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

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on 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.”

26 May 2021
Tara Doyle and Tristan Erion-Lorico of PV Evolution Labs (PVEL), will share this year’s top-performing modules and discuss key findings from PVEL’s PQP testing. Join us to explore which find out which new Top Performer category can affect project value by more than $100,000 – and which test resulted in >20% degradation.
15 June 2021
Looking at the drivers and dynamics of utility scale solar in the UK over the next five years. This event will consider the immediate challenges as we enter the build phase in the UK market where we could see as much as 3GW deployed in 2021 alone! What developments will continue the growth of 100MW+ sites and what impact will government policy have on the rate of deployment in the UK? Join leading developers and manufacturers shaping the direction of one of Europe’s most active markets and hear from speakers with a history of influencing innovation and change.
6 July 2021
Explore in depth the opportunities of the different countries via case studies, business and financial models that will foster growth in the region with particular focus on Thailand, Philippines, Indonesia, Taiwan, Korea, Cambodia, Singapore, Malaysia & Vietnam.
13 July 2021
Energy Next is a new industry exhibition focusing on the latest renewable energy and energy efficiency technology, which will be held for the first time in 2021 in Sydney, Australia alongside the Clean Energy Council’s Australian Clean Energy Summit, the peak gathering of leaders driving Australia's energy transformation. Organised by the same people behind Australia’s largest clean energy event, All-Energy Australia, Energy Next will give visitors two days of access to key suppliers in the industry, free-to-attend professional development and industry workshops, and networking opportunities to better understand clean energy issues and solutions and learn about the latest developments in this transformational, dynamic sector.
24 August 2021
Join us to hear directly from the CTOs and heads-of-research from the top-20 cell/wafer producers to the PV industry today. You'll find out which companies are investing and what technologies and cell architectures are being primed for multi-GW production and gather key market intel around wafer supplier trends for cell manufacturing, including which format/wafer-size is likely to dominate 3-5 years out.
25 August 2021
The Intersolar Summit Brasil Nordeste takes place in Fortaleza, Brazil. It addresses leading local and international experts on solar power and renewable energy in the region. The Summit’s mission is to provide in-depth education, enable high-quality networking opportunities, expand the use of PV technologies at regional and national level and strengthen the local PV industry. The Intersolar Summit Brasil Nordeste is organized by Intersolar South America - Latin America’s largest exhibition and conference for the solar industry: Solar Promotion International GmbH, Pforzheim, Freiburg Management and Marketing International GmbH (FMMI) and Aranda Eventos & Congressos Ltda, São Paulo as co-organizer.

Read Next

PV Tech Premium
May 12, 2021
After the International Energy Agency revised its renewables deployment forecast upwards by 25%, Liam Stoker looks at the difficult nature of forecasting a rapidly maturing sector amidst a changing landscape
May 12, 2021
Data from green hydrogen demonstration projects should be made available to help enable the future bankability of larger installations, unleashing the sector’s decarbonisation potential, a panel has suggested.
May 12, 2021
Integrated solar roofing firm GAF Energy has started moving its manufacturing base from Asia and building out its first combined research and development (R&D) and manufacturing centre in San Jose, California.
May 12, 2021
Array Technologies has withdrawn its guidance for 2021 after experiencing “unprecedented” increases in material and logistics costs which severely impacted earnings in the first quarter.
May 12, 2021
Inverter supplier SMA Solar reported a fall in sales during Q1 2021, but cited the political landscape in the US and Europe as being “extremely encouraging” in the long term.
May 12, 2021
Daqo New Energy and JA Solar have signed a long-term supply deal for high-purity polysilicon, the latest in a growing line of deals as manufacturers look to lock in polysilicon supply.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
May 26, 2021
Session 1 - 7:00 AM (BST) | Session 2 - 5:00 PM (BST)
Solar Media Events
June 15, 2021
Solar Media Events
July 6, 2021
Solar Media Events
August 24, 2021