No net metering without grid connection, no net metering controversy where wires and energy products are unbundled

Around the country lobbyists for utilities and solar power companies are fighting over public policy, mostly for and against reform of net metering policies.* Today, The Alliance for Solar Choice (TASC) trumpeted in a press release recent victories in the states of Utah and Washington over net metering reforms urged by utilities. TASC highlighted the involvement of conservative policy group the American Legislative Exchange Council (ALEC), which joined the battle over net metering via a January 2014 resolution calling for “policies to require that everyone who uses the grid helps pay to maintain it and to keep it operating reliably at all times.”

In the TASC press release the group makes the odd and laughable claim:

Net metering allows rooftop solar customers to … receive full retail credit for any excess electricity sent back to the grid. Utilities turn around and sell this energy at the full retail rate to the neighbors, even though they paid nothing to generate, transmit or distribute that cleaner power.

I wonder how TASC thinks the net-metered customers’ excess electrical power actually flows to the neighbor’s property?

On the other hand, I take the next sentence in the TASC press release as obviously true: “Utilities attacking net metering want to eliminate the policy to stifle energy choice and protect their monopolies.” Evidence for the point is contained in the Washington state bill which, in addition to reforming net metering would have banned third party financing of rooftop solar if the utility itself offered a leasing program.

But one can oppose net metering and still favor “energy choice.” In fact, net metering is in the end incompatible with energy choice since net metering requires a grid connection and a cross-subsidy from grid-connected, non-net metered customers to survive. Giving energy choice to the customers subsidizing their solar-paneled neighbors will, if the burden grows large enough, push unsubsidized customers off the grid.

Currently, the burden is rather small most places. The utility industry is worried, though, about the possible rapid spread of net metering as the economics of rooftop solar improve and the consequent rate “death spiral” as fewer and fewer customers remain who actually pay for the costs of local distribution systems. See the report Disruptive Challenges, distributed by EEI in early 2013, and now the Economics of Grid Defection, published by the Rocky Mountain Institute this year.

The fight over net metering and other rooftop solar policies has broken out in a number of states, from Georgia to Massachusetts to Wisconsin to the solar-rich states of California and Arizona. Perhaps most interesting, however, is to note one solar-rich state lacking a battle over net metering: Texas. As Lynne noted here last summer, with generation and retailing already divorced from the monopoly wires business (in most of the state), Texas’s wires utilities are not nearly as threatened by distributed generation resources.

Power retailers in Texas are free (within limits) to offer a variety of contract to customers with distributed generation capability, and at least one offers a net metered-style product. Reliant’s e-Sense Sell-back plans credit customers for the full retail energy rate for the first 500 kwh of power put onto the grid (about $0.17 kwh at peak prices, and any additional power at $0.05 per kwh). Notice that as Reliant is an unregulated retail power provider, not a regulated utility, there is no forced cross-subsidization of distributed energy resources in the offering.

No subsidy, no undermining of grid finances, supports energy choice without promoting energy poverty. What is not to like?

 

 

*Net metering policies allow consumers capable of self-generation to be credited for any generation put onto the local distribution grid at the full retail price of electricity. Because the full retail price of electricity covers both energy and grid costs, utilities object that net metered customers are overpaid for the power they inject into the distribution grid.

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3 thoughts on “No net metering without grid connection, no net metering controversy where wires and energy products are unbundled

  1. I had assumed that distribution wires companies would be neutral to net metering as long as their own rates were not volumetric. How are their rates structured in TX? Regulators willing, you’d think there’s no reason an integrated utility couldn’t unbundle a distribution charge on the same basis.

  2. Reblogged this on Colder Air and commented:
    An overview of net metering issues – with a possible model resolving some of them.
    “one can oppose net metering and still favor “energy choice.” In fact, net metering is in the end incompatible with energy choice since net metering requires a grid connection and a cross-subsidy from grid-connected, non-net metered customers to survive. Giving energy choice to the customers subsidizing their solar-paneled neighbors will, if the burden grows large enough, push unsubsidized customers off the grid.”

  3. Utility commissions have, in general, not allowed utilities to recover 100% of their fixed costs in the fixed portion of their rates (monthly service charge). Rather, they have required that the utilities recover a portion (frequently a major portion) of their fixed costs through the variable portion of their rates (energy charge). That is the primary reason that utilities under-earn their allowable rates of return during periods of mild weather and economic stagnation; and, over-earn their allowable rates of return during periods of unusually hot or cold weather and of vibrant economic activity. This is also the primary reason that utilities and utility customers who do not generate on-site are disadvantaged by net metering, since the customers who do generate on-site receive not only the entire variable cost of the power they would otherwise consume from the grid, but also the portion of the utility’s fixed costs and return on ratebase which are recovered through the energy charge.

    The solution to this issue is technically simple, though politically difficult. Restructuring utility rates to permit the utilities to recover 100% of their fixed costs and their return on ratebase through the fixed portions of their rates would make them largely indifferent to on-site generation economically. However, it would reduce the price paid for on-site generated power through net metering, thus reducing the economic attractiveness of net metering to on-site generators. On-site generators would still have the option of going off the grid, to avoid the higher monthly service charge, and relying on their own generation to meet their needs.

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