The Role of Net Metering in the Evolving Electricity System (2023) / Chapter Skim
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3 Background and History, Current Status, and Near-Term Future of Net Metering
3 Background and History, Current Status, and Near-Term Future of Net Metering
Pages 32-57
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For state-by-state details of eligible technologies and other rules, see NC-CETA (North Carolina Clean Energy Technology Center)
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systems. As shown in Table 3-1, 7 states initiated net metering programs in the 1980s, followed by 14 more states in the 1990s, and then another 21 states in the early 2000s.4 Net metering policies spread to many jurisdictions because net metering was a relatively easy to understand and administer tariff for serving early adopters of BTM distributed generation (DG)
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(SC) Increasing size limits for individual systems (shown in parentheses for increasing size limit for total net metering program capacity)
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10 and 29 in T Stanton, 2019, "Review of State Net Energy Metering and Successor Rate Designs," NRRI 19-01, Silver Spring, MD: National Regulatory Research Institute, https://pubs.naruc.org/pub/A107102C-92E5-776D-4114-9148841DE66B, and pp.
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At the same time, net metering policies combined with multiple solar support mechanisms and financial incentives in many jurisdictions to further improve the customer economics for solar. As a result, larger numbers of customers began adopting BTM DG, particularly solar, and participating in net metering programs.
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states was to allow or to mandate that regulated utilities would offer green or renewable energy premium pricing programs, where customers could voluntarily participate in utility rate offerings with higher than the minimum and up to as much as 100 percent of supply from clean or renewable resources.9 8 As experience was gained and costs fell as more net metering systems were installed, many states revisited their renewable or clean energy portfolio standards and increased the rates of additions-per-year. Gradually, many states enacted new laws and rules, increasing annual new clean energy capacity goals or mandates.
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In specific states and utility service territories, rapid growth in customer-sited PV capacity increased pressure for modifying rate structures. Efforts have been made in many areas to adjust net metering variants and alternatives so that returns on investment for selfgeneration would not be excessive when considering multiple categories of benefits and costs associated with the self-generation, and the combinations of both utility rate treatment and the available federal, state, and sometimes also local solar support policies.
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states, and several jurisdictions had already established and begun to implement net metering rate design variants, including several jurisdictions adopting what are often called net metering replacement tariffs.12 Arizona, California, Hawaii, Indiana, Louisiana, Michigan, New York, South Carolina, and Utah had adopted variants to replace traditional net metering offerings. Other states, including Alabama, Mississippi, and South Dakota offer variants to traditional net metering, without previously having had in place a traditional net metering retail rate compensation structure.
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Idaho and Texas do not have statewide rules for DG compensation, but several Idaho utilities and Texas competitive electric service providers do offer net metering for their participating customers. SOURCE: NC-CETC (NC Clean Energy Technology Center)
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rates.14 For example: • New York. For larger customer-generators, calculates credits using a VDER methodology • Arizona is gradually reducing its credit rate by 10 percent per year until reach ing the avoided cost, based on the recent contract cost of utility scale solar resources15 • California and South Carolina have adopted variants to traditional net metering, applying time-varying retail credit rates • Massachusetts uses geographically variable retail credit rates that depend on costs associated with the specific distribution circuit where each DG project is interconnected16 Concerns about the potential for utility costs to be shifted from net metering customers to non–net metering customers continue as a major consideration in both legislative changes and regulatory proceedings exploring and implementing net metering variants and alternatives.17 Separately from the net metering credit interval and rate, several states and utilities have attempted to address cost shifting issues primarily by assigning additional fees to customer-generators or in some cases to only those on net metering rates or those with BTM solar.
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. Net metering applies to customer-sited BTM generation and storage, with rules determining how participating customers are credited for electricity exported to the utility network.
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.21 Although net metering policies in many states preceded the early years of this century, almost all customer-sited PV capacity has emerged since 2010, as shown in the yellow color in Figure 3-3.22 That growth occurred as solar PV costs fell (as discussed later in this chapter) , other supportive policies proliferated, and markets matured.23 Compared to customer-sited PV, customer-sited storage has been deployed at a much smaller scale to date, with just over 1 gigawatt installed in the United States as of the end of 2021 (see Figure 3-4)
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As a result, revenue impacts to the utility are similar to what would have occurred under traditional net metering. (See Chapter 4 for further discussion.)
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Net metering customers and capacity by technology type, by end use sector."a Data for small (<1 MW) non-net-metered storage are from EIA Electric Power Annual, "Table 4.9.B.
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Berkeley, CA: Lawrence Berkeley National Laboratory. https:// emp.lbl.gov/publications/residential-solar-adopter-income-and; Wood Mackenzie and Solar Energy Industries Association.
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NREL/PR-6A20-80246. Golden, CO: National Renewable Energy Laboratory.
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Cost Trends for Distributed PV and Storage The impacts of net metering on DG adoption, and their implications for future net metering policies, must be viewed in the context of a broad set of market conditions and deployment drivers for DG. Chief among those drivers in the committee's judgment has been declining costs, particularly for rooftop PV, and to a lesser extent for distributed storage as well.
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As noted earlier, 92 percent of distributed PV is net-metered, and 97 percent of all net metered capacity is PV; thus, the chart effectively shows the penetration of all net-metered DG by residential customers. SOURCES: Values are calculated from statewide residential PV system counts (Wood Mackenzie 2022a)
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Forrester, 2022, Tracking the Sun: Pricing and Design Trends for Distributed Photovoltaic Systems in the United States, Berkeley, CA: Lawrence Berkeley National Laboratory, https://emp.lbl.gov/tracking-the-sun. costs, permitting and inspection costs, as well as installer profit.
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2022b. "State Clean Energy Policy Tracker." https://www.naruc.org/nrri/nrri-activities/ clean-energy-tracker.
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What is most important for readers to understand is that existing net metering policies interact with these challenges and trends, and those interactions simultaneously help shape the environment in which policymakers are considering net metering and its variants and alternatives. Some publicly available data can shed light on some of these drivers, including information collected at the utility-specific and jurisdiction levels by the Department of Energy's Energy Information Administration41 and by North Carolina State University's NC Clean 38 DOE Grid Modernization Initiative.
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The FIT price is set high enough to attract investing, and then the quantity adjusts in response to market interest. The general objective for a FIT is to "provide a stable investment framework, thus lowering the investment costs and the costs for the final consumers."45 By the end of 2008, 50 countries had implemented feed-in tariffs, either nationwide or in at least some specific jurisdictions, and by 2010 FITs had spread to 63 42 The NC Clean Energy Technology Center Hosts the Database of State Incentives for Renewables & Efficiency® (DSIRE)
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Golden, CO: National Renewable Energy Laboratory. https://www.nrel.gov/docs/fy15osti/62361.pdf.
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2012. Transforming On-Grid Renewable Energy Markets: A Review of UNDP-GEF Support for Feed-In Tariffs and Related Price and Market-Access Instruments.
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territories had in place traditional net metering or successor tariffs. Finding 3-2: Among various types of DG technologies, solar PV has been the dominant form of BTM technology adopted in conjunction with net metering, and almost all customer-sited PV installed to date has occurred where customers take service under net metering.
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RECOMMENDATIONS Recommendation 3-1: Utility regulators and decision makers of publicly owned utilities should work with stakeholders to explore and implement solutions to technical, legal, proprietary, or privacy concerns about the collection and release of information about the performance of behind-the-meter technologies and their interactions with the grid. Recommendation 3-2: Data about participation in net metering and alternative and supplemental DG policies should be collected and reported so that policymakers can monitor how policies are interacting with energy market conditions in wholesale and retail, regulated and unregulated energy markets.
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