Net metering battle heats up as utilities fear “silent subsidy”

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email

Net metering is becoming an increasingly divisive issue in the US, with a dividing line as distinct as night and day. Solar companies and their customers count their sunshine dollars earned or saved – utilities count their revenue losses.

For residents who have either had the money to install systems 1MW or smaller, or have been able to make the most of assistance through schemes such as the wildly successful California Solar Initiative, reversing the metre when systems produce excess power, has been a disappointment.

Utilities will credit the customer's next bill at retail rate. But what utilities won't do is pay customers the retail value for the energy exported to the grid.

Forty-three states have net metering policies but they vary dramatically between states. Wyoming's net metering limit is a paltry 25kW, Arizona has no limit while the California Public Utilities Commission has capped net meters to 5% of utility's peak demand – the state is at around 2.8% of this cap.

The CPUC last year rejected a general rate case brought by San Diego Gas & Electric General, which sought to scrap the cap. Transmission, distribution and generation still have to be paid for as the customer base shrinks, rates can only go one way, goes the utility argument.

Although the utilities lost this battle in January, they will likely continue to wage a quieter war on this “silent subsidy”.

Kerinia Cusick, senior director of government affairs at SunEdison, recently told the PV America West conference in San Jose, that Virginia introduced legislation to allow Dominion Virginia Power to collect a standby charge from customers with systems larger than 10kW – even though the utility only has one customer in that category.

“Virginia is a case study in what not to do with public policy,” she said. “Utility that brought the case in Virginia said net metering is having a big impact on us financially. But they had one customer in that class.”

Misinformation generated by utilities and amplified by media reports of the “rich soaking up solar subsidies” and soaring utility bills as those without solar shoulder the rate burden of those freeing themselves from the grid.

“The press can't be relied upon to get something as controversial as net metering right,” said Cusick. “But there is a lot of confusion out there and a lot of misdirection about messaging that's been happening on this topic.

“The real issue is that the revenue is going down. All the rest of this is distraction. This can be a problem for utilities so maybe we should be talking about that issue rather than some of the other issues.”

Solar installations should be viewed from a similar perspective to energy efficiency measures, she said. “Is it really that different for me to get solar panels than it is to get rid of that second 1970s vintage freezer that is sitting in my garage. How different is that from a policy perspective? Is my neighbour subsidising me if I get rid of my refrigerator? No probably not. So how is this different from solar?

“This is a very big and scary argument to have. The sky isn't falling in. There's this impression that there are huge subsidies being handed out.”

Net energy metering is a subsidy but it really is an issue of rate design, said David Rubin a customer energy solutions manager at Pacific Gas & Electric.

California's largest utility company has around 63,000 net metered customers, with around 30% of rooftop systems across the US, he said.

PG&E's solar segment under its commitment to the 33% Renewable Portfolio Standard would increase from 1% last year, to 51% by 2020.

Rates that become increasingly onerous for heavy electricity users had pushed customers to turn to solar and cut their bills by around 70% by supporting half their energy use with PV, he said.

“The time is now to reconsider our rate structure for residential customers. Customers who install solar generally use around 1,000kWh a month or more whereas the average PG&E customer overall uses about 550kWh a month.

“A year ago, these upper tiers were hovering between 40c-50c/kWh and we worked with our regulators to bring them down but not before some of our service territory got close to a red alert rate revolt level. Customers were paying more for their electricity than they were for their mortgage, for example in Bakersfield during a hot July.

“Virtually all of the cost increases that are experienced by customers putting in various solar systems are being pushed on to these higher tiers. These costs will continue to go up and will either be a signal to customers to go solar and those that can't go solar will feel trapped paying higher rates and [we'll] start to have a lot of dissent among our customer base.

“We need to set the stage for continued growth in solar in what we believe will be a sustainable way which is to not have solar customers that are being subsidised by the rest of our customers and producing unsustainable rates for those customers.”

Steve Weissman, at Berkeley Law, University of California, said PG&E was taking “somewhat of a moderate position compared with what's going on with other utilities further south”.

“SDG&E [suggested] that the utilities not should sit back and wait until the 5% is reached, it wants to change rates now in a way that would reduce fairly dramatically the financial incentive to net metering customers.”

But Weissman said to understand the equities of the system it was essential to weigh up the costs and benefits of solar programmes like net metering.

“It's a very simple argument to make and certainly easy to believe that wealthy customers with more money are going to put these systems in. If you're going to try to encourage DG and you're going to have a net metering programme to do it that's fundamentally good news because if you relied on customers who can't afford to install solar systems you're going to have to give them a lot more money or you'll have to pay for the whole system.

“Nothing [in the legislation] says anything about giving wealthy customers subsidies so they can have nice systems on their house.

This is about getting the market moving in the residential side. It's probably the wealthier customers who are going to help make that happen.”

Renewable incentives in California will ramp down over time, including a 30% federal tax credit and the CSI, which has offered cash rebates up to US$4,500 since 2007 and is well on track to install approximately 1,940MW by 2016.

“Overall incentives are being reduced,” said Weissman. “I think about a patient in intensive care with tubes, wires, everything is hooked up and the doctor comes in and says I think the patient is doing better, let's yank them all out! That's not what they're going to do, they're going to pull one plug, ramp down one medicine and see what the impacts are.  If the patient stabilises, they might look at other things.

“In California we have a plan to test out one of those factors and see what happens to the market.”

So what might a new rate system look like that will accommodate a bright future in the sunshine state, while keeping its utilities intact?
Rubin said that the rate design was “screaming for some kind of reform” but admitted that considerations so far sounded like a “number of different shrimp”: a customer charge, demand charge, network use charge and standby charge.

But the CPUC does not allow these charges nor any additional interconnection fees.

In later comments, Rubin explained: “We aren’t proposing any change to the decoupled regulatory structure, where our capital recovery is decoupled from sales.

“We need to move away from a volumetric rate design, particularly for residential and small commercial rate schedules, to one where fixed costs are recovered through fixed charges. We believe that this is the best way to chart a course towards a sustainable solar future, while helping to reduce the shifting of cost responsibility from solar customers to all of our other customers.”

Rubin estimated that a 5% cap would be equivalent to 1,040MW of installed capacity and predicted that California might reach up to 3.7% of the cap next year. “It's not as if it's a crisis yet,” he added.

But that 5% cap could well be reached even before the CSI and tax credits run out in 2016 – what happens after that is uncharted territory and how much local distributed solar is too much is yet to be determined.

“You've got to take a system wide perspective,” said Cusick. We all want grid stability no one's going to go out there and say hey let's put out so much intermittent resource that we end up with an unstable grid. That would be irresponsible.”
 

1 December 2021
Join over 500 attendees at this virtual conference on 1-2 December 2021 for expert presentations covering PV Module Technology, Supply & Site Optimisation for Utility-Scale. Delegates can access streamed presentations, session recordings and chat/messaging tools to connect with fellow delegates and speakers. Speakers include leading developers, manufacturers, testing and research institutes, including: NREL, Silicon Ranch, Sonnedix, Heliene, Powertis, LONGi Solar, JinkoSolar, PVEL, Risen Energy, Seraphim, STS, Trina Solar, Eternalsun Spire, QEERI, Fraunhofer, Estuary Capital Partners, VDE, First Solar, Longroad Energy, Powertis and DNV Energy Systems
2 December 2021
Intersolar is the world’s leading exhibition & conference series for the solar industry. As part of this event series, Intersolar India in Mumbai is India’s most pioneering exhibition and conference for India’s solar industry. It takes place annually and has a focus on the areas of photovoltaics, PV production and solar thermal technologies. Since 2019, Intersolar India is held under the umbrella of The smarter E India – India’s innovation hub for the new energy world.
9 December 2021
The Smart Energy Council is hosting Australia’s second Virtual Smart Energy Conference and Exhibition on Thursday, 9 December 2021. This event will show that the industry powers on despite COVID-19 and we are standing together undeterred in spirit. Bringing our global community together using the latest technology.
13 January 2022
Intersolar North America and Energy Storage North America “Come Together” for the first time in Long Beach, CA—connecting installers, developers, utilities, technology providers, policy makers, and key stakeholders from around the world to advance the clean energy future. With best-in-class conference programming, integrated exhibits and pavilions, and the live Solar Games installer competition, #isnaesna21 will showcase the industry trends, innovative solutions, and emerging talent transforming the solar, energy storage, and e-mobility markets. Register today to redeem our exclusive offer for PV Tech readers—free expo hall or 20% off full conference pass.
1 February 2022
As Solar Finance & Investment enters its ninth year, we sit on the cusp of a new power market with solar at its heart. The 2022 edition of the event will build on our years of expertise and relationships to bring investors and lenders together with top developers. Connect with leaders in the field and use exclusive insights to drive investment and development decisions for the future. Meet new and existing project partners at the largest gathering of European solar investors and lenders.
23 February 2022
Held annually since 2016, the Energy Storage Summit Europe is the place to be for senior stakeholders in the European storage industry. Designed to accelerate deployment of storage, we examine evolving chemistries, business models, project design, revenue stacks and use cases for storage. The 2022 edition will include exclusive content around longer duration solutions, energy strategies for wide-scale deployment of EVs and "EnTech", the event which sits at the intersection of digitisation, decentralisation and decarbonation of the power system. Come to meet TSOs, DSOs, Utilities, Developers, Investors and Lenders and leave with new contacts, partners and a wealth of information.

Read Next

December 1, 2021
The price of shipping containers from Asia to Europe and North America remains high but should start to come down in the new year, although the main price drops won’t occur in earnest until 2023 when new capacity is brought online. That additional capacity, however, may be offset by new International Maritime Organisation (IMO) rules to address the industry’s emissions
December 1, 2021
Enefit Green, the renewables subsidiary of Estonian state-owned utility Eesti Energia, is looking to procure up to 500MW of solar modules in the next three years.
December 1, 2021
Tech major Amazon has added a further 2GW to its committed utility-scale solar PV capacity, adding projects in the US and Europe to its renewables portfolio.
December 1, 2021
Global solar PV deployment is on track to grow by 17% this year in spite of surging commodity prices increasing manufacturing costs, according to the International Energy Agency (IEA).
December 1, 2021
The European Commission (EC) has approved the extension of Poland’s auction scheme for renewable resources that is predicted to support the creation of 9GW of renewables after it passed EU state aid rules
December 1, 2021
LONGi Solar has dropped its wafer prices by as much as 9.75%, its first such fall in more than a year, as signs continue to mount that industry prices are set to normalise into next year.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
December 1, 2021
Solar Media Events
February 1, 2022
London, UK
Solar Media Events
February 23, 2022
London, UK
Solar Media Events
March 23, 2022
Austin, Texas, USA
Solar Media Events
March 29, 2022
Lisbon, Portugal