The necessary evil that is net metering


The system is structured so that the Legislative Branch creates the laws, the Executive Branch executes the laws, and the Judicial Branch oversees the application of the laws to determine if they are justly applied. This structure is in place to check the power that we humans seek to acquire in our short time on this rock. Net metering is a check on the monopoly power of electric utility by the people. And this value is found in equations far more complex than modern mathematics, with our simple computers, can manage.

Former rooftop solar installer, who also happens to be a PhD candidate at MIT, Scott Burger has shared his pre-publication dissertation – Rate Designs for the 21st Century: Improving Economic Efficiency and Distributional Equity in Electricity Rate Design (dropbox link). The paper analyses how electricity bill expenditures would increase as the number of homes with 100% net metering agreements in place trends toward 75%, and how those expenditure increases fall across the economic spectrum – namely that they’ll be most heavily felt by those in the poorest 20% of society.

Burger best communicates his research via the Twitter thread below – in which the key tweet notes how as net metering penetration percentages rise, the increases in electricity bill savings versus expenditures accumulate greatest in the poorest quintiles of society (the white line being the poorest 20% of society).

For many reasons, a system of this nature cannot continue unabated into the future. Luckily it won’t as the system that this data point exists within is far greater, quite complex, and ever changing. More importantly though – we must grasp, and never forget, that the value of distributed electricity generation is far greater than the electricity bills that we pay monthly. Net metering is a tool of the political economy that is used as a check on the accumulated power of the electric monopoly structure in the United States.


A more complex humanity

Before we get deep in the political philosophy, let’s first look at some quantitative analysis of the value of distributed – namely residential rooftop – generation, and then net metering separately.

First off, is the argument that utility scale solar power generation is “cheaper” than rooftop. In a most simplistic analysis, such as by saying some random record contract pricing represents a cheaper pure generation price (1.997¢/kWh) than rooftop solar, you might win an argument with me as I’ve only projected rooftop solar generation to hit 2.5¢/kWh as California’s rooftop mandate gets rolling.

Continuing, we’d then begin to discuss the actual price paid by the customer (>20¢/kWh once all the costs are added in for the above case), as well the need to add energy storage to be truly grid independent. At this point, I’d remind you that if the customer’s solar+storage system ever pays off relative to their electricity bill (and without incentives they always do in less than twenty years) – then it is cheaper to own their own solar+storage system. And I’ll repeat, rooftop solar+storage that pays off, is always cheaper than the electricity grid subscription model we pay.

Moving on towards the costs of distributed solar, in Burger’s podcast on his dissertation, he notes that research suggests a majority of the distribution network power grid upgrades in Pacific Gas & Electric of California’s territory – for the decade preceding 2018 – were driven by distributed generation upgrade requirements. It makes sense that completely changing the structure of the power grid will bring on upgrade costs. Per the EIA (below image), in recent times, we’ve seen electric utilities make use of this logic in many rate design cases as they shift the costs they charge for electricity from generation assets to transmission and distribution assets.

Let us be clear though, that this shift in regulated and approved spending is based on values submitted by utilities, utilities who are known for “gold plating” CEO offices and severely under investing in transmission, due the ease of building new generation assets relative to the NIMBY concerns of powerlines. Now, as pressure comes from below in the form of rooftop solar, this evolution in pricing structures to keep up utility returns on investments are an expected progression.

However, before we absolutely place this progression pricing changes upon the shoulders of the near two million solar power plants dispersed about the United States, let’s talk about how net metering helps the grid. For one, we have seen California state that some share of $2.6 billion in power grid transmission and distribution costs were saved due to distributed solar power. We’re seeing this sort of thing in smaller manner as wireless solution arise – for instance a 1.7 MW  / 7 MWh battery saving powerline upgrades.

We’ve also got solid research that suggests until an specific power grid circuit meets 20% penetration, the upgrade costs are close to negligible (pdf).

Next are the jobs that distributed solar power installations are driving, and it happens that these positions are on one of the fastest growing in the United States. This residential solar “inefficiency” generates employment income for the same blue collar, low wage quintiles, that probably can’t afford to install solar. Maryland research suggested an eye popping value of ~31-42¢/kWh in benefits for distributed solar power. The retail costs of electricity in Maryland range from 9.5-13¢/kWh. And a collection of studies published, by my favorite net metering internet link, shows broad academic acceptance that net metering brings great benefits, far greater than what those who install are paid.

Yes, it costs money to upgrade the grid for distributed solar, but it also saves in many places – while generating income for 250,000 industry employees.


The Man

Of course though, I’ll be blunt, none of the above is the main driver of my political economy position on net metering. And the person who said it in the most compelling manner recently was Mr Matto Mildenberger in a recent conversation concerning carbon taxes (please click his tweet and read the second tweet that follows the one below):

Net Metering is about balancing the political power that electric utilities have acquired during the hundred plus years of monopoly power they’ve held across the United States. This monopoly power has allowed them to capture, in many states, the regulatory structure that is known as Public Service Commissions. These inherently political positions have been spoilt by our modern capitalist system with its inherent money system. As we’ve seen electric utilities pay actors to boo solar power, or – in a great danger to our species – to ignore the reality of climate change while pushing fossils since the 1960s – we the people need a tool to attack the pocket books of utilities and force change.

One could argue, that the death spiral talked about by electric utilities and the massive amounts of solar being built now, have been driven by the fear of these net metering customers. And that’s my position on this topic, and why the very narrow scope of research like Berger’s – on a day in which Louisiana just stole net metering from the people – does not, and cannot, grasp the broad political economy values created by our simple policy of net metering.

A very strong wording of this logic, by Leah Stokes below, also applies to our lack of use of other seemingly “efficient tools” like nuclear power and carbon taxes:

In these words we see a recognition that our overly simplified mathematical our models, as they must be to be manageable, are simply not complex enough to directly model our political economy. And politics is the most complex of all sciences, as all of the simpler science’s effects accumulate underneath humanities most broad aggregation of ourselves.


The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.

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