Wednesday, October 21, 2015

A Conversation on Net Metering, Energy Storage and Stakeholders

As a smarter grid evolves through the introduction of new technologies, we’re seeing differences arise over potentially unintended consequences.

I’m referring here to the rapid rise in consumer adoption of rooftop solar panels, driven by a drop in cost and the promise of lower utility bills and reduced greenhouse gas emissions. This trend is accompanied by the increasing availability of energy storage technologies and strategies. One of the resulting issues is the emerging division among stakeholders.

Consumers who adopt rooftop solar power argue that they’re contributing major benefits to the grid and to society by reducing demand and overall use of centralized, greenhouse gas-producing power. These consumers argue that reducing peak load helps a utility’s load shaping efforts and allows a utility to defer capital investment in peak-power plants. This position holds that the benefits outweigh the cost to utilities of accommodating distributed generation.

In contrast, some utilities are arguing that managing distributed generation costs more than its claimed benefits. As a result, the utility and customers who don’t adopt rooftop solar because they cannot afford it are subsidizing solar power adopters. Consequently, some utilities are seeking to adopt monthly charges or other means to accommodate rooftop solar installations. An associated issue is how net metering – a policy that credits customers for electricity they return to the grid against the power they use – is structured and whether it exacerbates the purported inequities described above.  

Thus, SGCC’s recent webinar on the topic, “Energy Storage and Net Metering,” featured a distinguished panel representing diverse views on these issues.

Jon Wellinghoff, former chairman of the Federal Energy Regulatory Commission, currently a Partner in the Stoel Rives law firm, essentially argued that the system and societal benefits of rooftop solar adoption outweigh its costs to a utility. Barbara Lockwood, General Manager of Regulatory Policy Compliance at Arizona Public Service (APS), countered that when costs and benefits are fairly weighed, utilities need to recover the cost to serve customers who adopt rooftop solar. Dan Vogler, founder and CEO of UtiliCell Energy Storage Systems, provided a technologist’s view of how storage can perhaps render the foregoing arguments moot by providing flexibility to both the utility-centric grid and to consumers seeking alternatives.

Wellinghoff argued that all means by which utility customers reduce demand should be treated equally, whether that is the adoption of more energy efficient appliances or sending a child off to college. He acknowledged that, under many regulatory schemes, consumer reduction in energy use erodes utility revenue. Wellinghoff implied that this effect should be dealt with through a regulatory scheme that rewards utilities for energy efficiency as well as volumetric sales, but not by penalizing rooftop solar adopters through demand charges.

Wellinghoff cited a meta-data analysis of 11 studies on the issue by Environment America Research and Policy Center, which found a net benefit to utilities from rooftop solar adoption. The study determined a value of $0.17 per kilowatt hour (kWh), well above the national, average retail rate of $0.12/kWh.

“Ultimately, when we talk about net metering, we’re providing a proxy for the value of [rooftop solar] to the grid,” Wellinghoff said.

Wellinghoff suggested that charging customers for rooftop solar adoption is “arbitrary and discriminatory” and that a net metering backlash from utilities will drive consumers to adopt energy storage technologies and to move away from the grid – the “least desirable outcome,” he said, due to the societal value of a centralized grid.

Lockwood in turn argued that most of the “cost of service” born by utilities is infrastructure based, though utilities price electricity consumed by customers on a volumetric basis. She argued that demand charges – applied mostly to commercial and industrial customers at this point – can align cost drivers and rates. She said she agreed with Wellinghoff that “aligning cost drivers and rates will unlock technology innovation for everyone’s benefit.”

However, Lockwood argued, the “cost to serve” and “value” are not the same thing and discussions of rooftop solar adoption and net metering do not fairly assess the cost to a utility to accommodate rooftop solar. The study cited by Wellinghoff, Lockwood argued, is based on “value,” not “cost to serve.” Demand charges to accommodate customers who adopt rooftop solar will help utilities recover the necessary infrastructure costs driven by that adoption, she said.

Lockwood also said that APS provides many options for its customers to adopt solar power in a way that includes the “cost of service” and that the utility provides customers with time-of-use pricing that assists in load shaping and cutting peaks, achieving the benefits claimed by rooftop solar and net metering advocates.

Vogler, our third panelist, sees current and nascent technology as an opportunity to finesse the net metering debate, though he pointed out that such policies support the business model for distributed generation.

Vogler extrapolated, explaining how rooftop solar, energy storage, electric vehicles (EV) and the grid could interact to benefit both utility and customer. Digital technology today could provide the means for a three-meter scenario that decouples a customer’s kilowatt-hour consumption at home from the customer’s EV-charging demand, as well as any electricity injected from home to grid, from vehicle to home or vehicle to grid. Using an EV battery as a mobile storage technology provides further flexibility to both consumer and utility, he suggested. He called that “carbitrage.”

Vogler’s presentation reminded me that technology, economics and fairness for all stakeholders in the net metering and energy storage debate is a highly complex matter. The value of electricity consumed and/or produced – at least in a single, local utility service area – has been based on the time of day that each occurs, and the application of energy storage is upending that traditional fact. De-regulated markets such as Texas, which now allow EV owners visibility into the price of wholesale electricity for EV charging purposes, adds another element of complexity.

Clearly these associated issues are now coming to the fore and will be argued at length in traditional public utility commission (PUC) hearings, which require utilities to present their case for cost recovery and require PUCs to weigh that against the public interest.

Industry stakeholders also are debating the net metering issue in energy-related media via essays, blogs, webinars and conferences – not just at PUC hearings. I invite everyone to join us for the SGCC’s 6th Annual Consumer Symposium: The Connected Consumer & the Future of the Grid. The Symposium is one of the industry’s premier events in consumer engagement with smart grid. Co-located with DistribuTECH 2016, the Symposium will feature two panels on the net metering issue.

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