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).
This means that under net metering & ill-design residential electricity rates, expenditures for low income customers could rise substantially, while high income customers benefit predominately from rooftop solar. This isn't the equitable clean energy future many are striving for! pic.twitter.com/E5nGR4clns
— Scott Burger (@burgersb) September 6, 2019
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):
I take your point about redundancy from an economic efficiency vantage – but I think there are often economically inefficient policies that serve important political economy purposes. Regulations layered on top of a carbon price can shape winners and losers from policy regime …
— Matto Mildenberger (@mmildenberger) September 11, 2019
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:
There's economic models and theories. And then there's political economy.
Carbon pricing has struggled enormously in the latter sense. That matters for how we think of the tool.
— Leah Stokes (@leahstokes) September 11, 2019
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.
And so, DOWN WITH NET METERING! LONG LIVE NET METERING!
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.
The largest cost to utilities is peak load. Solar alone can exacerbate load demands. Solar + storage, on the other hand, could bring the solution. In order to maintain some form of net metering, solar generators may need to support some form of storage. This could come in the form of their own stationary battery, an EV via V2G or V2H, or an agreement to pay for the usage of another aggregator or to the utility itself. The optimum being a little of each. A 15kWh stationary battery + an 80 kWh BEV via V2G would be light years past agreeing to let the utility turn devices like hot water heaters on and off during demand periods. Eliminating peak load plants just takes all the wind out of costing the little guy argument.
I agree. Net metering should be mandatory until the peak is eclipsed by solar and a duck curve is beginning. Then the early solar adopters should be rewarded for their early adopter spending and be grandfathered in for 5-10 years.
I would actually go further than net metering though – solar should be paid at the same rate as the most expensive generator that must be called upon to meet the load. This would encourage utilities to retire the most costly generators so they don’t have to pay distributed solar the same rate.
To largest cost is the stockholders that benefit from profits and the fucking over of the subscribers paying for everything else like growth, expansion, upgrading and loss due to unseen expenses like weather and other acts of “God” aka a loss.
I looked into how much I would have to borrow to either:
1. Buy sufficient shares in the local utility to receive $100 after tax toward paying my $200 piwer bill or,
2. Put solar PV panels on my roof that would knock $100 off the power bill.
The winner was rooftop solar PV, in a deregulated environment where I still pay the same grid usage fees as everyone at night or when I run the clothes dryer.
Not really seeing where the evil lies with net metering. Or with holding stock in the power company.
Interesting: “I like to think of this like property taxes for the public school system. Imagine I had 2 kids. I send them both to public school for years, but decide to send 1 to private high school. Do I stop paying 1/2 of my property taxes? No! The infrastructure exists & I have to pay!”
This guy doesn’t buy a new car every few years? I’ve actually witnessed a couple of grammar schools shut down when the age group of the students in a “service” area moved on and there wasn’t a student to teacher ratio that would sustain the school’s operating costs. Less bodies in the ‘required’ age group, less monies allocated to the school.
The ‘tell’ and ‘smell’ of institutionalization. His affiliation with academia has bent his reasoning into the circular, it’s established, it must have worth. Then why throw away the money for the one kid’s high school education?
“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.”
On old home PV systems, reconfigure the system to be a “net generation” consumer, one that self consumes the majority of solar PV power generated by the system every day. For new systems, install the latest/greatest solar PV and put in a smart ESS that can decide when to charge the battery pack and from what source, solar PV during the solar peak day, off peak or super off peak power storage for arbitrage during peak demand times of the day or TOU rate spiking. Make a 2,500 square foot house look like a 500 square foot bungalow to the power company, there wouldn’t be enough profit left for slush money.
As for utilities, APS in Arizona put in a Punkin Center solar PV system, with energy storage in the small community, instead of trying to replace 30 miles of copper wire in rough terrain.
Perhaps a more reasonable comparison of the electeical grid would be to compare it to the information grid. In a century we’ve gone from telegraph to voice to wireless + undersea cable to satellite and digital copper to wireless + fiber optic + satellite.
Surely the transmission of energy will have to advance at least a little, along with conversion technologies.
Maybe it’s time to lay the Edison Bulb socket to rest in favour of a low voltage DC standard for LED lighting with battery backup.
Maybe every building would receive its energy primarily from rooftop solar, with backup power available in gaseous form and use a fuel cell to provide electricity and heat / hot water.
Maybe the old power grid and gas grid would combine into a waste electricity collection, gas conversion, and gas storage system where buying and selling continues based on supply and demand
But to go on endlessly about it being unfair that the poor have access to fewer resources to buy every new technology and product from insulation to stainless steel to electricity and cigarettes than the rich… yes, obviously they do have fewer resources. Access to a dictionary would tell me that. Whether it is also unfair and unjust… it depends on the individual.
The school tax argument is odd, there being no relationship between property ownership and number of children needing schooling. You could have two children and I have none, yet I pay property tax.
The most fair system would attempt to understand underlying cost drivers and charge / reimburse accordingly. A deregulated free energy market where grid transmission and generation have separate floating prices should automatically result in the lowest total price.
Once rooftop PV and storage are treated as just another commodity, and grid customers have access to sufficient storage to weather or even take advantage of price spikes, the monopoly is broken and it’s impossible to do an ‘Enron’ on customers.
Net metering, carbon tax are irrevelant! The orinonal idea was we needed wind and solar because oil would get scarce and expensive. Today we have record low LNG prices, and OPEC keeps cutting production while still projecting demand growth. While wind, solar, batteries are still around 8% of US electricity out put. The US has been the market maker for the petroleum industry since World War One.
The Koch bros realized how quickly other sources, and choices to costomers would tilt their wind mill.
The enemey is cost,and the monopoly restrictions, many electric utilities will combine and consolidate to hold market. As low cost renewables expand past 20% they will be filing for reorganization, unless the can make up market loss through the sale of services to transportation. We will see what happens first.
The duck curve could become irrevilant also heat pump water heaters will reduce energy consumption massively. Simple timers could do most of the rest. If you can lower the cost of hydrogen, ammonia production many power plants could run a high capicty just shifting back and forth between markets.
“The original idea was we needed wind and solar because oil would get scarce and expensive….”
Not so. The goal is to reduce carbon emissions. As oil consumption drops, the supply/demand balance will shift and oil will get cheaper due to reduced demand. In the limit when demand is zero the price will be zero.
Here in California, peak load occurs in late afternoon and early evening in the summer due to A/C load. The issue could be partially addressed rather easily by having the NEM rates vary more according to system demand. Although rooftop panels generate more power with a true south orientation, if the reimbursement rates were higher in our peak demand hours, I suspect that people would begin to install their panels with a more westerly orientation. The infrastructure and technology is already deployed, our TOU pricing is just overly simplistic by breaking the windows into 3 bands in the summer that do not really map to well to actual peak demand. NEM and TOU need to be improved and be accurately mapped to local (not state or utility wide) demand conditions. This really isn’t that hard.
Our air conditioning season is short, some years it’s not much more than ‘Stampede Week’, but we generally run it during the day to keep the house and contents cool all day (and it’s well insulated) and to mostly use solar (our net evil feed in tariff sell price is only 1/5 of the net buy price at midnight, they pay us $.05 for excess PV output but it’s $.25 when household load exceeds PV production)
Our rooftop PV on a southeast / southwest orientation because that was where the roof was, and we could get by with a smaller inverter. We do get a steeper, wider output curve, but we find that we get a lot of low output afternoons due to cloud buildup and thunderstorms.
To really shift A/C loads off peak there are systems like Ice Energy’s water-freezing units – they ‘make cold’ when the energy is cheapest or when the outside air is coolest.
As you say, a feed in tariff that matched the market demand and peak price would provide an incentive to place solar to match when possible. Solar isn’t having a noticeable effect here, and much of the demand is industrial – they don’t shut down Alberta’s pumpjacks and gas plants at five – so we’re not going to see a ‘duck curve’ for another decade or two.
There is clearly a problem with net metering. If you can afford a PV system, it forces the utility to buy your electricity at what are above market prices, and that cost is pushed on people that cannot have a PV system. So it is an intervention in the market that benefits the rich at the expense of the poor. So this is not people saying its unfair that if you are poor you have less means. It that the government is intervening to help the rich get richer.
I’m all for solar power, and I even have a PV system and benefit from feed in tariiffs, but I really think there must be more equitable ways of reducing greenhouse gas emissions. That BTW is normally the stated purpose of net metering laws.
Reducing the monopolies of electricity generators is also a good, and I think there are many ways to do that , but there are many more direct ways of doing that also – the EU electricity markets for example show how.
Having said that, if there is no possibility to feed in generated electricity, to make a PV plant pay you will probably need a battery, for example in Germany where I sell at 11c/KWh and buy at 27c/kWh, I figured storage would have reasonbable ROI. However having storage in every house goes counter to the goal of reducing green house emissions IMO it should be avoided. A virtual power plant with a shared battery that would buy the net excess electricity from many people with PV, and sell it on when needed at market prices would be much more effective and would not burden anyone. Regulations to enable that would be welcome.
The political situation in Germany is different than the USA, and my far away view of your world suggests that if I were in your shoes my answer would be closer to yours. There’s probably a nice volume of solar power and storage per local feeder line based on homeowners needs, as well to give group resiliency. I’m no statistician, but I bet we could gain a grid herd resiliency with 20-50% of homes having some mixture of solar, storage and vehicle. Some of those VPPs you suggest could probably do the job as well, but maybe on a substation level instead of a local powerline.
If I see energy politics change in the USA, I’ll jump on your plan.
I don’t know much about the taxation ans social welfare systems in Germany, but I feel safe in assuming that it is a progressive income tax with the stated aim of taking from the rich to give to the poor.
If adoption of solar PV does begin to become a n undue burden to the poor, surely it can be sorted out by tweaking the mix of fees paid for electric service, or adjusting tax rates and social programs.
Certainly rooftop PV with community storage could make sense. Perhaps community level underground DC wiring to collect solar to larger storage + inverter hubs, and AC wiring to meter the usage back would be the most efficient for new construction.
At the extreme, no-one would willingly fork over $30,000 + sales tax out of their after- 48%-tax money to buy solar PV for a one seven billionth share of the planet saving benefit. There has to be a benefit to me.