Net metering is under attack in the U.S. Currently, 43 states have adopted a net metering policy, and it’s the single most important policy for the long-term growth of solar in the U.S. However, as solar becomes increasingly popular, especially for the residential market, there is concern that solar will lead to revenue loss for the utility, which will either penalize the solar homeowner or shift costs to the non-solar rate payer. I’ll first define net metering, then review the arguments against it.
When a homeowner installs solar, their existing meter is usually swapped out by the utility for a bi-directional net meter, meaning it can spin forwards and backwards. This allows the customer to only pay the utility for power that’s not being created and consumed on-site.
This is not to say that solar power is always being consumed on site. During sunny days solar systems can generate more electricity than is being used on-site and power is exported to the grid, spinning the meter backwards. At night, the meter spins forward as power is taken from the grid because the solar panels are not generating. Net metering (NEM) allows solar customers to earn credits for the power they send back to the grid, offsetting the nighttime, winter and cloudy day consumption. In Washington State, incentives are structured so that credits can carry over from month to month, allowing a customer to reach “net zero” energy consumption on an annual basis. The meter gets reset once per year, meaning that for solar homeowners you “use it or lose it.”
The above explanation was not seen as controversial until solar started to become popular. Now, groups such as the Koch brothers’ Americans for Prosperity, ALEC and Edison Electric Institute are attacking net metering as “unfair,” effectively wanting to tax solar homeowners (ironically) for lost revenue.
First, let’s draw a parallel analogy with efficiency. Utilities in growing states are promoting energy efficiency because it limits the amount of energy a home or business needs to buy from them. Why would a utility promote this? Because they actually make more money by adding more ratepayers without increasing the existing energy delivery infrastructure. Just like energy efficiency, distributed places no burden on the existing utility system. Most solar output is used onsite without ever reaching the grid, and if it leaves the house, it’s consumed by the nearby residences and businesses through existing local transmission lines. No one is arguing that homeowners should be taxed for changing the lights to LEDs, so is solar any different?
Argument #1: Rooftop solar causes utilities to lose revenue and pass those costs to non-solar ratepayers.
Several studies have come out over the last few years proving this claim to be false. Studies in California, New York, Vermont and Texas all show that utilities actually make money in the long run when their ratepayers install solar, and do not shift costs to non-solar ratepayers even in the short term.
Argument #2: Too much solar creates an unstable grid.
Again, the opposite turns out to be true. In fact, net metering policies create a smoother demand curve for electricity and allow utilities to better manage their peak electricity loads. By encouraging generation near the point of consumption, net metering also reduces the strain on distribution systems and prevents losses in long-distance electricity transmission and distribution.
Essentially, the stability fear is this: the more solar we have, the more risk that utilities will over-generate during the day and need to ramp up very quickly as solar drops off in the late afternoon. First, there are several things utilities can promote to offset demand swings. Promoting energy efficiency during peak loads, charging higher power rates in the afternoon, paying more for solar that faces west than south (so that it produces more in the high-demand afternoon), increasing grid storage capacity to store the solar power produced in off-peak times, building smart grids that can more easily respond to ramping up and down, retiring inflexible off-peak generating plants, and taking advantage of interregional power exchanges are some obvious ways to handle the issue.
Second, if a grid can’t handle 1% solar saturation, much less 5% or 50%, the problem is in the grid, not in the solar. Germany, which recently powered 75% of the country on solar over a 12 hour period, is tackling this by promoting grid storage. Think large scale batteries charged by solar, or water pumped behind a dam by solar to create hydro power when you need it. Germany is also investing in smarter, more responsive inverters that can ramp up and ramp down with the grid, creating a much more respond and safe energy demand and storage system.
Solar needs to be valued by utilities for all of it’s benefits to them. It gives them predictably priced point-of-consumption electricity production in a volatile energy market. It saves them from building new and expensive plants. It saves on investment in new transmission and distribution infrastructure, and reduces the burdens on existing wires and infrastructure. It reduces the amount of electricity lost over transmission lines. And solar helps utilities meet state renewable energy portfolio requirements. Once micro-level and grid-level energy storage starts to be mobilized, solar will be even more valuable as an energy source during power outages from natural disasters and when central stations go offline. It will also help to stabilize grid voltage, which protects increasingly fragile electronics energy loads.
What we are really seeing is an industry that is adjusting to change. In reality, what utilities look like today will not be what they look like ten years from now, and that can be scary to business-as-usual shareholders. But fear not, the future includes utilities. They can even benefit from solar by being producers themselves. If utilities have a capital and tax-equity appetite, i.e. they are making profits, they can take advantage of existing federal incentives by building their own utility-scale solar, and/or installing residential solar on the homes of their ratepayers and charging them directly. Moreover, utilities will begin to look less and less like energy producers and more and more like energy brokers, moving power from one place to the next and charging ratepayers to maintain the infrastructure to do so.
In the end, worrying about utility profits misses the point of what makes solar special. It’s not just another utility fuel source like nuclear, coal or natural gas. It’s distributed renewable energy that’s paid for and maintained by solar homeowners. The net environmental benefits to society as a whole make solar a net positive, whether we are ready to quantify those benefits now or not.
I’m foreseeing the same arguments made against solar being deployed by the Koch brothers against electric vehicle owners not paying their fair share to keep gas prices low. Those poor multinational oil companies, we should probably tax drivers that had the audacity to stop going to gas stations that “the rest of us” use so that shareholders don’t lose revenues. Now, if you combined EV’s with solar, well, now you are really talking revolution…