Residential solar has demonstrated unprecedented growth over the past several years, driven in part by falling equipment prices, rising customer awareness, and supportive public policy. One of those key policies has been net-metering, which provides customers in more than 40 states credit for any excess solar generation not consumed at the customer’s home.
Despite years of encouraging the expansion of solar, many utilities now argue that customers with solar do not pay their fair share and create a cost shift to customers without solar. However, this argument does not address the true issue at hand, which is how does the grid need to change to address the emergence of distributed energy resource (DER) technologies, such as solar and storage?
The current utility regulatory structure was built for a one-way flow of power from large, centralized power plants to end consumers. The original net-metering policies were also established underneath this paradigm, and it is natural that compensation for exported generation will also evolve as the power industry shifts from a one-way communication platform to a two-way communication approach that delivers higher value to the grid and consumers.
As solar and DER adoption increases, compensation for generation and grid services must evolve from its early days as a simple billing mechanism for the one-way flow of power from large, centralized power plants to a more sophisticated platform connecting distributed generation and consumers to the grid.
To accomplish this goal, the grid must be modernized to allow for efficient and effective two-way communications by enabling data to be regularly provided to both utilities and customers. With this architecture in place, utilities can send clear price signals to consumers on the true cost to deliver power, and customers can make more informed decision about their choice to either generate their own power or purchase power from their utility.
One example of where this discussion is already underway is in New York, where the New York Public Service Commission is leading the Reforming the Energy Vision (REV) initiative. The REV initiative is designed to encourage clean energy innovation while improving consumer choice and affordability. To calculate the value of an energy source, New York is looking at the following features:
- the equivalent kilowatt-hour that the local wholesale generator can earn;
- the value of the energy power to the distribution system; and
- the external societal value.
As the role of utilities and the grid changes to allow greater consumer choice and participation in energy markets, utilities and the grid must be enabled through policy and rate reform to integrate technology that can quantify the true value of power, regardless of source, based upon the time and location power is provided to the grid. Until that time, retail net-metering, more than any other policy, provides “rough justice” for the value of solar exported to the grid from DERs, and provides the fairest platform for consumer choice available.