New Study Shows Net Metering Is Financial Benefit, Not Burden, to Ratepayers

Adam Browning, Vote Solar
January 16, 2013 | 13 Comments

For years, we've been making the case that in addition to the environmental benefits, solar also adds value to the grid. How much value? This week, we released a commissioned report to look at both the costs and benefits of net metering in California.

The study was done by Tom Beach of Crossborder Energy, who used actual data from 10,000 solar systems and analytic models from the CPUC. The report found that when California reaches its current net metering cap of 5% of non-coincident peak load (at about 5.2 GW of solar), the benefits of net-metered projects will exceed the costs by about $92 million annually, across the three large investor-owned utility territories in the state. That’s a great deal for ratepayers, and good news for the planet.

Take a look. Here it is, in all its wonky glory (along with a snazzy summary fact sheet): Evaluating the Benefits and Costs of Net Energy Metering in California, Crossborder Energy, January 2013

If you want to learn more, we are hosting a webinar today, Wednesday, to discuss the methodology and results. Register here (we’ll also post a recording after it is done).

We are releasing this report during a time when we are seeing increasing pushback from utilities around customer-owned solar. It’s our hope that by doing so, we can contribute to a fact-based discussion on the value of solar to the state.

A couple of other thoughts on the subject:

First, we note that investor-owned utilities in the state are given a monopoly in return for serving the public good. Every utility in the state is making a profit off that monopoly. Yet, despite progress, not a single one has a procurement plan sufficient to deal with climate change. In this context, we believe that if a customer wants to use their own money to install a 100% renewable power system, utilities should be doing all they can to help, not hinder.

We’d also like to note that utilities have fought every other way for an owner of a rooftop solar system to get fair value for the power that it generates. Feed-in tariffs? Fought bitterly. How about payment for any excess generation from net metered systems? In 2009, the CA legislature passed a law (AB 920 — pdf) requiring utilities to pay “just and reasonable compensation for the value of net surplus electricity” from net metered systems that produce more than the owners load over a year. Utilities’ idea of ‘just and reasonable’? According to them, it’s day ahead market prices for brown power. We fought it, but they won — net surplus generation gets compensated at around 4 cents per kWh. For emission-free, climate-change-fighting, on-peak power delivered inside of distribution networks, right at load. That doesn’t seem like fair value to us.

So not only are the utilities attacking net metering, but they have also systematically closed all other avenues. Some call net metering ‘rough justice.’ We say rough justice is better than no justice at all.

This article was originally published on the Vote Solar Blog and was republished with permission.

Lead image: Electric meter dials via Shutterstock

13 Comments

Tim Dolan
January 20, 2013

The utilities around here aren't anti-solar. They love solar as long as THEY own the solar and not the homeowner or business.

Ian Diamond
January 19, 2013

Not all utilities are anti-solar. For example, ConEdison is actually investing in, and owning and operating, solar generating facilities. These solar facilities include not just utility-scale but also distributed generation working directly with customers to provide to provide solar generated electricity. So far, ConEdison has invested more than $400M in solar with more projects being constructed and developed.

Ian Diamond
Senior Solar Developer
ConEdison Solutions.

Tim Dolan
January 18, 2013

Almost missed it, I would think that having small distributed solar arrays would to some extent actual lower the peak capacity needed for the transformers. mostly they need to be sized for night-time base load with some hot cloudy day peak capacity, but likely not for the hot clear day very high capacity.

Perhaps some kind of switching ability (which I suspect already exists) to switch larger transformers completely off based on weather and only use those which you need for a particular load. The transformers may still have to be in existence for assurance, but you shouldn't need to operate them when you don't need them, reducing load and maintenance costs on the overall system.

So Distributed Small Array Solar Generation, should overall reduce maintenance costs for utilities.

I am also under the impression that until about 30% total saturation, it will continue to reduce maintenance and infrastructure costs. After 30% saturation it may start increasing infrastructure costs, but maintenance should still be reduced.

Tim Dolan
January 18, 2013

Don't suggest a consumption tax to anyone from the legislature in Virginia, there is a tax on more things then I can think of. They may occasionally lower them, but they never go away.

You don't pay consumption tax on water from your own well, fire wood from your own trees, or food from your own garden, you shouldn't have to pay it for electricity from your own array.

Meanwhile, they already collect taxes on the line fee (or connection fee) and it is around 15%. Since I would like them to convert to an energy assurance instead of energy supply. I am happy with the taxes staying put on the the line/connection fee. The line fee I expect to eventually go up over time if we convert to energy assurance and I am okay with that to a reasonable extent.

I also paid sales taxes when I got my system, something the utilities generally don't have to do.

Gerry Wootton
January 18, 2013

Re longwatcher's comments.

DG has two direct cost impacts on the LDU. The obvious one is the provision and maintenance of infrastructure (poles and wires). In a central system, the LDU price share is somewhere around 1/9th of the electricity bill but since DG only utilizes a fraction of LDU capacity, the value attributed to use of the infrastructure would be perhaps 5% of the retail price. The second less obvious technical impact, particularly in North America, is the plethora of relatively small local distribution transformers which are sized for peak demand and, because cost is the main selection criterion, are less efficient when lightly loaded; consequently, when a local generator takes up much of the local load, additional power supplied by the utility experiences substantially greater losses in the transformer which are not completely offset by reduced feeder line losses.

The study highlights one utility which charges $29 per month merely to handle the additional billing effort associated with net metering - now we know that's usury. Data from smart meters is communicated electronically and billing is managed by a computer. Even for ordinary consumers, billing charges should have gone down substantially with the advent of smart meters since meter readers are no longer employed and no one has to transcribe consumption data(didn't happen in my neighbor hood). This is however, a convenient way for utilities to create a tariff barrier against DG.

Don't forget government's piece of the pie either(utilities aren't the only ones who profit from the electricity supply). Governments derive revenue from the sale of electricity. While DG exports are exposed to taxation, self consumption is not. LDUs may be required to meter total DG production and collect the 'appropriate' consumption taxes on self consumption for which they can legitimately charge a small fee. Depending on jurisdiction this can include state, county and/or municipal taxes.

Tim Dolan
January 18, 2013

While I believe utilities paying the base rate for electrical gerated by solar is unfair since solar significantly cuts down on peak costs. The value is also not the full peak cost either. But there are also savings on grid maintenance from small distributed systems reducing the demand needed to be carried over the grid. In the end it probably needs to be more then retail rate to customer, but not peak rate. Needs to be somewhere in between.

The problem (at least here in Virginia, is prying the data needed from the utilities on all of the secondary costs and benefits. I think we do need to turn the utilities into a energy assurance system, instead of a power generation system. To do that we need ALL the data to be available.

ANONYMOUS
January 17, 2013

pl give the details of net metering system is it wireless /Ethernet
system used

Gerry Wootton
January 17, 2013

The downside to these studies is that they only consider costs, not profits. For example, transmission and distribution losses effectively multiply up the cost of electricity from a remote source but then additional costs include the cost of providing the infrastructure and operating it plus the profits of the providers. These are all costs passed on to the consumer. Local generation has none of these costs except for a very minor local distribution cost. Regulators act to reward utilities for whatever level of inefficiency in T&D that they have plus an assurance of profit in a structure where even losses attract margin. If these costs were factored in, the picture shifts more dramatically.

The study focuses on the impact of TOU rate structures but less so on peak hourly market electricity pricing. Utilities pay much above the retail rate for electricity on occasion; this all gets blenderized in a an average cost number but the fact is that even a small lowering of peak demand would cause a substantial drop in the average wholesale cost of electricity in hourly markets. One would think that would be good but not for the producer that is on occasion able to charge a usurious price for that last increment of supply. Note the entire organizational principle is to create a constrained supply which justifies charging high prices in periods of peak demand. Prices paid for electricity during periods of apparent scarcity of supply clearly have nothing to do with the cost of production.

An important point in the study is the use of peakers which operate for less than 40% of the year and then only 50% of the time in order to meet peak seasonal demand - an investment with an inefficient return given an effective capacity factor of ~15%. This inefficiency is of course passed on to the consumer in the form of higher prices. DG solar has exactly the right profile to offset the need for this capacity.

Thomas M
January 17, 2013

I think the title says it all, except replace "raterpayers" with "utilities"....

Gerry Wootton
January 17, 2013

Focus on cost - how much does it cost the economy for lost productivity due to brown outs, black outs and demand curtailments? That's just a starter but, for those who live in some service areas, a fact of life. Selling equipment into high-value manufacturing inevitably requires integration of substantial ride-out capacity which increases local manufacturer's costs.

Utilities argue that net metering costs other consumers money -- they buy excess energy at 4 cents and sell it on at 16 cents and still they're not happy. It's more about maintaining the monopoly than economics. The real issue is that self-consumption deprives them of sales at TOU pricing and works against a carefully crafted constraint of supply which is used to justify high peak pricing. Paying for excess generation only further encourages this undesirable customer behavior. The only way that this hurts end users is if the utilities are allowed a guaranteed gross profit by their regulators.

Solar doesn't need a cap. It's self limiting with peak generation well synchronized with demand. A cap goes against an open market but then that's the point. Allowing individuals to achieve a modicum of energy independence or even to compete for production capacity goes against the utility's God given right to be their sole supplier of an essential commodity. Allowing individuals to profit by investing in their own means of production is a blasphemous abomination to the system.

Maximilian Breckbill
January 17, 2013

Well said, Adam. Looking forward to reviewing the report.

Looking at the US solar incentive system from a European perspective, would most of you agree that the primary reason for not adopting a robust FIT system is this profit motive by utilities?

DUNCAN JIM
January 17, 2013

It's not just IOUs fighting to retain monopolistic powers, cooperatives are just as guilty if not more so. Most coops are exempt from many of the regulations that IOUs are subject to. Their profit motive is just as powerful but coops have less oversight than even the for-profits.
There is no way to change rules for coops except thru legislation and, as we've learned here in Texas, the coops have powerful and well funded lobby in the state house.
While coops have technically decoupled prices from profits, it's not difficult to manipulate their rates and expenses to create greater 'profits' while staying just inside the letter of the law.
A perfect example is Pedrenales Electric in Central Texas, a coop that went over the line, way over the line.
After several board members were jailed for assorted corruption charges and the entire board was replaced, the status-quo has not changed. The process for generating huge income was still in place and even with fresh blood it's "...meet the new boss, the same as the old boss."
Price decoupling would go a long way in the battle against IOUs in Texas but the political will is not there, Texas' Legislators and the Public Utility Commission have for too long been supported by not only the utilities but natural gas producers and the coal cartel. This session will not be much different.

Jim Duncan
North Texas Renewable Energy Inc

V. Bruce Stenswick
January 17, 2013

Of course the utilities push back on rooftop solar. Their sole goal is to make money for their stockholders. If you put solar on rooftops, it decreases their sales. This can be somewhat compensated for, but only somewhat. Take the extreme case where all of the electrical generation has been off-loaded and the utility only runs the distribution. The regulators, legislature, whoever, is not going to allow them to make the same profit if they are not generating any electricity.