Working to reform net metering seen as better option to nixing policy altogether

New York — State and power industry officials during a panel discussion Feb. 9 for the most part agreed that net metering has been a good policy for getting rooftop solar off the ground but noted that the tool needed to evolve as the technology has matured.

Net metering programs allow customers' retail electricity bills to be credited for generation from rooftop solar or other behind-the-meter resources that exceeds their on-site needs. A majority of states have passed net metering laws, but critics, including some utilities that see it as a threat to their business models, have questioned its continued usefulness and charged that it results in unjust rates. A failed petition last year sought to bring the programs under the Federal Energy Regulatory Commission's jurisdiction.

But panelists that together offered perspectives from the state, solar industry, utility sector and environmentalist viewpoints appeared ready to offer tweaks and reforms to net metering policies rather than throw in the towel completely, during a session at the National Association of Regulatory Utility Commissioners' winter policy summit.

Level of simplicity

Kevin Lucas, senior director of utility regulation and policy at the Solar Energy Industries Association, said the country faced an incredible challenge in trying to decarbonize the electricity sector and overall economy on an unprecedented timeframe. With that in mind, he said policymakers must be cognizant of the potential impacts on rooftop solar from any changes to net metering.

Both a benefit and challenge of net metering, he said, is that it's administratively straightforward.

"It's one of those policies that it makes it very easy for a developer to sit across the table from a customer and try to find out whether solar makes sense for them economically or not," Lucas asserted. "It's important that this level of simplicity not be overlooked. Because the one thing that we cannot afford to do right now in the midst of this challenge is take an entire sector offline or throw in barriers that will make it harder for that sector to contribute to the challenge that we have in front of us."

Transmission constraints

Similarly, Vermont Public Utility Commission member Sarah Hofmann sang net metering's praises in terms of helping the state meet its renewable energy goals but said the policy tool needed "to change and evolve." She contended that solar was "a mature technology at this point in time, and you make different regulatory decisions when something has matured."

Of particular concern for Vermont, she said were transmission constraints exacerbated by new renewable installations and concerns about cost shifts to nonadopters.

She explained that the northern part of the state did not have much load but there were numerous renewable projects in the area, creating a situation where there is not sufficient transmission capacity to carry excess power out of the area without jeopardizing the grid.

Hofmann said the cost of needed grid upgrades was prohibitive and would only get more expensive as more transmission issues arise "if we don't figure out ways to control where net metering and bigger projects are going in."

Her state is already offering greater compensation to net metering customers using "preferred sites" identified by the state such as gravel pits. "Now, the next thing would be is there a location that would be good for the transmission grid if we put a 500 kW net metering system over here," she said. "I think we just have to start looking at different ways, more sophisticated ways than what we've done in the past."

Emily Fisher, Edison Electric Institute's general counsel and corporate secretary, said net metering was "a really blunt instrument" in need of refining.

Like Hofmann, she advocated for the introduction of a locational incentive. "If we could use rate design to help people figure out where it makes the most sense to locate these resources and then also try to use rate design to tell them when those resources provide the most value, I really think that then you would say it's a really strong policy tool."

Cost shifts

As for cost shifts, Hofmann said in her state "net metering compensation is 17.4 cents/kWh, while the price of other in-state solar facilities has fallen to less than 9 cents/kWh." And the state's largest utility, Green Mountain Power, reported that each 20 MW of new net metering capacity would create a cost shift to non-participating customers of $47.4 million over 25 years.

Mohit Chhabra, senior scientist for the Natural Resources Defense Council's Climate and Clean Energy Program, said that such cost shifts are a consequence of most residential rate structures being volumetric, which wraps in the costs of producing energy and electricity with all the costs of maintaining the grid.

"In California right now, 80% of utility revenue requirements are non-electricity generation related, but when you compensate it at volumetric, all of those costs get compensated for net energy metering," Chhabra said. "So as a result, there is this cost burden that happens on non-adopters."

When thinking about evolving the policy, he said a question that needs to be asked going forward is "can we come up with a rate structure and net energy metering on top of it that fairly compensates the value of solar."