Monday, October 20, 2014

Net metering, consumers and utilities: a second look

By Patty Durand, Executive Director, SGCC

I’ve read a good deal of public discussion recently on net metering and the purportedly unfair costs it imposes on the host utility. I hear this position echoed in personal conversations with many industry participants. Perhaps you have as well.

The arguments posited by a variety of utility-leaning parties might be summarized as follows:

When a utility pays retail or near-retail prices for power injected onto the grid by customers with distributed energy resources (DER), that payment amounts to a “subsidy” for those customers or the energy service companies that lease the DER to them. The reason given: the customer’s payment exceeds the utility’s avoided energy cost.

The spread of DER cuts into the amount of energy sold by the utility, the argument goes, and that reduces utility revenue, while the cost of maintaining the grid for all remains the same. Thus, affluent customers who can afford DER – say, solar photovoltaic panels on their home – get a break (the “subsidy”) while less affluent customers shoulder a greater burden to keep the system running.


And if the customer in question, say, leases solar PV from an energy service company, then the so-called “subsidy” flows to that third party, which is an unintended consequence of flawed policy.

These arguments conclude that utilities are treated unfairly by net metering policies and remedies are needed, and swiftly.  

As far as I can tell, these arguments have produced a disturbingly homogenous response: most industry people I speak to appear to accept these arguments at face value. And, at face value, they make sense to me as well. But because the arguments put forth so far have been utility-centric, I’d like to make a few points on behalf of a more well-rounded, long-term view that reflects the interests of all stakeholders.

After all, this blog appears courtesy of the Smart Grid Consumer Collaborative. Consumers indeed have advocates at the public utility commissions, but they tend to be devoted to traditional consumer protections. Net metering is an issue that will morph as utility grids get smarter, more DER is implemented and utility business models shift to accommodate new realities. So “getting it right” may require mid-course adjustments as we move forward.

Yet my points aren’t necessarily consumer-centric. Rather, I’d like to call attention to points being made on behalf of a 360-degree devotion to fairness and transparency for all stakeholders, including utilities and their customers, regarding net metering issues.

The well-regarded Regulatory Assistance Project (RAP) issued a position paper last fall titled, “Designing Distributed Generation Tariffs Well: Fair Compensation in a Time of Transition.” I find that RAP’s dispassionate approach goes the extra mile to be fair to utilities – and all other stakeholders as well. The points RAP makes are that at times net-metering policies can be unfair, and at other times net metering’s value to the grid exceeds the cost.  Each case must be evaluated separately and best practices for evaluating services to the grid must be used.

RAP recognizes that customer’s role will expand as technology – for instance, DER, storage and controls that create transactive energy markets – further empowers customers at grid’s edge.

Here are two central statements in RAP’s paper that are critical to a discussion of net metering:

“There is tremendous uncertainty regarding how and when we will collectively learn how to take advantage of the tremendous opportunities that technology offers. In short, we are in a time of transition where we can see the two-way and multi-party transactive future but we still live with legacy infrastructure and legacy institutions…

“The regulator’s challenge in this time of transition is to support policies that use the legacy systems wisely while nurturing the evolution of the systems that will facilitate the transition to a far more efficient, environmentally benign, transactive electricity sector.”

In my view, these statements embody an objective approach to the subject. We’ll take a closer look at a few of RAP’s specific recommendations to regulators in my next blog.  

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