DER, Solar, Storage

The Big Question: What Is the Future of Net-Metering?

Issue 110 and Volume 18.

Stakeholders weigh in on worldwide renewable energy issues

Distributed solar continues to sweep across the globe as home and businesses owners install solar panels and generate their own electricity. Net-metering laws in many regions of the world allow customers to receive payments equal to the retail rate of electricity for any power they generate and send into the grid. As more customers have adopted solar, however, utilities are starting to re-think net-metering policies, with some utility commissions going as far as stopping it altogether. Utilities need to consider how to pay for a grid that is no longer solely powered by centralized generation, while customers, who want more control over their energy use, need to be compensated for investments that they make that benefit the grid. Both sides need to agree on the value of solar and distributed energy resources.

As regulators increasingly rethink net energy metering and net-metering battles are waged across the globe, we ask this month’s big question: What is the Future of Net-Metering?

Bill Gallip, Engineering Manager

There are three issues that need to be addressed: 1) the original intent of net-metering, 2) net-metering at wholesale vs. retail rates, 3) paying to support the grid. I believe that the solar industry is mature enough to survive without net-metering at elevated rates, so if the tariff were reduced to wholesale levels it would be workable.

This still leaves the issue of paying for grid support. There is an argument within the electric vehicle community that they shouldn’t be taxed extra (they are not paying the road tax built into the cost of gas at the pump) because they are saving the environment, but they still want the same access to well maintained roads as conventional vehicles. The same applies to DG and access to the grid. For users without DG capability grid support is levied as a percentage of power used. I believe it is right for power distributers to collect a nominal fee from DG generators for the privilege of pushing power over the same lines that they expect to be there when the DG is not available.

John Massey, Energy Analyst & Trainer

It depends how far into “the future” you want to look, but I’d say eventually:

If home-owners (or other grid-edge users) want to keep connected to the grid, which has to be paid for, there will be a connection fee to pay.

If distributed energy is put into storage and then used when you get home, the financial benefit is that it offsets buying energy at retail prices from the grid. So the meter just doesn’t turn, since you’re not importing energy from outside (though it’ll be a smart meter anyway, so it won’t mechanically “turn” anyway…).

If distributed energy is fed into the grid while you’re out, it is effectively part of the wholesale power supply, so you’ll be paid wholesale market rate if it’s used — which will depend on a smart system determining whether it’s an economic source to use at a particular time, just like any other power plant. It’ll be up to your own smart system to decide whether best to store or to feed in (based on price signals from the grid).

Chris Hoffa, Energy Manager

I believe the answer to this dilemma is not related to the fate of net-metering regulatory laws, but is rooted in the need for a utility business model change. Distributed generation should become part of the utility business model via the utility being engaged in designing, installing, and maintaining systems for residential, commercial, industrial, and community level projects. The old 100 percent central generation and distribution utility model is under pressure and will become a dinosaur soon. Successful utilities must make PV and other distributed generation sources part of their business model. This would seem to relieve the utility and regulatory business pressures caused by the current surge in distributed generation and still allow it to develop.

Riccardo Battisti, Renewable Energy Project Manager

In Italy, exactly for the reasons you explained, there is a clear trend towards high self-consumption rates before choosing photovoltaic. In the residential sector, this can be reached either through home automation or storage. For larger users (commercial or industrial), usually a self-consumption of at least 80 percent can be obtained.

Michael Dim, Renewable Energy Marketing Executive

There are three main drivers behind the prosumer market and net-metering growth, which is expected in the next years. First is the drastic reduction of feed-in tariffs in many countries. Therefore feed-in tariffs started to lose their power as driver of renewable energy growth since 2011 and this process will continue. The second driver is grid parity, which is progressing and by 2025 not only sun-belt countries, but also a lot of countries with less solar irradiation will have grid parity. The third driver is growth of the smart grid concept, market and services, which make it easier to integrate renewable energy systems for net-metering.

Alex Peykov, Reliability and Engineering Manager

California utilities are trying to change the rules regarding net metering as well. They are very unhappy that some of their customers are using the grid during the night but make enough energy during the day to completely offset their electricity bills and want them to pay more for the luxury. I guess the benefits of decentralized grids and more power during peak demand are muted when it’s affecting your ability to generate income from your customers. Net-metering agreements will disappear and home and business owners will soon be on their own. One way to combat this change could be battery banks. I wonder if utilities will attack those next.

Eric Barz, Town Planner

The industry needs to reinvent itself. Maybe it should be our UPS instead of our energy source. I don’t want banks of huge Edison NiFe or deep-cycle AGM batteries in my house that need to be managed and replaced down the road in order to have solar on my roof. The utilities have the wherewithal to build massive batteries and pumped storage using technologies that may not scale down due to hazardous materials, energy density, complex maintenance requirements, permitting, etc. Plus, there will always be customers that cannot adopt distributed energy due to lack of ownership, urban densities, or sheer demand (e.g. smelters, automation, computing power). It’s not always as one-sided as the utilities might have us believe. There are companies out there making a niche living off helping utilities shed peak demand and/or avoid new generation facilities, so I know that solar can be a boon to utilities whose peak summertime demand corresponds with peak solar production.

Ankur Kumar Jha, Solar Start-up Manager

In India net-metering can have a great future. But since the mechanism is new, we are hitting and identifying the hurdles that are operational, financial and regulatory related.

While some countries have provisions of monetary payment for energy fed into the grid, the same cannot be implemented across India. The reason being electricity is a concurrent subject between central and state governments and so we have variation in policies from state to state. But the most important reason is that the financial condition of distribution companies of India is very fragile. A few states are exceptions where these companies are doing really well. Some of them pay for energy fed at Average Power Purchase Cost (APPC) rather than the retail tariff.

This makes sense as rooftop net-meter systems are connected with distribution systems, which eliminates transmission costs and losses. Distribution losses are also reduced and so does the APPC of DISCOMS.

While utility-scale solar projects are competing really well against utilities, the rooftop segment has been lagging. What becomes of the latter depends on what actions are taken to address the issues in the present.

James Kempf, Research Engineer

Clearly, a reorganization in the electric utilities market to reflect the new reality of distributed energy is needed. Unfortunately, the attempt in the early 2000s to disaggregate production and transport failed due to a faulty market design in California, which Enron used to game the system. This market design has been very successful in Germany for fostering renewable energy deployment, together with a preferential feed-in tariff for renewable energy. If utilities became like Internet service providers, where they were just responsible for transport, and generation was required to be in a separate business with a feed-in tariff that reflected the full value of renewables (including services such as VAR stabilization, etc.) net metering could be done away with. But given the failure in the early 2000s, net metering is really the only way for distributed generation funded by property owners to succeed.

Given that, there should be an accounting of the many services, beside just generating electrons, that distributed generation can provide to net. These may require the deployment of advanced inverter technology, but until they are brought into the equation, utilities will view net metering as a loss for them and will continue to fight it.

Russell Higgins, Architect

Net metering is great PR – run it in reverse, zero out your bill! It got people’s attention. Most utilities limit PV production to average building use. This keeps us from making best use of resources embedded in the inverters, cables, labor. This LIMITS our PV power production. As Hawaii shows, the future is paying ALL producers a fair wholesale price (50 percent retail in Hawaii) that represent not just the power, but the synergies of distributed peak energy production (as documented in FERC reports to all our utilities). ◑