What is "Net-Metering" And Why Are People Fighting About It?

Oct 20, 2015

Credit Dave Dugdale via Flickr / https://flic.kr/p/7kCZi1

Solar energy is big business in New Hampshire right now. Enough projects have submitted at least preliminary applications to add up to more than a 400 percent increase from 2014.

But as we have reported in the past, the solar industry will have to overcome serious hurdles if it wants that growth to continue in New Hampshire. For one, a state rebate program that cuts home and small business owners a nice check had to be ratcheted back after the revenue for the fund behind those checks plummeted.

But perhaps more importantly, early this year it became clear that New Hampshire utilities were swiftly approaching the legal limit on the number of solar installations that could take advantage of a program called “net-metering.”

Net-metering can be a difficult concept to understand. (Is it a subsidy? Is it just a way of crediting the accounts of solar panel owners? Who’s paying for it, if anyone?) And it’s the subject of heated debate in states across the country.

Read on and get a quick sample of the questions that are animating this debate.  

Credit Sam Evans-Brown / NHPR

  What is net metering and why are people fighting about it?

Net metering is a policy that lets certain renewable energy producers (though in practice it’s almost exclusively solar power that does this) sell excess electricity back to the grid at the same price they are spending when they buy energy from the grid. This makes it so that when you’re off at work and your solar panels are generating electricity that you can't use (or save up, since it’s been basically impossible to buy Elon Musk’s fancy battery) you can generate credits that you can then use when you get home and the sun has set and you want to make yourself some toast.

Is this a subsidy for solar? Solar advocates argue that it is not, but is just a way to credit home-owners for the power they generate. For instance, a recent NHPR article that called net-metering an incentive attracted this comment:

Saying that this is just a "billing arrangement" leaves out some important context. For instance: this is a billing arrangement that only certain generators get to take advantage of. When a net-metered customer feeds power into the grid, they are credited at the retail energy rate (about 14 cents per kilowattt hour), but if you were to fire up your natural gas fired power plant, you'd be paid the wholesale energy rate  (which is sitting around 5.5 cents per kWh these days). 

More to the point, everyone doesn't believe this is fair: electric utilities argue solar customers are still using the grid, but - by zeroing out their bills, as net-metering helps them to do - they aren't paying for it. They say costs are being pushed off onto electric customers that don't have a solar panel. 

Meanwhile, solar advocates argue that utilities are ignoring many of the cost savings that come from more solar panels on the grid. For instance, if solar homes translate to less demand on certain power lines during the hottest summer months, utilities may not have to upgrade those poles and wires, and can pass the savings along to consumers. Many solar industry funded studies also calculate the value of benefits like improved air quality and reduced carbon emissions.

This graph was the Rocky Mountain Institute's attempt to compare all of the various cost/benefit of solar studies that had been done prior to 2013. Some "found" solar to be worth less than the retail rate of energy, others said it was worth more.
Credit Rocky Mountain Institute / http://goo.gl/TGWLIX

There have been a slew of studies coming out each year that try to weigh these questions and come up with a number for how much small-scale solar power should be worth, (in fact an environmental group just presented a New Hampshire specific report last week) and they come out with wildly different estimates depending on their assumptions and what they do and don't include. In other words, this is far from a settled question. 

Whether net-metering is a subsidy or just a billing trick to encourage more solar onto the grid, one thing is definitely true, solar installations need the arrangement in order to pencil out. As on solar industry expert explained to me earlier this year, it is "the bed-rock of the economics for residential and commercial solar, all across the US in every state that has any kind of a meaningful solar market." 

What are the rules in other states?

Simply put, they are all over the map. All but three states have net-metering in some form, but the way the policies are formulated are very different: energy is reimbursed differently, many states have no cap on how many customers net-meter, others have caps that are smaller than New Hampshire's limit of 50 megawatts.

As utilities across the country have seen the numbers of net-metered customers rising, they've reacted by trying to lower the rates solar owners receive, or by increasing fixed charges those customers pay every month. The solar industry, meanwhile, has pushed for increasing the caps. 

These fights have played out differently in different states. Vermont bumped its limit up to 15 percent, and Massachusetts is currently embroiled in a battle over whether and how to lift its 9 percent cap.

In Hawaii, which has the highest percentage of solar power on its grid and has a new law pushing it toward 100 percent renewable energy in 2050, regulators have just recently eliminated net metering in favor two new rates. One, which is more generous, is available for customers who install batteries in their homes, and the second pays solar owners a lower rate. 

And just next door in Maine, which also had a 1 percent cap, a compromise led to what is being hailed as an innovative way to value solar, which involves aggregating all of the state's solar power together, bidding the energy produced into regional markets, and using the money earned to set the value of small-scale solar.

Its also worth pointing out that the New Hampshire Electric Cooperative - the first New Hampshire utility to hit its net-metering cap - unilaterally decided to continue taking new customers, though they slashed payments somewhat.

The Electric Coop's new rates came from a big review of the data from "smart meters" the coop had installed on solar homes, which helped show how much such homes relied on the grid hour-by-hour.

What can we expect going forward?

A small group of New Hampshire lawmakers have been meeting with folks from the utilities and the solar industry heading into this legislative session. Nothing written has emerged from those meetings as of yet, but utilities here have seemed open to lifting the cap as something of a stop-gap measure while a more long-term solution is worked out. 

But the devil will almost certainly be in the details. Senate Majority Leader Jeb Bradley, said two weeks ago that the deal would almost certainly be "more reflective of the cost of service" (by which he means to say, less generous to solar owners). 

But it will likely be long after the ink is dry on that deal before we find out whether New Hampshire's solar boom will continue, or be eclipsed.