out. Then why not treat distributed solar the same way? Evaluate it in an integrated resource plan (IRP) modeled over 30 years, tweak O&M and capital costs and environmental costs based on its values, bring it back to a levelized cost of energy (LCOE) and do an apples-to-apples comparison. "This is where utilities are going wrong," he said. "Treat it as a resource, manage it, make some money — or treat it like the enemy, like the tide and try to sweep it back."

Lead image: Big red button in fire, via Shutterstock

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