It’s been a busy summer for Duke Energy, with South Carolina at the forefront. Included in the season’s events or, in this case, the pre-season came the decision in the state’s House of Representatives to kill the proposed increase of net metering caps from 2% to 4% of peak capacity on the grid.
How long does it take for a utility to reach that 2% mark? About 189 days. On Monday Duke Energy announced that it had hit the cap, and released a statement:
As an important partner in our collective efforts to grow renewable energy for the benefit of our South Carolina customers, we want to provide you advance notice about a key milestone we have reached under Act 236. As of July 9, 2018, in Duke Energy Carolinas territory, the total generation capacity of customers applying for net metering has reached the 2% limit established by Act 236.
This is a catastrophic hit to the distributed solar market in South Carolina, with the the anticipation that South Carolina Electric and Gas (SCE&G) will hit its cap in the coming weeks. South Carolina already has the highest average electric bills in the country. Without net metering credits and with the substantial overhead cost of installing solar, PV systems could become economically unviable.
It’s not just electricity customers that will feel the pressure. Just a few weeks ago, Thad Culley, regional director for Vote Solar, told pv magazine that the reaching the net metering caps could put as many as 3,000 local jobs in jeopardy. The affect will first come to workers in sales, with Sunrun estimating that as of August 1 will no longer be able to sell systems that qualify for net metering. From there, installers, especially small solar businesses, will be impacted.
Sunrun Director of Public Policy Tyson Grinstead responded to the cap fulfillment, stating:
It is disappointing to see Duke disregard lessons learned in states like Nevada, where utility self interest caused avoidable job loss. We are hopeful that compromise can be reached between stakeholders that allows solar to thrive again in the Upstate.
Duke has explained that they will still honor electricity sold by customers back to the utility “at the same price the utility pays for electricity generated by large solar power plants.”
Grinstead notes that this represents much less value to customers. Where net metering is a billing agreement with compensation aimed at being easy for the producer to utilize, this secondary system is buy-all sell-all between Duke and its customers. Customers would be selling their power to Duke at the wholesale price, while purchasing power at the much higher retail rate.
The conflict over the net metering caps points to an increasingly divided political landscape over renewable energy within South Carolina’s Republican Party. While Sunrun has described the caps as a mistake in favor of utilities, a number of pro-solar candidates are on the ballot at the state and national level in this November’s elections. The state has fluctuated drastically in national ranks for installed solar, according to data by Solar Energy Industries Association (SEIA). South Carolina fell from the 8th largest market in 2017 to 18th during the first quarter of 2018.
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You’re missing a bigger point about SC PV Installations.
With the 30% FTC already in place, there is STILL a 25% STC AND Santee Cooper is giving out cash rebates for systems.
This means that the Net Metering cap is just a small part of what makes SC solar work. And at this point, it may not matter that they’ve hit the cap, as practically no one sells PV on the basis of the Net Metering ROI anyways since customers can’t build a system larger than 100% offset.
The bigger sell in SC Solar is the fact that they have the highest electric bills in the country. THAT will always remain Priority #1 for customers who end up buying solar. And since electric bills have ALWAYS gone up and have NEVER gone down, do you really believe that the Net Metering cap is going to stand in the way of distributed generation growth?
Net Metering accomplished it’s goal of giving PV a leg to stand on in its re-growth of the early 2000’s, but it really hinders PV’s future growth. The future growth of PV lies in Residential Microgrid and the development of Smart Contracts through Blockchain and Cryptocurrency. This takes ALL the power out of the hands of the Utilities as a middle man and puts it squarely in the hands of forward thinking, community minded residents who have taken the initiative to develop their own ‘neighborhood’ Utility.
Imagine this: A neighborhood like Carolina Forest just outside Myrtle Beach developing PV and Storage enough to install its own Transformer Sub Station. The neighborhood then develops its own Smart Contracts for the purchase of its excess power that includes NOT ONLY other neighboring areas like Forestbrook or Socastee, but Santee Cooper itself. If the neighborhood doesn’t like the negotiated rate and can’t come to terms on a new contract, the neighborhood then has the power to flip the switch at the sub station and simply use its own power without transmission of excess generation. With a dwindling base of customers to draw profit from, it is a matter of time before Santee has to give in to the contract demands of the Microgrid communities to supply larger nearby markets like Myrtle and Conway that are continually growing in demand.
Thanks for noting those details, and providing that perspective on market drivers.
Per the previous comment, I think the difference between rates and bills is important here. Yes, SC has the highest monthly residential electric bills in the country, but this is mostly due to high usage: https://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf
So I’m still skeptical that the distributed solar market can survive the end of net metering, particularly in Duke’s service area. Most residential electricity use is in the evening, so buy-all sell-all arrangements mean that customers are making wholesale for generation, but paying nearly 13 cents per kilowatt-hour for retail.
I think in the long run a move to peer-to-peer electricity trading is the logical result, but I’m not sure how this works with existing regulatory structures, so getting there may be a political battle as well.
Thanks For your response Christian.
In regards to regulatory changes:
Changing the regulatory structure starts with the Blockchain/Cryptocurrency and Smart Contracts that I eluded to earlier. Since that platform is essentially peer to peer unregulated, decentralized currency trading at its basic core, it is above the currently existing regulations per individual governments. As the popularity of those techs grow and become preferred because of their convenience and its ability to cut out the middle man, it will come to dominate the marketplace over the antiquated paper currency currently in circulation. It IS another form of FIAT currency, but built for the new age and economy we now live in.
As to the essence of Net Metering in it’s ability to reduce the electric bills:
There is no way to avoid the day/night conundrum we currently have until we can figure out how to produce electricity at night. Not going to happen with PV. That’s a fact as clear as day is to night 🙂
I think the best way to mitigate this is Energy Efficiency. Finding a way to mitigate electric used during the day when HVAC’s and Hot Water heaters are still cranking during the day when the majority of consumers are at work. Those two techs are the biggest energy consumers of any household, and have largely remained unchanged in the last 20 years. Sure, some efficiency changes to each item have been made, but ask any spec home builder, and they are still installing the cheapest tech they can buy in bulk, which leaves a LOT to be desired in the way of efficiency.
Super insulating the houses, changing the HVAC/DHW tech and the biggest one, awareness and timing of personal consumption, can help to mitigate the cost of nighttime use. Is it a end all, be all fix? No. Is it a step in the right direction? Absolutely, regardless of whether a consumer installs PV or not.
So in response to Net Metering being a pitfall to new PV construction. Yes, in the short term it may be a hinderance to the consumer as they learn how to mitigate their energy use, but as the electric bills continue to grow as Utilities continue to charge more, consumers will eventually get fed up with how insanely high those bills are and will make the one time down payment to permanently reduce their bill.
You and I both know it’s a matter of time before the Utilities cut their own throat with rate increases that they push away consumers to PV. It’s not a matter of IF, but WHEN.
Interesting question though. With Santee Cooper being a state run Utility, and the SC House killing the Bill that would lift the Cap to 4% DG, did the Government just buy itself time and money by voting to turn down the Cap increase? Wouldn’t that be a (major) conflict of interest to the residents of the state?
Thanks for your perspective on the blockchain/cryptocurrency issue.
I think we agree on most things here, but I want to note that PV _can_ meet evening demand when paired with batteries. When paired with either oversized li-ion batteries or flow batteries, it can meet overnight demand. I think we are going to see more and more of that as time goes on.
Also, I was not aware that Santee Cooper was publicly owned. That is an interesting wrinkle. But whether publicly owned or merely state-granted monopolies, there is a major conflict of interest with utilities using ratepayer money to fight to maintain their monopoly.
Finally, I think you need to watch the rate increases. If utilities increase rates through increasing fixed charges (like minimum bills) and demand charges but not the energy charge, then they also undermine net metered solar. Until you have peer-to-peer trading of electricity, these utilities will be holding their customers hostage.
It might be good to start with facts – North Carolina does not have the highest electric rates in the coutry as stated in this article- “state with the highest monthly electricity bills in the country”.
Hawaii has the highest rates in the country, Connecticut is 2nd, New Hampshire is 3rd (at typically $.165 – $.175/KWh). Residential electricity rates in North Carolina average 10.91¢/kWh, which ranks the state 32nd in the nation. The average residential electricity rate of 10.91¢/kWh in NC is 8.16% less than the national average residential rate of 11.88¢/kWh
Hello George. We didn’t say highest electricity rates – and yes we are familiar with those. We said highest electricity bills. South Carolina’s relatively high electric rates for the South (which generally has some of the cheapest retail power in the country) _combined with very high electricity usage largely due to air conditioning_ result in the highest monthly bills, per what Tim stated in the article.
Also, South Carolina, not North Carolina.
See: https://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf
I sympathize with the ratepayers in South Carolina. Here in Georgia, the legislature tried to give individuals the option to install solar and finance it through third party investors, but because of a backroom deal between the Georgia Public Service Commission (GPSC) and Georgia Power, the language in the state statutes that implies net metering with net excess credited at avoided cost is being applied as a net billing scheme and as a consequence the impending buy all-sell all you describe in South Carolina is already the practice here.
The GPSC has turned a blind eye to this illegal interpretation because Georgia Power agreed to offer time of use rates that offset the economic impact on its rooftop solar customers. Allowing the time of use rate scheme as an acceptable alternative has resulted in nullifying the third party financing law that was supposed to help everyday Georgians afford their own rooftop solar.
Because the unregulated electric cooperatives were asked by the Southern Company to follow the Georgia Power lead and use the same net billing scheme, distributed solar growth in the predominantly rural rest of the state has been nearly non-existent. The Southern Company and Georgia Power have used the market advantage they gained when they economically excluding distributed solar for everyday Georgians to invest heavily into utility scale projects. In doing so they have managed to raise Georgia into one of the top ten states for solar power generated, and they did it in just five short years. Does the end justify the means?
As your readers probably already know, Southern Company has now turned around and used the third party investor law to sell off a third of their solar holdings (about 1.2 billion dollars worth) to investors to pay down bad debt in Mississippi and on their overbudget nuclear reactors at Plant Vogtle here in Georgia. How is the process by which Southern Company and Georgia Power influenced the solar market in Georgia to acquire their utility scale holdings not a FERC violation for market manipulation? How is their coercing of their affiliated EMC co-owners of Plant Vogtle to establish the net billing scheme not seen as anticompetitive and a conflict of interest?
I am personally feeling the domino effect of the GPSC regulatory lapse first-hand as a solar-producing Rayle EMC ratepayer. If my usage drops below my maximum output during the day and energy leaks onto the grid I am credited about 4 cents per kilowatt hour for it, but if the heat pumps kick on 5 minutes later and we are using appliances that together cause our usage to exceed our production, we are charged upwards of 14 cents per kilowatt hour, more than three times what they gave us for it only 5 minutes earlier.
To their credit, the GPSC recognizes there have been downstream effects of their approach with Georgia Power, and have in at least two cases successfully helped rooftop solar customers work with their otherwise unregulated EMC providers to remedy unfair billing practices. The GPSC asked Rayle to consider a more equitable exchange by offering us a time of use arrangement similar to the Georgia Power rate structure but they politely declined.
Short of me filing a lawsuit against my utility, the end result is that it will take me at least another 4 years to pay for the solar installation I had originally timed to pay off before my retirement.
In case anyone wants to believe the electric utilities in Georgia are correctly interpreting current rules, in order to break even on my metered energy consumption under the currently practiced billing methods I would have needed a system that generated more than 130% of my annual use, but that would have been illegal based on current the 125% limitation written into the statutes. The legislators wrote in that limitation and the avoided cost as payment for any net excess energy generated to prevent people from oversizing systems as a way to make money.
I firmly believe, based on the language of the Cogeneration and Distribution Act of 2001, that the legislators didn’t intend to discourage everyday Georgians from adding power to the grid for later use.
I also firmly believe the legislators didn’t realize at the time the power companies would be allowed to subvert their language and use it to squash any competition from distributed solar so they could build their solar capacity almost exclusively through utility-scale projects. Otherwise why would there be a need for a 2% cap on mandatory purchase of distributed solar energy?
Finally, I have to believe that the legislators did not intend to pass legislation that could be co-opted by the utilities to provide a clear market advantage they could use to enhance their monopoly and improve their overall bottom line. I hope South Carolina can learn from the Georgia experience so their legislative actions can send a message of fairness. I hope they might in turn provide a moral compass for the regulatory system in Georgia to enforce the current laws as written and correct the inequities their willful misinterpretation has created. It may be my best hope for fair treatment now and the retirement I originally envisioned.