16 US states consider changes to net metering

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Net metering is a hot topic in regulatory agencies across the United States. The policy under which electricity customers who generate power with their PV systems exchange this electricity on a one-to-one basis has been under attack from utilities, who allege that this imposes extra costs on other customers.

Thirteen U.S. states are considering changes to the valuation of solar under net metering policies, according to the latest edition of The 50 States of Solar. This quarterly publication by North Carolina Clean Energy Technology Center (NCCETC) and Meister Consultants notes that a few of these states and another three states looked at other aspects of the policy, including net metering caps being raised and lowered.

Benjamin Inskeep, an energy policy analyst at NCCETC, says that while some of these examinations of valuation are coming from utility regulatory filings, that others are coming through the legislature and still others are spurred by net metering caps being reached. "It is difficult to tell sometimes what is inspiring a particular proposal or a particular bill," explains Inskeep. "Overall it is consistent with what a lot of utilities have been arguing in the public."

Utilities are finding little evidence to support their claims. "No consensus on the presence or absence of a cost shift has been reached, based on empirical evidence," states the report. "Many (but not all—e.g., Louisiana) studies conducted by state governments on these issues show that existing net-metered customers produce net benefits to all customers (e.g., Mississippi) and that solar electricity production results in substantial value, comparable to or in excess of the retail rate."

It is worth noting that the one study which did find that solar imposed a cost on net-metered customers was authored by a consultant with strong ties to the state’s utilities as well as its oil and gas industry. The Alliance for Solar Choice, Sierra Club and local group Alliance for Affordable Energy all raised concerns about the study and the regulatory agency’s choice of David Dismukes of Acadian Consulting.

One factor in many studies is the role that solar can play in "peak shaving," or reducing demand for power when it reaches its highest levels. A May 2015 study (p. 177-179) by the Massachusetts Institute of Technology found that moderate amounts of solar PV can have a significant effect in reducing the use of expensive peak power generation and imports across most of the nation. Electricity demand peaks in all areas of the continental United States during the summer months, with the exception of the Northwest.

Utilities may be reacting more to the threat to their business model than out of concern for customers. Investor-owned utility trade group Edison Electric Institute (EEI), issued a report warning of the direct threat to the utility business model posed by distributed solar. And while a number of utilities have responded to this by buying solar companies, others have dug in their heels.

Some of the biggest net metering battles will be fought in the coming months. Both California and Massachusetts are in the process of considering changes to net metering. Existing caps to the policy will be reached in California in the next few years, and at least one Massachusetts utility has already reached its limit.

Not all changes to net metering were driven by utilities seeking to slow down solar adoption. New Jersey passed legislation to raise its net metering cap, which has since been signed by Governor Chris Christie, and Mississippi became the 45th state to implement net metering after finding a net benefit to all utility customers.

And despite the attention it attracts, alterations to net metering were not the most common change. In 18 states, 32 utilities sought to increase fixed charges on residential customers. In the 15 cases decided, utilities sought an increase of US$4.71 per month, however regulators only granted increases averaging $2.50 per month.

Inskeep of NCCETC notes that these charges affect the value proposition of distributed solar. He says that such changes are driven by a variety of factors, but distributed generation is the main factor in cases where utilities are seeking increased fixed charges and lower variable charges. "They are trying to get more of a guarantee that they are not going to end up with stranded assets," notes Inskeep.