Net metering vs. demand charges: The latest news in an endless regulatory debate

No matter how many studies come out to show the value of distributed generation and rooftop solar, there will likely be just as many that state the opposite. Every side is then able to choose the reports that state what they’d like them to state and form their agendas from there. At least this is how it looks from our humble, backseat perspective.

How are local regulators, utilities and the general public sifting through all of this info – and what conclusions are they leaning toward? Again, these are all over the map, so, all we can ever do is round up the most recent conversations and see what actions follow.

Here we go…

solar net metering demand charges

New Anti-net metering study

Here’s the latest net metering denial study: The Electric Markets Research Foundation has released a white paper that said preliminary research revealed the value of solar diminishes as more rooftop solar is added to the grid and the costs of net metering to customers without rooftop solar become so significant over time that it is not a sustainable policy.

The white paper, released at the annual meeting of the National Association of Regulatory Commissioners, also claims that as market penetration of rooftop solar increases, the cross-subsidies from net metering that result in higher costs to customers not installing rooftop solar can become quite substantial and are probably not sustainable – particularly when there is already excess capacity in the system.

An example they give: while a 10 percent market penetration results in only about a $5/MWh increase in the rates of non-participants, at 40 percent market penetration the costs climb to roughly $50/MWh. Based on typical rates in the area studied, this would amount to about a 50 percent rate increase for non-participants.

“Regardless, as the penetration of solar increases, its value decreases, implying that a uniform net metering tariff will eventually result in a cross-subsidy that is unlikely to be economically efficient,” the white paper emphasized.

The white paper did find that rooftop solar can provide significant, site-specific benefits, including increased grid reliability, displaced marginal fuel costs and reduced peak demand in some limited cases. But while almost all solar displaces marginal fuel costs and can reduce peak demand by varying degrees, the ability to provide increased grid reliability or defer capital costs in the transmission and distribution systems is very dependent on where the facility is located.

Benefits of DG solar energy to the grid

To contrast that white paper, The Environment America Research & Policy Center recently published Shining Rewards: The Value of Rooftop Solar Power for Consumers and Society (2016 edition) that reviewed 16 recent analyses that showed those who go solar generally deliver greater benefits to the grid and society than they receive through net metering. The conclusion reached is that decision-makers should recognize the great value delivered by distributed solar energy by preserving and expanding access to net metering and other programs that ensure fair compensation to Americans who install solar energy.

Findings from that report:

Avoided energy costs. Solar energy systems produce clean, renewable electricity on-site, reducing the amount of electricity utilities must generate or purchase from fossil fuel-fired power plants. In addition, solar photovoltaic (PV) systems reduce the amount of energy lost in generation, long-distance transmission and distribution, which cost U.S. ratepayers about $21 billion in 2014.

Avoided capital and capacity investment. By reducing overall demand for electricity during high-load daytime hours that form the peak period for most utilities, solar energy production helps ratepayers and utilities avoid the cost of investing in new power plants, transmission lines, distribution capacity, and other forms of electricity infrastructure.

Reduced financial risks and electricity prices. Because the price of solar energy tends to be stable over time, while the price of fossil fuels can fluctuate sharply, integrating more solar energy into the grid reduces consumers’ exposure to volatile fossil fuel prices. Also, by reducing demand for energy from the grid, solar PV systems reduce its price, saving money for all ratepayers.

Increased grid resiliency. Increasing distributed solar PV decentralizes the grid, potentially safeguarding people in one region from other areas that are experiencing problems. Emerging technologies, including smart meters and small-scale battery storage systems, will enhance this value.

Avoided environmental compliance costs. Increasing solar energy capacity helps utilities avoid the costs of installing new technologies to clean up fossil fuel-fired power plants or meeting renewable energy requirements, and avoid the cost of emission allowances where pollution is capped.

There’s also this 2014 paper from the Lawrence Berkeley National Laboratory that concluded residential solar has little impact on residential rates but could erode shareholder returns.

Click Page 2 for a roundup of recent state actions, including Florida, Illinois and Utah

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  • Suffolk community
    December 11, 2016 15:14:51

    Hey Robin, this is an interesting report on the demand rates and net metering issue. it can be good info for the community to understand going forward. let me know what you think. can you post it to the SH site for others. I have issues getting access.?