The Long, Painful Slog to Resolving the Net Metering Debate

Graphic credit: SolaireGen

After a two-hour telephone discussion Thursday, participants in a “net metering” sub-group of the Solar Policy Collaborative Workgroup didn’t seem to agree on much other than which issues need to be resolved. But that represented progress of a sort toward promoting small-scale, distributed solar energy in Virginia by businesses, homeowners and nonprofits.

“These are very difficult and complex problems. We made a run at it last  year, and didn’t get there,” Mark Rubin, the Virginia Commonwealth University professor and mediator behind the policy collaborative, said at the beginning of the session. “From a process perspective,” he said at the end, “this has been a helpful, productive call.”

The solar policy group, which worked out compromise legislation enabling “community” solar in the 2017 session, tackled the net metering issue without success last year. Two-thirds of the way through the current year, the group still seems far from formulating a consensus on net metering. But the conference-call discussion Thursday, which included a diverse set of participants ranging from electric utilities to smaller solar developers and environmental groups, did at least illuminate the main fault lines of debate.

“Net metering” refers to the regulatory system governing how small solar power producers, usually businesses and households putting solar panels on their roofs, connect with power companies. Solar panels often produce more electricity than property owners can absorb during peak periods, and a policy question arises as to the terms and conditions under which they sell their surplus to the electric companies. Solar advocates say utilities should pay small producers the full retail rate. Utilities respond that (a) the full retail rate is higher than the wholesale price of electricity they can purchase on the open market, and (b) they should be compensated for maintaining the electric transmission and distribution grid that solar producers periodically draw upon.

Long a laggard in solar energy, Virginia now has a big pipeline of solar deals in the works, and environmentally conscious consumers soon will be able to purchase renewable energy developed by community groups and marketed and sold through the utilities. But most solar production is large scale generation in vast tracts farms owned and operated by the state’s electric utilities, Dominion Energy and Appalachian Power. Progress has been much slower for small-scale, rooftop solar for the masses.

The most intractable issue facing the net-metering workgroup centered on standby charges. While the impact of rooftop solar on Virginia’s electric grid is minimal now — less than 1% of the power supply — participants are looking 20 to 30 years down the road to when it could become a major contributor. If hundreds of thousands of customers generated most of their own electricity, cutting into utility revenues, other customers would be stuck with the cost of building and maintaining the distribution and transmission lines that even those with rooftop solar rely upon from time to time. To offset this erosion of market share, utilities want to charge solar businesses and households a stand-by charge amounting to several dollars per month.

Katherine Bond, Dominion’s senior policy adviser, noted that a minimum bill of $7 monthly would not cover the company’s costs.

Solar advocates and environmental groups counter that solar is cost positive — that solar has a value that benefits utilities. For example, solar panels emit no carbon dioxide emissions, thereby making it easier for states to attain regulatory goals. Also, peak solar production overlaps with peak electricity demand, reducing the need for utilities to purchase expensive, peak-load electricity on wholesale electricity markets.

These issues are all well known, as they have been hashed out in many other states. What’s not known are the particulars here in Virginia. Because each state has unique geography, solar exposure, and regulatory systems, cost-benefit numbers that might apply to California or North Carolina may not necessarily apply to Virginia.

Aaron Sutch, program director of VA SUN, expressed the view of many that he wants to see more data. “We really do appreciate a respectful dialogue,” he said. But he added, “We haven’t seen any data from the utility side on the issue of cost recovery. … This should be a data-driven process.”

Will Cleveland, a staff attorney with the Southern Environmental Law Center, agreed. “If you want stakeholder buy-in, present the data so we can see [that cost recovery] is a legitimate problem. It’s hard from an optics perspective to hear that you can’t share the data. It makes it hard for [solar] advocates to agree to any solution if the data isn’t provided.”

“I understand your point that you’d like it to be disseminated more broadly,” said Rubin, the lead mediator of the workgroup. Core members of the net metering sub-group have been exchanging detailed data. But due to the proprietary nature of the data, participants have been held to strict confidentiality. Perhaps, once a particular path forward has been chosen, it might be possible to share more detailed data, he added.

A related issue is the necessity of attributing a monetary value to the positive impact of rooftop solar.  It wasn’t clear from the discussion whether the electric utilities had any data to formulate an estimate.

The sub-group discussed other, seemingly less contentious, issues. No one voiced opposition to the proposition that anyone investing in solar energy today should be grandfathered, or protected, from changes in the law that would harm the financial return on their investment. Rubin said Virginia needs to create a “glide path” to a new system. “How do you go forward without hurting those people who have already committed to solar?”

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6 responses to “The Long, Painful Slog to Resolving the Net Metering Debate”

  1. LarrytheG Avatar

    I’m a skeptic on battery storage being a reality but on the other hand – if or when a breakthrough occurs – Dominion is pretty much toast – having lost the opportunity to make it part of their business model that people would readily accept and not be as tempted towards “storage”.

    And that’s not counting the advent of electric cars which could also nicely complement rooftop / garage / carport solar. Of course that would not
    directly harm Dominion but it would our transportation funding apparatus.

    So maybe Virginia should start taxing solar to go towards transportation for electric/autonomous cars!

    The thing is – we may be on the cusp of momentous changes in both electricity and transportation.

  2. What would we be grandfathering to existing solar users?
    I am not sure what benefits we currently have, that could be taken away.

  3. Steve Haner Avatar
    Steve Haner

    I am not deeply into this issue and need to learn more. If I put a solar array on my house to reduce my electric bill, that’s good. If that is all I do, then I guess the utility has nothing to say about it. I just buy less power. but I still have a connection and pay for everything I do buy. When I swap out all the incandescent bulbs with new LEDs, that really drops my power bill as well.

    If that array is producing power when I am not using it, and the utility MUST accept it and pay me a full retail price – well, that’s just wonderful for me. I can see why solar advocates just love that idea. But I can see the utility point of view on why they don’t want to do that. That is a huge transfer payment to my benefit. And it is also a transfer payment from the other ratepayers, isn’t it? And if there are tax credits, then it is a bonus transfer payment.

    1. You got it Steve. Net-metering almost always has the implication of giving a subsidy to the solar household, above and beyond add’l gov’t subsidies for purchase of solar panels etc. But many feel such subsidies are fair and important to reduce fossil fuel use. So that’s where we are, Virginia currently of course being less inclined to promote net-metering.

    2. Steve, the subsidy is twofold: The homeowner who receives the full retail rate for his solar production (whether cash or as an offset on the bill is irrelevant) is NOT making a pro-rata contribution to the cost of building/maintaining the grid when he’s not using it, even though he relies on it for standby (nights and cloudy days). And he’s not paying his share of general overheads like billing. Those are the parts of your retail electric bill labelled “distribution” and “customer” charges.

      From a ratemaking point of view, it would be correct to bill these charges as monthly lump sums due from each retail customer, as a “grid attachment” charge; but generally they are billed per kilowatthour, so as to give the customers with very low consumption a break and hit the bigger users harder. Since the grid charges are billed per kWh, a rational utility response to a customer with a solar unit generating during the day would be to boost the distribution and customer charges billed per kWh delivered at night, since that customer has fewer purchased kWhs of energy to spread the grid charge over. But the simplest and easiest way to administer this is keep the grid and customer charges the same, then impose a monthly surcharge to collect this “net metering shortfall” based on the difference between the kWh billed to a typical retail customer versus the typical retail customer-with-solar.

      We can argue for hours over the details here — for example, does the customer who only falls back on the grid at night impose the same costs as one who uses the grid for his electricity in the heat of the day? — but the general principle is not to use utility rates to discriminate for or against particular customer groups, and net metering violates that principle.

      Without a net metering surcharge the grid is not fully paid for and retail solar is overcompensated. Other customers inevitably have to pick up the slack. The cost of net metering to other ratepayers is seductive; it’s for a politically-correct cause and it doesn’t hurt much at introductory levels of solar penetration; but California demonstrates what happens to the ratepayers left paying for the grid if solar penetration takes off and remains overcompensated; and it’s almost impossible politically now for the California PUC to control the beast. I’m all for distributed solar, but let’s get off on the right foot in Virginia with proper rate incentives in place.

      1. TooManyTaxes Avatar

        Acbar -very well stated. The basic argument is: I’m a wonderful person doing great things for the world, such that those who are too ignorant or corrupt to copy me must subsidize me.

        Any person who is connected to the power grid and who can draw on that grid needs to pay rates that include a contribution to the operation and maintenance of the gird.

        Who do these greenies think that they are: real estate developers?

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