Power industry debates how net metering should evolve
A diverse group of electric industry stakeholders agreed that net metering policies need to be updated, but continued the debate on the most effective way to accomplish that during a panel discussion at the National Association of Regulatory Utility Commissioners Winter Policy Summit.
Many states are grappling with how best to reform net metering rates that compensate energy exports to the grid. Early adoption of rooftop solar was rewarded with net metering rates for homeowners and businesses, but the power industry and state regulators are questioning whether the rates paid to solar owners are accounting for the full value of the grid.
The nation is facing a challenge of decarbonizing the electric industry and other sectors as quickly as possible. “When we think about this challenge and the magnitude of it, it’s not an either/or type of a situation,” said Kevin Lucas, senior director of Utility Regulation & Policy at the Solar Energy Industries Association (SEIA).
“It’s not either we build more rooftop solar or we build more utility-scale solar. It’s not ‘do we build more solar or other types of resources?’ It’s not even ‘do we build more local solar or do we add more transmission lines?’ We have to do all of these things,” he said. “We have to do it on a timescale that no one thinks is practical.”
Emily Fisher, general counsel, corporate secretary, and senior vice president of clean energy at the Edison Electric Institute (EEI) agreed that it is an unprecedented time when it comes to how electricity is generated.
In 2019, about 40 percent of the electricity consumed in the U.S. was from carbon-free resources. EEI’s member electric companies at the end of 2019 had reduced their carbon emissions by about 45 percent below 2015 levels. Cheaper natural gas and decreases in the price of solar and wind assets has helped lower emissions, while electric companies continue to aggressively invest in renewables. In 2020, around 12 gigawatts (GW) of utility-scale solar was brought onto the grid amid the pandemic, and 16 GW is already expected to be brought online in 2021.
“Net energy metering is a really useful tool, but it’s just a tool,” Fisher said. “What are our policy goals and what do we need to achieve those goals? Are there ways to reform net energy metering at the retail rate so we can drive even greater benefits from those resources and still meet our objectives? I think the open proceedings in many states indicate there is room to look at how we can improve this policy to serve a range of objectives.”
Sarah Hofmann, a commissioner with the Vermont Public Utility Commission, spoke about net metering’s evolution in Vermont. The state has reduced net metering rates since 2017, but the distribution of costs from net metering are still something they are working on. Vermont’s largest utility, Green Mountain Power, reports that for each 20 megawatts of new net metering capacity it creates a cost-shift to non-participating customers of $47.4 million over 25 years, she said.
Hoffman said Vermont’s program has been so successful that “we have had transmission problems, and cost is an issue. It does need to change and evolve.”
Mohit Chhabra, senior scientist of the Climate and Clean Energy Program at the Natural Resources Defense Council (NRDC), said the industry needs to be rephrasing the age-old question: “Is the value of solar more or less than the retail rate?”
“Regions are going to have very different valuations of solar and in some regions that will be much greater or much less than the rates, depending on how the numbers pan out,” he explained.
Lucas said net metering has been successful overall, but that “all good policies do need to evolve.”
One of the things the panelists agreed on is that refining a previously successful program will be necessary for future growth.
Fisher said two things are important to the future of net metering: location and time.
“[Net metering] does not currently provide any locational incentive,” she said. “It really does matter where those resources are located both in respect to increased cost on the distribution system but also the value of the solar that is actually being sent back to the grid.”
For instance, if a home in a high penetration area, like California or Arizona, is sending power back to the grid during a time when the grid is already at capacity, that energy may not be beneficial.
Fisher believes rate design should be used to help people figure out where it makes the most sense to locate these resources, as well as when those resources provide the most value.
Most of the panelists also agreed that net metering was an important tool to help jump-start the home solar industry, but that the technology is now mature.
Fisher offered support for universal utility-scale renewable resources because they are cost competitive and the benefits are available to all customers. Continued deployment of larger-scale renewables in the next decade will help reach states reach their aggressive climate goals, as well as many electric companies that have committed to achieving zero emissions in the coming decades.
Even if utility-scale renewables become the norm, the importance of those who decide to install rooftop solar should not be overlooked.
“That being said, I do think that distributed resources play a role and that they can be helpful and supportive in this effort,” she said. “And I just think that maybe net energy metering at the retail rate is not the tool to help us figure out where we need them the most. I also don’t want to discount the value that some people want to feel like they’re taking personal action and I don’t think we should restrain them from doing that. We just need to get to the point where we figure out who pays for that personal action.”
Chhabra agreed that the practice of incentivizing small-scale solar customers doesn’t need to stop, but it can be thought of in many different ways — including a one-time incentive at purchase.
“Net energy metering isn’t the only way to promote solar,” he said. “When you come up with the value of solar in your system, additional incentives for adoption can be given. Building stuff into rates is hard because unintended consequences can happen and it’s hard to predict what those can be years from now.”
