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Net Metering for Rooftop Solar: How to Fix the Problems

Full Spectrum: Energy Analysis and Commentary with Jesse Jenkins

Summary: Net metering policies are effective at supporting solar power adoption but can threaten the financial stability of electricity distribution companies and result in cross-subsidies between electricity users once solar penetration grows. The solution is to align network charges with the real drivers of network costs.

A widely adopted method to encourage distributed solar photovoltaics (PV) may cause real problems once solar adoption reaches high levels, according to a new paper by researchers from the Instituto de Investigación Tecnológica (IIT) at the Universidad Pontificia Comillas in Madrid and the Delft University of Technology (TU Delft).

Under “net metering” policies adopted across most of the United States, Spain, and other jurisdictions, owners of solar can offset their charges for electricity consumption by feeding excess energy back into the grid. In some cases, net metering can reduce electricity bills to close to zero.

Net metering has proven effective at incentivizing solar adoption, but as solar penetration rises, these policies also give rise to new problems.

Electricity distribution companies typically recover most of their costs through volumetric charges per kilowatt-hour of energy delivered across their networks. Yet while charges are based on energy delivered, most distribution network costs arise from fixed investments in wires, transformers, and other equipment sized to meet peak demands. To be clear, this mismatch between (mostly) fixed costs and (mostly) volumetric charges predates solar adoption and can cause inefficiencies and cross-subsidies on its own. Yet when volumetric network charges are combined with net-metering policies, the results can threaten the cost-recovery of distribution utilities and give rise to cross-subsidies between network users. 

According to the paper, a typical Spanish residence with a 2 kilowatt solar system could offset 69% of their volumetric charges if consumption and production are netted out daily, 77% if credits can be saved across a month, and 99% for a full year rolling credit. If solar penetration rises to 20%, that could threaten 8-20% of a distribution company’s revenue. If utilities raise rates to cover these shortfalls, customers without solar end up paying more while solar owners continue to offset most of their bills through net-metering, resulting in cross-subsidies between electricity users.

The solution, according to the researchers, is to align network charges with the real drivers of network costs. That would include a blend of capacity charges based on a network user’s contracted or measured peak in electricity consumption and production and smaller volumetric charges for electricity consumed from or injected into the grid. To support solar PV adoption, implicit net-metering subsidies should be replaced by explicit supports for solar production or investment.

With solar penetration growing rapidly in many countries, the time is now to fix these issues and keep both solar growth and utility revenues healthy.   

Publication: “The economic effect of electricity net-metering with solar PV: Consequences for network cost recovery, cross subsidies and policy objectives,” Energy Policy 75 (2014): 244-254.

Authors: Cherrelle Eid is pursuing an Erasmus Mundus Joint Ph.D. degree in Sustainable Energy Technologies and Strategies and is a visiting PhD researcher at the Institute for Research in Technology (IIT). Dr. Javier Reneses Guillén is Associate Research Professor at IIT and Dr. Pablo Frías Marína is a Professor of Electrical Engineering, both at the Universidad Pontificia Comillas in Madrid. Rudi Hakvoortis Associate Professor at the faculty Technology, Policy and Management of Delft University of Technology.


Note: This is article is part of an ongoing series of concise summaries of interesting and important conclusions from new research and peer-reviewed journal articles. This series at Full Spectrum is written in partnership with Observatorio de las Ideasa Spanish-language publication which finds and summarizes important, cutting-edge ideas for policy makers, business leaders, and others on key topics like energy, health care, economics, and more.


Conversation Starters:

  • As solar penetrations rise, when should regulators prioritize a “fix” to net metering?
  • What would be the best way to incentivize solar while preserving the financial viability of network utilities?
  • Can we avoid a solar vs utilities war? Or with new competition, is this a fight we can’t avoid?
  • Solar is the first distributed energy resource reaching significant scales. But batteries, microgenerators, fuel cells, active demand response, and electric vehicles are gaining ground as well. How do we adapt regulation of utilities to facilitate adoption of these distributed resources and encourage their efficient siting and use?
Jesse Jenkins's picture

Thank Jesse for the Post!

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Discussions

Joris van Dorp's picture
Joris van Dorp on Jan 14, 2015 3:14 pm GMT

Good article. Now, to implement the recommendations. That will be fought tooth and nail by solar groups and related politicians. In the Netherlands, proposed reforms to make net-metering subsidies for rooftop PV equitable, sustainable, efficiency and targetted to enhance sustainable development have been struck down by the Greens repeatedly, and the deadline to resolve these (already acknowledged) issues as noted in this article has been moved out to 2020.

So it doesn’t look like it will be easy to reverse the current costly and inefficient net-metering policy in the Netherlands. Of course, that was the stated intention when the law was introduced.

In the Netherlands, Green strategists had openly noted at the time that net-metering would provide such a generous gift to owners of rooftop solar (in combination with FIT’s) that the increasing number of rooftop solar owning voters would help prevent the net-metering law from ever being overturned, which they regarded as a good thing. These Green also openly noted that they learned this strategy from Germany, where net-metering and FIT’s have caused massive overconsumption of state subsidies for rooftop solar on the one hand, and on the other hand political gridlock preventing the solution of the problem with net-metering as privileged owners of rooftop solar now succesfully defy attempts at restructuring this overly generous and wastefull form of subsidy.

Josh Nilsen's picture
Josh Nilsen on Jan 14, 2015 4:11 pm GMT

Any knowledgable person can easily see the only thing utilities are doing is strangling the last mile and forcing their customers to pay for their bad investments.  

Their entire core business model is obsolete and they’re going to try and take people down with them.

Expect to hear “TOO BIG TO FAIL” real soon.

I’ve been paying ComEd a long time, they have no interest in saving me money.  They want my bill to stay high with artificial charges while I use less electricity.  The exact same garbage the ISPs pull.

Engineer- Poet's picture
Engineer- Poet on Jan 14, 2015 6:01 pm GMT

Echoing what Joris said but from an American perspective, such reforms will necessarily kill the incentives to install grid-tied solar PV (alone).  This is why net-metering pressure groups have names like TUSK, Tell Utilities Solar won’t be Killed.  Half of the crisis is due to grid-tied PV users not “eating their own dog food”, demanding that others eat their noon-time surpluses instead.  That road ends in tears.

Reforming billing to energy + peak power (in or out) + transmission cost fixes the problem at the utility end.  It also allows consumers to save at the edges of the grid, but the means required are very different from the highly visible, sexy rooftop of PV.  Managing demand via systems like off-peak water heating and ice-storage A/C can slash the peak demand and the associated line item on the bill.  They’d also allow the PV owner to “eat all their own dog food”, soaking up most of their own production.  But are people going to even understand it, let alone leap to adopt it?  Color me skeptical; there’s too much noise in the air already.

Paul O's picture
Paul O on Jan 14, 2015 7:43 pm GMT

Josh,

What I hear from you is that rather than (by buying batteries) using the power you produced from your own PVs by your own choice, you want to foist your unwanted excess power on the utility, and force other power users (some of them poorer than you), to pay for the power you refuse to gnerate for yourself and the grid maintenabce you benefit from whenever you self power to the utility, or take power back from them?

Am I right?

 

Jesse Jenkins's picture
Jesse Jenkins on Jan 14, 2015 7:53 pm GMT

Paul, let’s tone down the rhetoric a bit. 

Why would you assume that any injected power from PV generators is “unwanted.” Unless PV penetration is very high in the local feeder, injected power is consumed nearby by other electricity users. There are significant economies of scale/scope in electricity networks, as you well know. The idea that everyone should go it alone and “eat their dogfood” as another commenter pointed out, is pretty simplistic thinking.

As long as all network users are paying/being paid for the costs/benefits they incur on the system, we are all better off if we participate in a power system, rather than disconnect or go it alone.

Jesse

Roger DePoy's picture
Roger DePoy on Jan 14, 2015 8:52 pm GMT

I believe that Paul’s point is that when net-metering pays the solar users at above market rates, the non-solar customers are indeed subsidizing the solar user. The utilities are not paying a premium to the net-metering customer out of the goodness of their hearts! And there are indeed many in the non-solar user base which are low-income, and will be adversely affected.

Schalk Cloete's picture
Schalk Cloete on Jan 15, 2015 8:18 am GMT

The solution is of course to price electricity according to its real cost drivers as the paper suggests. The vast majority of electricity costs are CAPEX related and setting prices as if most costs were OPEX related will naturally lead to substantial capital under-utilization and other economic inefficiencies. 

Presumably the main reason why such inefficient rate structures are implemented across the world is because it is simple. Basing electricity bills primarily on consumption rate (load) during peak times will be complicated and can also result in some very unhappy constomers when they receive a nasty shock due to a few minutes of accidental high consumption at the wrong time. Perhaps smart meters will solve some of these issues in the future. 

The other problem with implementing these more economically efficient rate structures is of course that it will kill the distributed PV market. As is common with subsidized energy, a large industry has now developed that is completely dependent on continued subsidies for its survival and this will make market reform progressively more difficult as the industry grows.

As a last point, it should be pointed out that, as more utility scale clean energy resources are brought online, the economically optimal rate structure will shift even more to the CAPEX side, thereby completely wiping out the business case for rooftop solar. Since OPEX-type $/kWh costs will be close to zero in this case, savings from rooftop PV will be negligibly small as long as a grid connection exists. The tiny offgrid market will be the only viable business case in such an environment. 

Bas Gresnigt's picture
Bas Gresnigt on Jan 14, 2015 11:17 pm GMT

There seems to be at least an ethical and an economic issue.

Ethical
Here in NL hiring a garden maintenance service implies that ~50% of the money that I pay them goes to government who uses it a.o. for maintaining the road on which I drive.

If I stop hiring and use the saved money for a long holiday in Switzerland, than Dutch government has to increase taxes in order to collect the same money for maintaining the roads, etc. Roads that I use.

In that situation, nobody will accuse me that I’m sponging / freeloading.
So, than net metering isn’t sponging / freeloading either.

Beacuse in both cases:
– I decrease my payment to maintain the common good (road / grid) that I use;
– I still use the common good, though less than before.

So people who argue that net metering is freeloading are either hypocrites or miss some sound thinking or think that keeping holidays abroad is also freeloading (contrary to almost everybody else).

Paul O's picture
Paul O on Jan 15, 2015 1:15 am GMT

Jesse I did not construct my question sufficiently well, and  Roger helped me out.

Frankly I am quite annoyed by people Vilainizing the Utilities and casting aspersions on them, when if one were to drill down to the bare facts and bottom line, the folks Villifying the utilities are just being selfish. 

The truth, to me as I see it, is not that these folks really want to save the planet by buying PV’s (that’s the line of the greenies), to me it seems they are simply trying to save some money and cash in on a bill of goods/fad sold by PV installers and salesmen.

I happen to think that the distributed Solar PV paradigm is extremely flawed and won’t save anything (planet). In the end it won’t even eliminate the grid, it might socialize it. There will still be a grid, (how else will we connect to Wind Farms), it will still require maintenance, and someone will still have to pay for that.

If we trully want to employ solar power as part of a CO2 reducing plan, then Utility based PV (just as utility based wind farms), is far better than the distributed stuff.

Nathan Wilson's picture
Nathan Wilson on Jan 15, 2015 4:09 am GMT

Now, to implement the recommendations. That will be fought tooth and nail…”

This is another instance of the general need to implement a change for good public policy when there is lucrative market that depends on maintaining the status quo.  We (ironically) see the same thing trying to implement anti-pollution/CO2-emissions regulations.

I would think it would help if activist groups would push for more technical competance in political appointees and more technical and science based decisions from government, and not just  push their own ideology.

Math Geurts's picture
Math Geurts on Jan 15, 2015 10:23 am GMT

To prove your statement, for Germany: “Speaking at the “2nd inverter and PV System Technology Forum 2012,” in Berlin, German renewable energy expert Professor Volker Quaschning, of the University of Applied Sciences, was met with applause when he suggested that Germany could meet a target of 100GW of rooftop solar by 2020 and 200GW of solar by 2030.”

source: http://bze.org.au/media/newswire/why-germany-should-aim-200gw-solar-120206

Meanwhile, in 2014, less than 2 GW PV is added to reach 38.5 GW. The government’s target of 52GW (for all PV-plants) in 2020 propably will be missed, and the government does not seem to have a problem with that. By the way: quite a big share of these 38.5 GW is not rooftop, even if in Germany quite some 30 kW “rooftop” plants exist.  

Overall there are about 1.4 million PV plants in Germany. If that all of these would be regular 5 kW solar rooftops it would be just 7GW. 

 

Math Geurts's picture
Math Geurts on Jan 15, 2015 11:20 am GMT

.

Math Geurts's picture
Math Geurts on Jan 15, 2015 11:18 am GMT

The ultimate proof of your statement, for Germany:

“Zum Abschluss ihrer Rede betonte Merkel, dass der BEE mittlerweile einen großen Einfluss im Bundestag habe. Reformen ließen sich nur noch schwer gegen den Widerstand der Erneuerbaren durchsetzen. Sie appellierte an die Branche diese Macht verantwortungsvoll einzusetzen”

Read more: http://www.pv-magazine.de/nachrichten/details/beitrag/merkel–atempause-fr-die-photovoltaik_100017860/#ixzz3Ot4nQ6Fo

Spec Lawyer's picture
Spec Lawyer on Jan 15, 2015 9:50 pm GMT

At this point, I don’t see any problem.  The utilities fought hard against a feed-in tariff program and accepted net-metering instead.  And now when solar PV is taking off, they want to kill off net-metering.

Sorry, the world is changing.  Deal with it.  Newspapers didn’t get to ban the internet when the internet took off.  

Maybe when you really start to suffer, we can adjust the program a bit.  Or you could take Steven Chu’s advice and get into the solar PV installation game.  

But if/when we eventually have to adjust the net-metering program, we are also going to have to raise the caps on the number of homes allowed to do net-metering.

Climate change is real.  There is a strong public-policy reason to encourage this.  Sorry your 19th century business model doesn’t work that well any more.  But times change.  

Spec Lawyer's picture
Spec Lawyer on Jan 15, 2015 10:15 pm GMT

Those “real costs” need to include health costs created by toxic emissions from fossil fuel plants, climate change effects from fossil fuel plants, health costs from nuclear plants, radioactive waste disposal costs for nuclear plants, etc.  

Spec Lawyer's picture
Spec Lawyer on Jan 15, 2015 11:07 pm GMT

Why should PV users have to use all their electricity?   No sense in that.  If they have extra, it SHOULD be put onto the grid and push off any fossil generated electricity that emits toxins and climate changing gases.  There is a strong public policy reason for that.  

 

If you want to have someone ‘eat all their own dog food’ then have the utilities figure out how to sequester their emissions so I don’t have to breath the mercury, lead, arsenic, SO2, and other toxins they spew.  

Spec Lawyer's picture
Spec Lawyer on Jan 15, 2015 11:20 pm GMT

Why does the utility get to freely foist their toxins on my lungs?

Spec Lawyer's picture
Spec Lawyer on Jan 15, 2015 11:24 pm GMT

Feed-In tariffs pay solar users above-market rates, net-metering does not.  Net metering just exchanges day-time solar PV generated electricity for night-time electricity.  Specifically, the solar PV people provide peak-rate daytime electricity to the grid which the utility sells to the PV owner’s neighbor at peak rates.  The utility repays the solar PV owner with cheap off-peak electricity at night (which they have lots of excess of).  The utility actually gets a good deal . . . and yet they whine.

Spec Lawyer's picture
Spec Lawyer on Jan 15, 2015 11:33 pm GMT

I don’t see the problem, joris.  They wanted to incentivize green energy and they succeeded in doing so.  I guess if you don’t appreciate the green energy over coal-generated electricity then I can see why you are upset.  But fossil fuel toxins and greenhouse gases are detrimental things and many of us are happy to see those problems addressed.

Paul O's picture
Paul O on Jan 16, 2015 12:55 am GMT

1) Are you saying that Utilities don’t use Wind, Nuclear, Nat. GAs, and even Solar Power?

2) Are you saying that Net Metering is the only way to reduce CO2? if so you are being ilogical and uninformed.

3) If PV users are so woried about toxins in your lungs, Why, oh Why do they want power generated from the dirty toxins back from the same Utilities?

For your information, Utilities do use low or none carbon sources, and they will do more so as ageing plants are replaced. Furthermore, how sure are you that the PV’s being installed were not manufacture with dirty power?

 

Nathan Wilson's picture
Nathan Wilson on Jan 16, 2015 4:06 am GMT

No, net-metering is a huge subsidy.  Looking only at solar for utility versus residential:  as the solar industry group SEIA reports, utilities can generate solar electricity for half the cost of residential solar, yet net-metering makes residential solar appear competitive.  Essentially of the states with large residential solar deployments also have utility solar deployments (i.e. no shortage of land for big projects), hence it must be the case that net-metering represents a false economy (the actual savings for residential solar compared to utility is just the 5% transmission loss).

Going further and comparing solar with gas peaking plants, we can use the EIA data.  They report a variable cost of electricity from combined cycles plants as 4.6 ¢/kWh, which is much less than solar.  The variable cost is the cost of power if you have to have the plant anyway (e.g. for locations with winter demand peaks like in the north, or places with evening demand peaks).  

Net-metering is taken to the extreme in California.  There they have tiered electricity rates, with the top rate of 30-40 ¢/kWh (not because it costs this much to make, but to encourage conservation and help the poor).  For consumers at the top rate, the subsidy is comically high.

Effectively, residential solar displaces electricity which costs only 4.6 ¢/kWh in all of the north, and even in the south after solar grows to a few percent of demand since at that point, no gas peakers can be avoided because of evening demand and cloudy days.

Jeremy Olm's picture
Jeremy Olm on Jan 16, 2015 2:35 am GMT

Now if that isn’t a piece of good news then I don’t know what is. Even for me as an estate agent, this new ruling on solar energy storage and redistribution is going to be a game-changer because my clients are going to be looking out for homes that are able to offer all these new routing and rerouting capabilities, otherwise they’ll have to incur the costs of getting them implemented on their own dime. It’ll be good to see that there are further encouragements to people to have solar capability installed though and grants to families that make the switch would be very welcome!

Joris van Dorp's picture
Joris van Dorp on Jan 16, 2015 8:12 am GMT

The point is that addressing fossil fuel pollution and GHG’s in a timely and sufficient manner is a complex and costly undertaking which needs to be handled effectively, efficiently, equitably and honestly. The incentives and policies currently in place in most countries are not hardly effective, not hardly efficient and certainly not equitable or honest.

I appreciate green energy energy when it displaces dirty energy, but when it is used to displace nuclear energy like in Germany, and when using the most expensive types of green energy (intermittent wind and solar) is incentivised disproportionally, and when the cost of this inefficient undertaking is dumped essentially on lower income households, and when misleading claims of imminent ‘grid-parity of green energy’ are used to fool people into believing that decentralised green energy will reduce their energy bills and allow us to casually do things like ditching nuclear power and poo-poo-ing cost-effective centralised power generation, that is when I see a very serious threat to our common future, motivating me to act and make my voice heard.

I want a clean, sustainable future as much as the next person. But what we are getting currently is not that. People all around the world are being swindled out of their money and their precious public funds are being depleted for the sake of half-baked pseudo-green pipe-dreams, which not uncommonly create even more environmental degradation and energy poverty than they are ostensibly claimed to reduce. That has to stop. 

Engineer- Poet's picture
Engineer- Poet on Jan 16, 2015 8:48 am GMT

And now when solar PV is taking off, they want to kill off net-metering.

Of course.  The perverse incentives of net metering can destroy the grid, and even net-metering customers still need the grid.

At this point, I don’t see any problem.

Then you didn’t bother to read the article, or didn’t have the wherewithal to understand it.

Sorry, the world is changing. Deal with it.

Net metering isn’t “a changing world”.  It’s an economic imposition by fiat.

Climate change is real. There is a strong public-policy reason to encourage this.

Google dropped its research program into alternative energy (including PV) because, and I quote:  “Trying to combat climate change exclusively with today’s renewable energy technologies simply won’t work; we need a fundamentally different approach.”

In the words of Robert F. Kennedy Jr, “the plants that we’re building, the wind plants and the solar plants, are gas plants“.  To fix climate change, we need carbon-free generation that’s available 24/7/365.  Net metering is intended to force precisely that generation off the grid, and guarantee a market for the gas interests in perpetuity.  Net metering is the enemy of real climate-change measures.

Engineer- Poet's picture
Engineer- Poet on Jan 16, 2015 9:01 am GMT

Why should PV users have to use all their electricity?

Didn’t your mother ever get you to think about your actions by making you ponder the question “what if everybody did it?”

Not everybody can dump power on the grid at the same time.  The grid is not a battery, and allowing people to treat it like one is destructive to its purpose.  That today’s incentives make it highly profitable doesn’t change that one bit.

If they have extra, it SHOULD be put onto the grid and push off any fossil generated electricity that emits toxins and climate changing gases.

You’re assuming that those generators can just turn off and on at will, that cranking them down doesn’t reduce their efficiency, and that they’re not needed to run to keep the grid itself (which nobody can net-meter without) from blacking out.  All of those assumptions are false.

There is a strong public policy reason for that.

There’s a strong public policy reason to keep the grid operational.  Without it, we would literally lose civilization.

have the utilities figure out how to sequester their emissions so I don’t have to breath the mercury, lead, arsenic, SO2, and other toxins they spew.

Build nuclear plants.  Whatever the stuff inside the zircaloy cladding, inside welded steel dry casks, inside reinforced concrete shield “overpacks” is doing, it’s not going in your lungs or altering the climate.

Engineer- Poet's picture
Engineer- Poet on Jan 16, 2015 9:07 am GMT

Cooked statistics aside, the health costs of nuclear power plants are negative once the effects of the power they displace are considered.  Ontario removed its last coal-fired power station from service in 2013.  Toronto had zero smog days in 2014.  This is not a coincidence; the improvement in air quality over the US and Canada during the 2003 blackout was due to coal-fired plants being off-line.

Bas Gresnigt's picture
Bas Gresnigt on Jan 16, 2015 3:43 pm GMT

…when using the most expensive types of green energy (intermittent wind and solar) is incentivised disproportionally…
To my opinion onshore wind and solar are the cheapest methods of green electricity generation.

Apparently you know other methods that are cheaper (in a relative flat country such as Germany or NL)??

Bas Gresnigt's picture
Bas Gresnigt on Jan 16, 2015 3:57 pm GMT

Economic; Grid
Assume consumers PV-solar produce 30% of total consumption and feed 50% into the grid (=15%).

That implies savings for the grid (thinner cables) and/or the utility (less losses due to grid transport; losses =I²R)**).  As normal grid losses are ~5%, the 30% PV-solar production save utilities ~40% of those losses=~2%.

The electricity fed into the grid by consumers is transported only a short distance and then delivered to other consumers.

So if anything, the grid costs become smaller thanks to consumer PV-solar.

Economic; Utiliities
The extra costs due to some increase in variability are marginal as utilities have that variability already (also competitors who take market share, etc). So they buy/sell electriciy from/to competitors, etc.

Those marginal extra costs are compensated as they have less transport losses in the grid.

Economic; Future
Battery costs are predicted to decrease greatly. So, getting only a little for feed-in implies that consumers will buy more battery capacity and/or a micro CHP boiler, etc and may go off-grid in next decade.

This threat, 25% of German consumers said they may do that before 2020*), is one of the drivers for the two biggest German utilities, E.ON and RWE, to transform themselves in a service company. Away from dirty (nuclear, fossil fuel) power plants which besmirch their name, hence costs them customers.***) Customers that move to 100% renewable utilities, or may go off-grid in the future.

So low feed-in rates may in the end be counter productive for utilities.
As a consumer who feels he is ripped off by his utility, will not forget and choose alternatives even if it is unsure whether that alternative is cheaper.

___
*) Not strange as the German consumer pays ~28cnt/KWh and gets ~12cnt/KWh for the electricity he delivers back (if he has a new solar installation).

**) Cables and transformers are bi-directional by nature. So no real adaptation costs as shown in S-Germany which has large areas where solar share is much higher than in Hawaï.

***) Last year the big German utilities tried to get rid of their nuclear power plants by offering them all for free to German government including the funds for decommissioning, etc. They were clearly prepared to pay some additional billions if German government would accept. The offer was flatly refused.

Jean-Marc D's picture
Jean-Marc D on Jan 16, 2015 2:34 pm GMT
I think they are some factors missing in your analysis Schalk. Why are rates not based on true OPEX/CAPEX ? Not really because it’s simpler the way it’s done currently. 
Basing rates purely on CAPEX/OPEX would mean big consumers would pay much less, but small/very small consumers would pay proportionally a lot more, so some of them would simply not be able to afford their contract anymore. Small consumers are the ones who have little money and just aren’t able to pay a large part of CAPEX.
But despite that reduced number of consumers, CAPEX would actually stay almost the same, which means that it would rise for the other consumers. Which means more consumers departing. Which means higher CAPEX for the remaining ones. Etc.
 
At the end, the grid would exist only for a small number of highly consuming users. Who might still be able to afford it, but would pay now more than they used to when *apparently* they were subsiding the CAPEX of small users.
 
How much of the CAPEX should each user pay ? It’s far from stupid to say it should be proportional to the *usefulness* that CAPEX has for them, which can be measured from the amount of electricity they use.
Jean-Marc D's picture
Jean-Marc D on Jan 16, 2015 3:14 pm GMT

Taking this into account, how could the problem of net metering be solved ? One solution can be that you should still contribute to the CAPEX/grid according to the total electricity you use, and that’s the path Germany is taking starting to take by making larger solar PV producer pay a part of the EEG even for self-consumed electricity.

Spec Lawyer's picture
Spec Lawyer on Jan 16, 2015 7:35 pm GMT

The grid is not being ‘destroyed’ . . . that’s just hyperbolic whining.

The only ‘problem’ here is that the utilities are not happy because they are having to change the way they do business and not making as much money.  Boo-hoo.  They are just going to have to adapt.  Sorry . . . thousands of different businesses have had to adapt to the internet and utiltities are going to have to adapt to solar PV.

 

You fundamentally misunderstood the Google RE>C findings and engineering in general.  Net-metering is a fundamental technology needed to get to a 24/7/365 carbon free grid.  It is done with a grid balanced combination of solar PV, onshore wind, geothermal, offshore wind, nuclear, demand-response, concentrated solar power, hydropower, pumped-hydro storage, battery storage, biomass, efficiency, compressed-air-storage, tidal power, geographic diversity, etc.  

Spec Lawyer's picture
Spec Lawyer on Jan 16, 2015 9:02 pm GMT

You don’t seem to understand the way it works.  The utility doesn’t pay ANYTHING for the residential solar PV electricity.  They receive it on loan and sell it to someone else at retail rates.  They repay the loan by providing their  4.6 ¢/kWh electricity to the solar PV user at night (so they effectively only paid 4.6 ¢/kWh for the residential solar PV electricity).  So they do NOT pay this alleged higher cost of solar PV electricity which is probably why you didn’t bother to cite a number for this alleged higher cost . . . it is never paid. 

What happens is that they do lose that PV owner as a customer.  Boo-hoo, the world is changing.  You had a 100+ years as a monopoly with guaranteed profits but those days are over.  But losing a customer is not a subsidy.  

Spec Lawyer's picture
Spec Lawyer on Jan 16, 2015 9:08 pm GMT

These are strange strawman responses.

1) No.  But I am saying that they do mostly use fossil fuels.  39% of the grid is still coal.

2) No, I am not saying that at all.  

3) I don’t want power generated from dirty toxins.  I want them to build out more wind, hydropower, geothermal, nuclear, tidal, concentrated solar power (which can produce at night), storage, etc.

4) Yes, I know they are changing and I greatly appreciate it.  I’m certain my solar PV panels were generated with dirty power but I have little choice in that matter.  But as I and others add more PV, it continues to get cleaner.  

Spec Lawyer's picture
Spec Lawyer on Jan 16, 2015 9:19 pm GMT

*sigh*  I think you need to learn more about the technology before speaking.

1) Every cannot do it.  There are caps on the % of residences that will be allowed to do net-metering.  They have already protected themselves from that.  Yet you are still internet white-knighting the multi-billion dollar utility from us evil residential solar PV users.  *eyeroll*

2) The utility alread has to deal with people turning on air conditioners, stoves, etc. at the same time.  This is the whole point of the grid.  Solar PV just adds in another element.  One that is very predictable with weather reports and a clock.  

3) Residential PV is NOT bringing down the grid!   You’ve really bought into the utility fear-mongering.  Grow a pair and stand up for your rights instead of bending over and taking it.  It was the utilities themselves that were bringing down the grid and causing brown-outs by gaming the energy markets to get themselves bigger profits.  Yet you are worring about solar PV people who do nothing but add generation to the grid as being the possible ones to bring down the grid?  Nonsensical!

Schalk Cloete's picture
Schalk Cloete on Jan 16, 2015 10:25 pm GMT

Well, the CAPEX would of course be distributed according to the amount of it utilized by each customer, i.e. the consumption rate (kW) during peak times. Large customers who draw massive loads would therefore pay a lot more than small customers who only run a few home appliances.

What this kind of rate structure would do is to strongly incentivise peak shaving within the consumer base. Everyone would know that they can substantially reduce their bills if they just limit their consumption for a short time during certain times of the day. This would significantly reduce the generating, transmission and distribution capacity that needs to be installed to serve the needs of the consumer base, thereby making the entire system cheaper (which of course must translate into lower overall rates for the average consumer).

Bas Gresnigt's picture
Bas Gresnigt on Jan 16, 2015 10:41 pm GMT

Nathan,
Sorry. Some statements not correct, some fuzzy:

“…Effectively, residential solar displaces electricity which costs only 4.6 ¢/kWh…”
That is the production price in some situations (e.g. PV-solar delivered to the Austin utility). If the new Vogtle NPP is involved, than the production price will be >12 ¢/kWh.*)
Add to those prices the major add-on and overhead of the utiliy of ~5 ¢/kWh.

“… savings for residential solar compared to utility is just the 5% transmission loss…”
Of course add-on and overhead costs of the utility don’t go down immediately. But they will do when the utility starts making losses.

“…net-metering represents a false economy…”
What is false here? The savings for the ciitzen? For the utility?
Or are you one of the hypocrites, etc. that I identified im my other comment (up in this blog, under “Ethical“)?

___
*) Unless you consider the investment paid by the ratepayers via the surcharge as free money.
But then the cost price of their rooftop PV goes down to <10¢/MWh (that investment also free).

Paul O's picture
Paul O on Jan 16, 2015 11:36 pm GMT

Spec…. This entire post by you is one extreme Fantasy. 

If my currency is Dollars, and I am forced to take spare Russian Rubbles or Nigerian Naira Loans” that I don’t want, can barely use, and disrupt my dollar business, and I am forced to return those Rubbles  in US Dolars of the same numeric value, what Kind of  Loans is that?

I have a better idea, let Me keep my Dollars, and the Russians and Nigerians keep their Rubbles and Nairas, and we’ll all live happily.

 

Spec..What you are really doing is this. Any excess good is low value good, that is why it is excess, nobody wants it nor can use it.

You are simply looking for a way to reduce your own costs, you buy into a PV scheme which allows you to pawn off your low value excess energy on the utilities. You convince yourself that you are doing them a favor. Then YOU demand  that they turn over their High value energy in exchange for the low value energy that you are forcing them to “Loan”.

Don’t go telling the utilities that your excess solar power is high value to them, it is not.  Don’t go telling them that it displaces Toxins, which may not be true if they already use nuclear, their own solar, or their own wind+ Nat Gas.

You should just Man-Up and buy some batteries, and eat your own solar power.

I am not sure if this qualifies as a shell game, but it smells close to it to me.

Bas Gresnigt's picture
Bas Gresnigt on Jan 17, 2015 12:23 am GMT

Schalk,
Your solution is too easy:
The solution is of course to price electricity according to its real cost drivers...” 
…economically optimal rate structure will shift even more to the CAPEX side, thereby completely wiping out the business case for rooftop solar…
Because the grid costs + add-on & overhead of the utility are added, it won’t whipe out the bus.case for rooftop solar.

Your solution will create a dichotomy: Either people buy solar+battery+… and go off-grid; or they do nothing. Worse; negative emotions of customers associated with the high fixed connection costs will boost going off-grid, starting with customers that under-utilize their connection.

As PV-solar+battery costs decrease fast while grid costs, etc. do not, the share of off-grid citizens will grow. Which will further increase the fixed connection costs for those who did nothing…

I don’t see a solution for present utilities. Becoming a service company, as announced by the 2 biggest German utilities, may be the best solution. But for that you need the sympathy of the residents, which is difficult when you created high grid connection costs…

There is a real paradigma change going on.

Mark Heinicke's picture
Mark Heinicke on Jan 17, 2015 12:48 am GMT

Thanks, Joris.

Privileged owners of rooftop solar” indeed.  There is a giant blind spot socioeconomic blind spot in the thinking of many if not most net-metering advocates.  About a third of U.S. households do not own their home.  If they want rooftop solar they will have to talk the landlord into installing it, and unless the landlord is paying the electric bill, there is no economic incentive to do so whatsoever.  Of the two-thirds who do own their own homes, only a minority possesses either the wealth/income level to install a system, and of those only about half will have a home with an axis suitable for affordable rooftop solar, even with a tax credit.  Of those at the sufficient wealth/income level, (besides the very rich), they have other demands that trump rooftop solar as a way of disposing of discretionary income, such as education for themselves or their children, or one of those out-of-country vacations Bas so enjoys.

The rest of us schmucks without rooftop solar have to keep paying for the infrastructure and operation capacity that enable net-metered solar rooftop owners to use the grid as (following Engineer-Poet’s analogy) a massive battery.  The rest of us schmucks also have had to pay for the tax credits enjoyed by the privileged owners of rooftop solar.

This is not simply a matter of socioeconomic justice, it is a matter of affordability. That’s the essential point of Jesse’s article.  The burden net metering places on the non-solar-rooftop owners is yet another economic pressure inflicting more cracks in the entire system. The cracks grow as net metering grows. Were it not for the resurgence of cheap oil and the dawn of a new age in natural gas production, the energy landscape would look more oppressive to low income and low-middle income Americans. As I see it, solar rooftop owners should be cheering for Saudi Arabia (love their political system?) and for fracking.  (Natural gas, after all, is the sine qua non of increasing reliance on intermittent generation; although I can’t help remarking that natural gas is a fossil fuel, the fossil fuel most beloved by solar and wind enthusiasts.)

Am I against “renewable” energy?  Far from it. Those who can afford to install it, by all means. . . but they should be prepared to pay for their own storage, or entitle the utility to get something for the virtual battery that is equitable across the entire customer base. That’s what sacrifice for the greater good is all about.

If they aren’t, they should consider a CO2-free energy generator that benefits all, such as nuclear energy.

As a liberal and detractor from big U.S. corporations conducting business-as-usual, I am paradoxically forced into the view that the utilities, vis-a-vis net metering, are actually representing the customer base at large. Besides, as big U.S. corporations go, the utilities are small change. 

 

Mark Heinicke's picture
Mark Heinicke on Jan 17, 2015 12:49 am GMT

Thanks, Joris.

Privileged owners of rooftop solar” indeed.  There is a giant socioeconomic blind spot in the thinking of many if not most net-metering advocates.  About a third of U.S. households do not own their home.  If they want rooftop solar they will have to talk the landlord into installing it, and unless the landlord is paying the electric bill, there is no economic incentive to do so whatsoever.  Of the two-thirds who do own their own homes, only a minority possesses either the wealth/income level to install a system, and of those only about half will have a home with an axis suitable for affordable rooftop solar, even with a tax credit.  Of those at the sufficient wealth/income level, (besides the very rich), they have other demands that trump rooftop solar as a way of disposing of discretionary income, such as education for themselves or their children, or one of those out-of-country vacations Bas so enjoys.

The rest of us schmucks without rooftop solar have to keep paying for the infrastructure and operation capacity that enable net-metered solar rooftop owners to use the grid as (following Engineer-Poet’s analogy) a massive battery.  The rest of us schmucks also have had to pay for the tax credits enjoyed by the privileged owners of rooftop solar.

This is not simply a matter of socioeconomic justice, it is a matter of affordability. That’s the essential point of Jesse’s article.  The burden net metering places on the non-solar-rooftop owners is yet another economic pressure inflicting more cracks in the entire system. The cracks grow as net metering grows. Were it not for the resurgence of cheap oil and the dawn of a new age in natural gas production, the energy landscape would look more oppressive to low income and low-middle income Americans. As I see it, solar rooftop owners should be cheering for Saudi Arabia (love their political system?) and for fracking.  (Natural gas, after all, is the sine qua non of increasing reliance on intermittent generation; although I can’t help remarking that natural gas is a fossil fuel, the fossil fuel most beloved by solar and wind enthusiasts.)

Am I against “renewable” energy?  Far from it. Those who can afford to install it, by all means. . . but they should be prepared to pay for their own storage, or entitle the utility to get something for the virtual battery that is equitable across the entire customer base. That’s what sacrifice for the greater good is all about.

If they aren’t, they should consider a CO2-free energy generator that benefits all, such as nuclear energy.

As a liberal and detractor from big U.S. corporations conducting business-as-usual, I am paradoxically forced into the view that the utilities, vis-a-vis net metering, are actually representing the customer base at large. Besides, as big U.S. corporations go, the utilities are small change. 

 

Nathan Wilson's picture
Nathan Wilson on Jan 17, 2015 1:30 am GMT

This is elitist and assumes low penetration.  Let’s assume everyone has a solar PV system.  This brings up two questions which will clarify the whole system:

1) If everyone’s solar PV production equaled their annual usage, would their bills be zero?
Of course not, assuming customer-side batteries and fossil fuel on the utility side, bills would only go down by about 30% (almost all grid is needed and over half of the power plants on standby, plus curtailment and fossil fuels cover seasonal imbalance).  With storage on the utility side, the electric bills would go way up to cover that cost (storage is not cheap compared to fossil fuel and unlikely to become so).

2) What ratio of distributed solar PV and centralized utility PV produces the lowest overall cost?
Zero distributed and 100% utility scale except in certain rare localized cases of grid congestion (see the SEIA data which shows that utility solar is half the cost of residential).

Any electricity rate structure which hides or ignores these two truths is fundamentally dishonest.

Nathan Wilson's picture
Nathan Wilson on Jan 17, 2015 1:19 am GMT

Capacitance is only used to storage energy for 1/60th of a second.  If you need 20 minutes of storage, consider thermal energy storage at a next generation nuclear plant.  Failing that, batteries or pumped hydro.

But the concensus of grid designers seems to be that if you use transmission to spread the peaks and troughs geographically, the modern fossil fuel plants (especially simple but less efficient gas turbines) can regulate the grid just fine with well over 30% renewables. 

There is simply no forseeable case in which storage with renewable-overbuild is cheaper than fossil fuel backup.  Hence, the concern that the renewable-rich path does not really lead to an economical phase-out of fossil fuels. 

Nathan Wilson's picture
Nathan Wilson on Jan 17, 2015 1:54 pm GMT

Back before net-metering caught on, there was another option: dual ratched meters.  With this system, pro-sumers would have one meter measuring electricity they put into the grid, and another to measure energy they took out; they sold power at wholesale price and bought it at retail.

This could be fair for early adopters, but as solar grows to high penetration, customers with solar will be putting just as much strain on the grid in the evenings (the time which will become the highest grid load) as everyone else; thus it undercharges solar system owners at high penetration (and even when they have batteries, as cloudy days would have the highest grid loads).

Nathan Wilson's picture
Nathan Wilson on Jan 17, 2015 1:57 am GMT

I think you are mis-understanding the difference between levelized cost and variable cost.  Levelized cost is most familiar, it include capital cost, fuel, maintenance, and interest.  Variable cost (the small one) is the one that matters if the plant is needed any way for grid reliability and backup of renewables.

At Vogtle, the variable cost will be around 1.2 ¢/kWh, so curtailment saves this amount.

For economies, I prefer to consider total system cost.  In my town, my utility is regulated, so all costs are passed on to electricty users.  They are regulated by a PUC who works for the people.

Your ethics argument didn’t make sense to me.   Goverments write tax rules which are thousands of pages long with the goal of fairness; but there will always be plenty of opportunity for free-loading (paying less tax than other people for the same services).   Fairly biliing solar PV owners is subtle, but need not involve complex rules.

Paul O's picture
Paul O on Jan 17, 2015 6:09 am GMT

Jesse,the solution is simple.

Compel every salesman who sells a rooftop solar array to sell enough storage to contain the excess electricity generated at solar max for the in the area where the house is located.

Let every homeowner with Rooftop Solar take responsibility for their own generated and stored power, but let them have the capacity to buy additional power they may need from the utility at a rate proportional to what they use from the utility.

There is no reason to hold society hostage tothe whims of people who unwisely fallin love with rooftop solar power.

Paul O's picture
Paul O on Jan 17, 2015 6:13 am GMT

Why would you want to buy <<< LOAN>>> the said coal generated Toxin producing power back from the utility?

Are you then not complicit in filling your own lungs with toxins?

Bas Gresnigt's picture
Bas Gresnigt on Jan 17, 2015 8:12 am GMT

…unless the landlord is paying the electric bill, there is no economic incentive to do so ...”
As the costs for the tenant go down, he can agree an increase in the rent (which occurs already in Germany). Similar in NL concerning houses that get increased isolation.

…only a minority possesses either the wealth/income level to install a system…
Banks deliver loans which are payed back with the savings the installed system devlivers.

“... only about half will have a home with an axis suitable for affordable rooftop solar...”
Within ~5yrs it will be economic to install PV-solar at both sides (here in NL you sometimes see already houses with solar panels at the east and west side of their roof). Then these people will harvest relative more than the people with a south facing roof. 

… out-of-country vacations Bas so enjoys ….
I really do. Advice: don’t take a group trip, but go with a friend or alone. Without any reservation (except the plane ticket) and travel around. It will broaden your view. Especially if you go to total different countries.
With a group trip you won’t meet many local people.

… enable net-metered solar rooftop owners to use the grid as … a massive battery…
If not facilitated, those rooftop owners will install bigger batteries and/or a micro-CHP boiler and go off-grid in next years. Thanks to decreasing prices for batteries, micro-CHP’s, small generators.
That is worse for the rest, as then these rooftop owners contribute nothing to the infra-structure which has lost all value (for them)..

… it is a matter of affordability…
Here in NL the price of a rooftop system is less than that for a small car. And you can get loans to buy a car. Banks will be more prepared to deliver a loan for a rooftop system, as you can pay that back with the money you save.

… inflicting more cracks in the entire system. The cracks grow as net metering grows...”
Times are changing! It’s better for your mental health to go along with progress, than to pull the brake.

In the old days we had a mainframe computer system with dummy terminals in big companies. The people that ran those were wrestling with ideas: How to prevent ‘wild’ computing, such as mini-computers and then micro-computers. IBM came with information architectures which could only be realized using mainframes. In the end the mainframe people became irrelevant…

It seems that some utilities, such as HECO in Hawai, are following similar path. Or they may succeed in adapting the law such that they become an obligated burden to the population, as in Spain.

Schalk Cloete's picture
Schalk Cloete on Jan 17, 2015 8:17 am GMT

If it ever becomes genuinely more economical to go off-grid than to buy electricity from the utility then this is what should happen. However, the amount of capacity under-utilization associated with going off-grid makes this the most expensive, lowest EROI and most environmentally damaging form of electricity generation available, especially in higher latitudes. 

We will have to see some massive technological breakthroughs before it becomes economically viable for a significant percentage of electricity consumers in an industrialized society to go off-grid. 

 

Bas Gresnigt's picture
Bas Gresnigt on Jan 17, 2015 9:28 am GMT

Nathan,
…low penetration.
I assumed a solar share of 30%. It will take Germany ~2 decades to arrive at 30% solar.

… everyone has a solar PV system.
Together with a battery (with increasing capacity).
Utilities will become less relevant, similar as occurred with mainframe computing.
Only the grid stays relevant, for exchange between solar, wind, etc. producers/consumers.

Your questions:
1) For most people: Yes. As then most people will be off-grid if they didn’t get good FiT.

2) Question identical to the question mainframe people asked, when mini-computers (and then micro-computers) started to enter big companies through the back-door.

Consider that the costs of distributed electricity generation decrease much faster, than the grid costs + the add-on and overhead costs of utilities. So distributed generation will gradually become cheaper than centralized generation.
So you may understand why the big German utilities decided to transform into service companies, and the biggest utility want to get rid of all its ff and nuclear power plants.

… rate structure which hides or ignores these two truths is fundamentally dishonest...”
What is dishonest???
It’s dishonest and communist like, that there are still utilities that monopolise electricity generation while it is clear that competition delivers better price/performance.
Only the grid justifies a monopoly.

Please refer to my other comment here, under the header Ethics.

Bas Gresnigt's picture
Bas Gresnigt on Jan 17, 2015 9:56 am GMT

In NL we just started a project to install smart meters in every house/building before 2021.
So then time of use metering, etc. will all become possible against low costs.

It’s a one time investment, which pays off.

The privacy issues delayed and complicated the project, but could be solved in the end.

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