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Nevada Solar Net Metering Will Save the Grid $36 Million, Says State Report

Step outside in Las Vegas on any July afternoon, and you can’t help but recognize Nevada’s tremendous solar opportunity. Recent solar price declines coupled with a restructured state incentive program and strong net metering policy mean that the state is now primed to make good on its rooftop solar promise in a big way.

And just like clockwork, cue the utility opposition to customer solar adoption. NV Energy, the biggest utility in the state, wants to raise residential fixed charges in southern Nevada a whopping 50 percent to $15.25 per month. Charges like this create a big disincentive for solar and efficiency measures because they are slapped on customers no matter how much energy they buy from the utility. Invest in a new energy-saving refrigerator? You still pay that $15.25 fee on your utility bill each month. Went solar to reduce your dependence on utility power? Still $15.25.

The fixed charge proposal is just one piece of a multipronged effort by NV Energy to make rooftop solar a bad deal for its customers. The utility is also pushing the Commission to recommend changes to the state’s net metering law, the cornerstone program that gives NV Energy solar customers credit on their utility bills for valuable power they deliver to the grid for use nearby. Like many utilities across the country, NV Energy is now aiming to quell the growth of rooftop solar with rhetoric about the costs of net metering. But a Public Utilities Commission (PUC)-ordered study released last week shows just how unfounded NV Energy’s anti-solar efforts are.

The study, conducted for state regulators by consulting firm Energy and Environmental Economics (E3), found that the grid benefits of rooftop clean energy systems installed through 2016 will exceed the costs by $36 million. Private investment in local solar generation delivers real savings to the grid and other ratepayers. If anything, net metering under-compensates Nevada solar customers for the valuable clean energy they produce.

Additional key takeaways from the study include:

  • For systems installed in 2014 and 2015, the annual grid-specific benefits of net metering flowing to other customers exceed the costs by at least $168 million over the systems’ lifetimes, or 5 cents/kWh of net metered energy generated. That means that even excluding important non-grid benefits like jobs, water savings and cleaner air, net metered customers will pay more than their fair share of grid costs in Nevada going forward. 
  • If savings from avoiding distribution upgrades are included, E3’s estimated net benefit over the systems’ lifetime increases by $130 million. E3’s base case numbers, since they exclude any distribution benefits, are very conservative estimates of grid-specific net benefits.
  • For systems installed in 2016, after Nevada’s  Renewables Portfolio Standard rules have changed and clean DG no longer receives a compliance adder that boosts its value, the grid benefits of net metering to non-participating ratepayers still exceed the costs by $6 million.
  • Of course, local solar delivers tremendous societal benefits beyond the grid. The study quantifies just one of those non-grid benefits to the state — public health costs avoided from fewer harmful air emissions (NOx, Sox, particulate matter and mercury) — but uses an inaccurate proxy for those health benefits, as discussed below.

We appreciate that the PUC took input from a range of stakeholders during the study’s development, and that impacts were calculated from multiple perspectives (net metering participants, non-participants, and society as a whole). But to be clear, this report is not perfect, and it’s important to note a few big problems with E3’s Nevada approach. First, the study chose to include the price of the state’s solar incentive program as a cost. The NV Energy SolarGenerations rebate is of course an entirely separate program with a separate budget approved by the Legislature, and should not be part of a net metering study. Removing this cost would clarify that net metering delivers further net benefits to Nevada.

Second, E3 accounts for both energy consumed onsite and energy exported to the grid in its accounting of grid costs. Just like turning off the lights or buying a new refrigerator to reduce the amount of energy you use, solar that is both produced and used behind the customer’s meter places no burden on the utility system, and should not be part of the cost-benefit equation. E3 couldn’t show just the impacts from exported energy because the utility didn’t provide E3 with the necessary data on hourly load profiles. Correcting this calculation would also increase the benefits side of this net metering cost-benefit study.

Finally, E3’s Nevada study omits almost all the societal benefits of net metering. No study on the impacts of clean distributed generation is complete without taking into account public health benefits from avoided air emissions, job benefits and downstream economic effects, market price impacts, grid security benefits, and water savings. As noted above, E3 built in just one societal benefit — public health savings associated with air emissions (NOx, Sox, particulate matter and mercury), and even there, E3 used NV Energy’s relatively low cost of avoiding such emissions, which is an inaccurate proxy for the value of avoided premature deaths and healthcare cost savings. In addition, E3 mistakenly assumes that due to the state’s Renewables Portfolio Standard (RPS) rules, more rooftop solar means less utility-scale solar. But in fact, Nevada utilities have already largely met the existing RPS, and more customer-installed solar will create additional clean air, water and public health benefits for Nevada. 

Including some number for a public health benefit is better than none, but E3 has left a whole lot out of the equation, especially given that the Nevada Legislature specifically included a requirement that “comprehensive” benefits “to the State of Nevada” be included in the study. Net metering programs are not established simply to perpetuate business-as-usual grid economics. They have specific policy objectives, typically related to job growth, environmental or other social benefits. It’s only right that net metering impact studies also account for these very real benefits wherever feasible.

Those shortfalls aside, the results of this study are a good indicator of what other states could and should expect when evaluating the grid impacts of net metering; namely, that this simple crediting arrangement is a fair way to compensate solar customers for the benefits they deliver to the grid.

As utility attacks on net metering have raged across the country, we’ve argued for objective studies that accurately quantify the full range of costs and benefits that flow between solar customers, non-solar customers and the grid. For more guidance on what makes a good cost-benefit study, be sure to read A REGULATOR’S GUIDEBOOK: Calculating the Benefits and Costs of Distributed Solar Generation from our friends at IREC.

When a utility in any given state argues that the sky is falling because a small percentage of their customers are going solar — in Nevada, rooftop solar generates less than 1 percent of total power demand — we need facts to determine whether or not changing course is warranted. E3’s Nevada study is a great example of how data can dispel the utility hype, showing that net metering provides all Nevada ratepayers with grid savings, in addition to tremendous economic, water conservation and environmental benefits. E3’s analysis makes clear that the PUCN and the Nevada Legislature don’t need to change the state’s successful net metering program, or increase fixed charges for Nevada ratepayers. Instead, what really needs to change is the old-school utility model, which isn’t reflecting utility customers’ growing desire to make the switch to solar. 

Lead image: Nevada sign via Shuttertock

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