For the first time in a decade, the Montana Public Service Commission (PSC) has ruled on a general rate case from NorthWestern Energy, the state’s largest investor-owned utility. While that is certainly noteworthy on its own, it’s the content of the decision that draws our attention today, not the rarity of it.
This is because the PSC officially shot down NorthWestern Energy’s proposal to change the way net metering customers would be charged for solar power. The proposal actually included twofold action on net metering: establishing a separate rate class for residential customer generators and a demand charge.
NorthWestern’s proposed demand charge of $7.69/kW-month would amount to approximately $45/month for the average NEM customer, while the separate rate class would have meant an export credit rate of $0.063/kWh, 44% less than net-metering customers currently earn for their excess electricity.
Additionally, ehe regulators adopted the a measure to maintain retail rate net metering until rooftop solar adoption reaches 5% of NorthWestern’s peak load. NorthWestern Energy can request an earlier review if they provide new evidence based on proper methodologies, though any future changes to solar rates would still need to occur in a general rate case. Vote Solar and the Montana Renewable Energy Association estimate that rooftop solar is currently only 1% of NorthWestern’s peak load.
In a statement following the PUC’s decision, solar advocates like Andrew Valainis, Executive Director of the Montana Renewable Energy Association, praised the ruling:
Montanans value self-reliance and resilience, two important benefits of rooftop solar and other distributed generation systems. The ruling today preserves and protects those values. We are thrilled at the ruling, which is a win for Montanans and for small businesses in a growing industry.
While the retention of net metering in Montana is a good decision for the health of a rooftop solar market that is barely in existence as things stand, demand charges are not quite as catastrophic as you may be led to believe.
Over the summer, researchers at the US Department of Energy’s Lawrence Berkeley National Laboratory (LBNL) published “Implications of Rate Design for the Customer Economics of Behind the Meter Storage.” The report models how electric company demand charges and electricity pricing arbitrage drive the economic payback of energy storage when installed behind the meter.
What the report found is that a $7/kW demand charge will drive a 10-year payback, Moreover, if your demand peak aligns with the evening demand window, the payback period is higher. That’s where storage comes in. Energy storage can increase potential revenue by allowing customers to avoid those times where the demand cost is the highest (peak demand).
All that being said, Montana is still a state where rooftop solar meets 1% of the peak load. Because solar is so scarce, the potential payback benefits of a battery are outweighed by the amount of customers who would find solar financially unviable due to the demand charge and decreased net metering rate.