Net metering
Net metering is an electricity billing mechanism that allows consumers who generate some or all of their own electricity to use that electricity anytime, instead of when it is generated. This is particularly important with renewable energy sources like wind and solar, which are non-dispatchable. Monthly net metering allows consumers to use solar power generated during the day at night, or wind from a windy day later in the month. Annual net metering rolls over a net kilowatt-hour credit to the following month, allowing solar power that was generated in July to be used in December, or wind power from March in August.
Net metering policies can vary significantly by country and by state or province: if net metering is available, if and how long banked credits can be retained, and how much the credits are worth. Most net metering laws involve monthly rollover of kWh credits, a small monthly connection fee, require a monthly payment of deficits, and annual settlement of any residual credit. Net metering uses a single, bi-directional meter and can measure the current flowing in two directions.
Net metering can be implemented solely as an accounting procedure, and requires no special metering, or even any prior arrangement or notification.
Net metering is an enabling policy designed to foster private investment in renewable energy.
History
Net metering originated in the United States, where small wind turbines and solar panels were connected to the electrical grid, and consumers wanted to be able to use the electricity generated at a different time or date from when it was generated. The first two projects to use net metering were an apartment complex and a solar test house in Massachusetts in 1979. Minnesota is commonly cited as passing the first net metering law, in 1983, and allowed anyone generating less than 40 kW to either roll over any credit to the next month, or be paid for the excess. In 2000 this was amended to compensation "at the average retail utility energy rate". This is the simplest and most general interpretation of net metering, and in addition allows small producers to sell electricity at the retail rate.Utilities in Idaho adopted net metering in 1980, and in Arizona in 1981. Massachusetts adopted net metering in 1982. By 1998, 22 states or utilities therein had adopted net metering. Two California utilities initially adopted a monthly "net metering" charge, which included a "standby charge", until the Public Utilities Commission banned such charges. In 2005, all U.S. utilities were required to consider adopting rules offering net metering "upon request" by the Energy Policy Act of 2005. Excess generation is not addressed. As of 2013, 43 U.S. states have adopted net metering, as well as utilities in 3 of the remaining states, leaving only 4 states without any established procedures for implementing net metering. However, a 2017 study showed that only 3% of U.S. utilities offer full retail compensation for net metering with the remainder offering less than retail rates, having credit expire annually, or some form of indefinite rollover.
Net metering was slow to be adopted in Europe, especially in the United Kingdom, because of confusion over how to address the value added tax. Only one utility company in Great Britain offers net metering.
The United Kingdom government is reluctant to introduce the net metering principle because of complications in paying and refunding the value added tax that is payable on electricity, but pilot projects are underway in some areas.
In Canada, some provinces have net metering programs.
In the Philippines, Net Metering scheme is governed by Republic Act 9513 and its implementing rules and regulation. The implementing body is the Energy Regulatory Commission in consultation with the National Renewable Energy Board. Unfortunately, the scheme is not a true net metering scheme but in reality a net billing scheme. As the Dept of Energy's Net Metering guidelines say, "Net-metering allows customers of Distribution Utilities to install an on-site Renewable Energy facility not exceeding 100 kilowatts in capacity so they can generate electricity for their own use. Any electricity generated that is not consumed by the customer is automatically exported to the DU's distribution system. The DU then gives a peso credit for the excess electricity received equivalent to the DU’s blended generation cost, excluding other generation adjustments, and deducts the credits earned to the customer’s electric bill."
Thus Philippine consumers who generate their own electricity and sell their surplus to the utility are paid what is called the "generation cost" which is often less than 50% of the retail price of electricity.
Controversy
Net metering is controversial as it affects different interests on the grid. A report prepared by Peter Kind of Energy Infrastructure Advocates for the trade association Edison Electric Institute stated that distributed generation systems, like rooftop solar, present unique challenges to the future of electric utilities. Utilities in the United States have led a largely unsuccessful campaign to eliminate net metering.Benefits
Renewable advocates point out that while distributed solar and other energy efficiency measures do pose a challenge to electric utilities' existing business model, the benefits of distributed generation outweigh the costs, and those benefits are shared by all ratepayers. Grid benefits of private distributed solar investment include reduced need for centralizing power plants and reduced strain on the utility grid. They also point out that, as a cornerstone policy enabling the growth of rooftop solar, net metering creates a host of societal benefits for all ratepayers that are generally not accounted for by the utility analysis, including: public health benefits, employment and downstream economic effects, market price impacts, grid security benefits, and water savings.An independent report conducted by the consulting firm Crossborder Energy found that the benefits of California's net metering program outweigh the costs to ratepayers. Those net benefits will amount to more than US$92 million annually upon the completion of the current net metering program.
A 2012 report on the cost of net metering in the State of California, commissioned by the California Public Utilities Commission, showed that those customers without distributed generation systems will pay US$287 in additional costs to use and maintain the grid every year by 2020. The report also showed the net cost will amount to US$1.1 billion by 2020. Notably, the same report found that solar customers do pay more on their power bills than what it costs the utility to serve them.
Drawbacks
Many electric utilities state that owners of generation systems do not pay the full cost of service to use the grid, thus shifting their share of the cost onto customers without distributed generation systems. Most owners of rooftop solar or other types of distributed generation systems still rely on the grid to receive electricity from utilities at night or when their systems cannot generate sufficient power.A 2014 report funded by the Institute for Electric Innovation claims that net metering in California produces excessively large subsidies for typical residential rooftop solar photovoltaic facilities. These subsidies must then be paid for by other residential customers, most of whom are less affluent than the rooftop solar PV customers. In addition, the report points out that most of these large subsidies go to the solar leasing companies, which accounted for about 75 percent of the solar PV facilities installed in 2013. The report concludes that changes are needed in California, ranging from the adoption of retail tariffs that are more cost-reflective to replacing net metering with a separate "Buy All - Sell All" arrangement that requires all rooftop solar PV customers to buy all of their consumed energy under the existing retail tariffs and separately sell all of their onsite generation to their distribution utilities at the utilities' respective avoided costs.
Post-net metering successor tariffs
On a nationwide basis, energy officials have debated replacement programs for net metering for several years. As of 2018, a few "replicable models" have emerged. Utility companies have always contended that customers with solar get their bills reduced by too much under net metering, and as a result, that shifts costs for keeping up the grid infrastructure to the rest of the non-solar customers. "The policy has led to heated state-level debates since 2003 over whether — and how — to construct a successor to the policy," according to Utility Dive. The key challenge to constructing pricing and rebate schemes in a post-net metering environment is how to compensate rooftop solar customers fairly while not imposing costs on non-solar customers. Experts have said that a good "successor tariff," as the post-net metering policies have been called, is one that supports the growth of distributed energy resources in a way where customers and the grid get benefits from it.Thirteen states swapped successor tariffs for retail rate net metering programs in 2017. In 2018, three more states made similar changes. For example, compensation in Nevada will go down over time, but today the compensation is at the retail rate. In Arizona, the new solar rate is ten percent below the retail rate.
The two most common successor tariffs are called "net billing" and "buy-all-sell-all". "Net billing pays the retail rate for customer-consumed PV generation and a below retail rate for exported generation. With BASA, the utility both charges and compensates at a below-retail rate."
Comparison
There is considerable confusion between the terms "net metering" and "feed-in tariff". In general there are three types of compensation for local, distributed generation:- Net metering: always at retail, and which is not technically compensation, although it may become compensation if there is excess generation and payments are allowed by the utility.
- Feed-in tariff: generally above retail, and reduces to retail as the percentage of adopters increases.
- Power purchase agreement: Compensation generally below retail, also known as a "Standard Offer Program", can be above retail, particularly in the case of solar, which tends to be generated close to peak demand.