Are Solar PV and Net Metering the Elephant in the Room?
ONE OF THE HOTTEST TOPICS in utility regulation today is what utilities and regulators could or should do about the rapid growth in distributed energy resources, most particularly rooftop solar.
A recent NRRI research paper summarizes and catalogs over a hundred recently adopted changes and pending proposals, from 43 states and the District of Columbia, that would change rate designs for customers with solar photovoltaic generation. The four major types of proposals include, singly or in combinations: (1) raising fixed charges, (2) adding demand charges for residential and small commercial customers, (3) raising minimum monthly bills, and (4) changing the terms and conditions for net metering. The paper lists and classifies the many different types of rate design proposals, including:
A total of 25 states have seen proposals for fixed-charge increases, either for all customers, for solar photovoltaic self-generators only, for all distributed generation customers only, or for net metering customers only.
Over a dozen states have recently enacted changes to net metering policies, and 17 states are currently reviewing changes to net metering rules and standards, or are explicitly considering possible successors to net metering.
Eleven states have recently completed or ongoing studies of net metering, and in four of those states the efforts are directed toward identifying new program designs or replacements for net metering.
Broader dockets about policies affecting all distributed energy resources have been recently decided in two states and are underway in 10 others.
Six states have recently enacted provisions and nine states and the District of Columbia have open dockets on community-shared solar.
Several major factors set the stage for the dozens of recent proposals, including: (1) aging utility infrastructure in need of replacement; (2) further tightening of federal environmental protections and the likelihood of greenhouse gas regulations; (3) flat or declining loads and load factors resulting from greater energy efficiency and the widespread slow-growing economy; (4) requirements for grid modernization; (5) declining costs and rapidly growing markets for distributed energy resources, particularly solar PV and battery storage; (6) state and utility net metering programs nearing or exceeding existing caps, thus triggering policy reviews; and (7) strong interest on the part of growing numbers of large corporate and institutional buyers and municipalities engaging in community-choice aggregation, that want to take more control of energy purchases and obtain more or all of their electricity from renewable and low- or zero-emissions energy resources.
Another factor creating some urgency is that many jurisdictions are approaching, and a few have already exceeded, the system-wide caps in existing NEM rules. In large part, the perceived urgency in addressing rate designs for customers with PV is a result of net metering’s success in opening up PV markets. In several jurisdictions, reaching the caps is automatically triggering a review of existing rules. The average utility in the U.S.reports only about one-quarter of 1% of customers net metering, but Hawaii utilities lead the country with 8% to 12% of customers net metering, one Washington/ Idaho utility has reached 5%, and a handful of California and Arizona utilities have hit 3% of customers. Almost 60 more U.S. utilities report over 1% of customers are net metering. In the U.S., net metering reportedly accounts for almost 675,000 systems, which represents 99% (by number) of all PV systems installed, and 44% of all installed solar PV capacity.