As the topic of net metering is a very important one concerning solar in NC, we thought we’d share this thought-provoking article authored by Matt Lehrman & Peter Bronski and originally published on the Rocky Mountain Institute’s September blog.
“Why the Net Energy Metering Debate Misses the Point”
It’s no secret that net energy metering (NEM) is a controversial topic in the electricity world these days. Customers love the way it helps solar PV offset their utility bill and adds clean energy to their home or business. Some solar advocates argue it is foundational to the continued growth of rooftop solar (as an early-market mechanism, it’s been tremendously successful). And many utilities loathe it, seeing NEM as a “free ride” for solar customers (since a rooftop solar customer could, for instance, net to zero over the course of a month and have a $0 utility bill, thereby avoiding paying for the value of being grid-connected), while also arguing that they can add more renewables to the grid at a lower cost through utility-scale projects than can customers through individual distributed systems on residential rooftops. Then there’s the issue of the benefits that distributed solar brings to the grid.
But the debate around the continuation, expansion, reform, or abolishment of NEM distracts from a much bigger opportunity to unleash innovation and investment in distributed energy resources (DERs) in ways that are better for everyone: customers, DER providers, and utilities alike.
RETAIL ELECTRICITY PRICING, NOT NET METERING, THE REAL ISSUE
The real lever for unleashing innovation in DERs, including rooftop solar, is the widely held utility rate structure of bundled, block, volumetric pricing. The per-kWh price customers pay for electricity service bundles many components—energy, capacity, frequency regulation, reliability, environmental attributes, and much more. When we net meter with bundled, block, volumetric pricing, perverse incentives and cross-subsidies emerge that encourage customers to install DERs that maximize benefits on one side of the meter (theirs), which often leaves significant value on the table (or can even discourage customers from installing DERs), including value that can cross over the meter to benefit the grid.