Net Metering PV Systems Can Lead to Big Savings

Researchers at the Department of Energy’s Lawrence Berkeley National Laboratory (LBNL) released a new study on the bill savings received by residential customers with solar photovoltaic (PV) power systems, under the net metering rates currently offered by California’s two largest electric utilities.

The report focuses on California and shows that the bill savings per kilowatt-hour (kWh) generated by a PV system varies by a factor of four to five for residential customers of Pacific Gas & Electric (PG&E) within the study sample, and by a factor two to three for Southern California Edison (SCE) residential customers in the sample.

“One purpose of this study,” according to report co-author Ryan Wiser with Berkeley Lab’s Environmental Energy Technologies Division, “is to help policymakers and others that seek to support the development of residential distributed PV in California understand the bill savings benefits of PV under net metering, and how those savings compare to other possible compensation mechanisms.” The study acknowledges that this is only one issue that policymakers must consider in developing policies related to distributed PV, and thus for example the report does not attempt to provide a comprehensive cost-effectiveness evaluation of net metering policies or to evaluate the cost of net metering to utility ratepayers who do not install PV.

The study is based on a sample of over 200 residential customers located in the service territories of PG&E and SCE. Depending on the size of the PV system, the median PG&E customer in the sample is found to receive bill savings of US $0.19 to $0.25 per kWh generated by the PV system, and the median SCE customers receives bill savings of $0.19 to $0.24 per kWh. However, many customers receive bill savings that are substantially lower or higher than these figures.

According to the report, variation in the value of bill savings across customers is primarily the result of the particular residential retail electricity rate structures offered by the two utilities.

“The residential rates currently offered by PG&E and SCE have inclining usage tiers whereby customers that consume more energy each month pay a higher price. Consequently, high-usage residential customers receive relatively high-value bill savings from net metered PV systems,” said report co-author Galen Barbose.

This is particularly true for PG&E customers; among the highest-usage PG&E customers in the study’s sample, the bill saving value ranges from $0.31 to $0.49 per kWh.  The inclining price structure of PG&E’s and SCE’s residential electricity tariffs is much more pronounced than residential rates offered by other utilities.

The degree of variation in bill savings value observed among the customers included in Berkeley Lab’s analysis is therefore not necessarily representative of other utilities and states, but it nonetheless does demonstrate the sensitivity of bill savings from net metered PV to the underlying rate structure.

The study also compares the bill savings that residential customers with PV receive under net metering to the bill savings that they might receive under several hypothetical alternative compensation mechanisms.  One of the alternatives examined is a feed-in tariff under which all PV generation is compensated at prices based on California’s Market Price Referent (MPR) – a price established by the California Public Utilities Commission that is intended to represent the long-run market price of electricity. The value of bill savings received under such an MPR-based feed-in tariff ranges from $0.12 to $0.13 per kWh for most customers.

Depending on the PV system size, this equates to a 40 to 54 percent reduction in bill savings relative to net metering for the median PG&E customer in the study sample, and a 32 to 45 percent reduction for the median SCE customer. For high-usage customers, who receive the greatest bill savings under net metering, the reduction in bill savings under the MPR-based feed-in tariff would be substantially greater than these median values.

Another potential alternative compensation mechanism to net metering would allow customers to offset up to 100 percent of their consumption within each hour, but any hourly excess PV generation would be compensated at MPR-based prices, rather than being credited against consumption in other hours.

Under this payment system, customers are found to generally experience a reduction in bill savings relative to net metering, but the difference is significantly less than under the full MPR-based feed-in tariff. Depending on PV system size, the median PG&E customer would see a 6 to 12 percent reduction in bill savings, and the median SCE customer would see a 6 to 10 percent reduction.

Click here to download the LBNL report The Impact of Rate Design and Net Metering on the Bill Savings from Distributed PV for Residential Customers in California.

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