The Role of Net Metering in the Evolving Electricity System (2023) / Chapter Skim
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5 Equity Considerations of Net Metering
5 Equity Considerations of Net Metering
Pages 92-130
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From page 92... ...
The specific equity-related topics examined in this chapter include: • An overview of the multiple dimensions and types of equity in the context of net metering and distributed generation • The demographics of net metering participation • Equity concerns associated with net metering non-participants • Environmental, health, and societal equity effects from net metering policies 1 Sunter, D.A., S Castellanos, and D.M.
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From page 93... ...
Residential decarbonization efforts have historically deployed numerous programs and policies that have been inaccessible to disadvantaged populations and environmental justice communities.4 As a result, energy cost burdens remain persistently high for lowincome households and people of color, households with children and elderly residents, and in the South and rural America, where housing is generally less energy-efficient.5 Like many other public and ratepayer-funded clean energy initiatives, these same sociodemographic subgroups, and the South,6,7 have been under-represented in net metering programs. 3 National Academies of Sciences, Engineering, and Medicine (NASEM)
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2020. "Distributional Disparities in Residential Rooftop Solar Potential and Penetration in Four Cities in the United States." Energy Research & Social Science 69:101612.
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Weatherization Assistance Program15 as a result of the Energy Act of 2020 • The creation of a DOE Weatherization Readiness Fund16 in 2022 that can be used to repair roofs, readying them for solar panels • Components of the 2022 Inflation Reduction Act, including solar tax credits These enablers are likely to continue to expand rooftop solar adoption by a broader range of households. DEFINITION AND DIMENSIONS OF EQUITY Definition and Scope of Equity Concerns Equity is a multi-dimensional concept including distributional, procedural, intergenerational, and structural equity.17 When applied to the net metering of DG, these concepts can be considered across various socio-demographic groups, timeframes, and geographic scales.
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Whatever affects one directly, affects all indirectly."18 Direct equity impacts of net metering include various first-order effects. Electricity rates and bills of participating customers would be directly impacted by net metering as their adoption of DG would be expected to reduce their electricity costs and provide bill 18 King, Jr., M.L.
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However, the degree to which disadvantaged communities would share in these employment benefits without specific policy focus and program designs intended to ensure that result is not clear.21 As a result, several states, including Illinois with its Clean Energy and Jobs Act (CEJA) , require that local economic development, job training, and local job offerings be included in solar policies.22 At the same time, residents in disadvantaged communities are more vulnerable to losing their jobs if solar energy displaces fossil plant jobs in communities that have hosted 19 EPA (U.S.
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Since disadvantaged communities tend to suffer more from air pollution, clean energy policies that reduce pollution like net metering have potential to reduce pollution in overburdened communities, but the level of benefit will depend on factors such as the location of solar adoption, the location of emission reductions, and how these benefits compare to other clean energy adoption policies. Dimensions of Equity Equity may be characterized along four dimensions (among others)
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Rather, it has focused on aggregate or average benefits and costs and has overlooked the distribution of impacts. Understanding the impact of net metering on low-income households and disadvantaged communities requires distributional equity analysis (DEA)
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Additional impacts: Energy burden Reliability Resilience Public health Job creation Community revitalization SOURCE: Modified from NESP (National Energy Screening Project) , 2022a, "Energy Equity and BCA," https:// www.nationalenergyscreeningproject.org/resources/energy-equity-and-bca.
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• If the principal policy goal is to provide clean backup generation to vulnerable or disadvantaged populations, how does net metering compare to other policies in terms of their distributional impacts? Also, how does net metering compare to other programs that deliver equitable outcomes and services to disadvantaged communities, with respect to efficiency and cost- and rate-containment goals?
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Failures of procedural justice can result in discrimination and marginalization, while failures of economic efficiency can result in higher rates. Procedural equity also embraces the processes by which rates may evolve over time, also called "transitional equity."36 This report discusses procedural equity to the extent that it interacts with net metering policies.
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Regulatory proceedings such as integrated resource planning quantify the value of benefits and costs to future generations when they specify discount rates to apply to their valuation. For example, applying low discount rates to assessments of clean energy benefits (i.e., discounting future benefits less)
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2022. "Characterizing Local Rooftop Solar Adoption Inequity in the US." Environmental Research Letters 17(3)
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Low-Income Households Low-income households face significantly higher energy cost burdens than the population at large,46 with low-income U.S. households measured as spending an average of 8.1 percent of their income on energy costs, compared with an average of 2.3 percent for those not considered low-income.47 In some areas low-income households that use less electricity than average also pay higher de facto rates for electricity under rate designs with high fixed monthly charges.
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For participants, BTM DG supported by net metering holds the potential both to reduce energy costs54 and provide bill stability, which may have value for populations facing high energy cost burdens and energy insecurity. However, many barriers hinder the adoption of DG and exacerbate inequities for under-resourced groups.55 As a result, programs aimed at boosting DG adoption in disadvantaged communities need to consider structural barriers beyond income to address race, language, education, historic investments, home ownership, access to capital and credit, and other factors.56,57 53 DOE (Department of Energy)
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-focused programs, such as community solar, may help reduce some of these inequities and improve access for historically underserved populations,60 these programs are not likely to fully address distributional equity concerns related to the possibility of costs shifting from net metering participants to non-participants. 58 Weissman, G
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For example, the distribution grid in California has been found to have a lower hosting capacity64 for DER on circuits with higher proportions of Black households and disadvantaged communities.65 Similarly, satellite imagery of Texas in February 2021 found that widespread outages caused by winter storms were four times more prevalent in minority communities than in predominantly White communities.66 Households of color frequently face higher energy cost burdens67 and greater energy insecurity68 than White households, not only because of their lower average incomes but also because of a history of discriminatory 61 Pager, D., and H Shepherd.
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(2019) , which found significant racial and ethnic differences in rooftop solar adoption in the United States.
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2020. "The Impact of Policies and Business Models on Income Equity in Rooftop Solar Adoption." Nature Energy 6(1)
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NEM 3.0 adjusts for this by providing an export adder for CARE customers; to further encourage installation of distributed generation in disadvantaged communities, the NEM 3.0 Decision recommended that approximately $600 million dollars from the state budget be used to subsidize rooftop solar and storage in disadvantaged communities. Time will tell whether these policy updates can adequately encourage adoption in disadvantaged communities in California.
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solar is coincident with system demand peaks. In such circumstances, solar adoption by net metering participants may help defer transmission, distribution, and capacity investments, thereby reducing these costs that would otherwise be included in rates.
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The equity implications of rate design, inclusive of any cost shifts, might be considered for all rate components, not just those that may be associated with net metering. Net Metering Participation and Equity Impacts on Electricity Bills and Rates Any increases in rates and bills are particularly harmful to low-income communities and energy-burdened customers.88 Increasing BTM DG adoption, which reduces consumption of utility-provided electricity, can put upward pressure on retail electricity rates and bills, particularly where costs are largely recovered in volumetric charges that differ from social marginal costs (see Chapter 4)
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28 in Putting the Potential Rate Impacts of Distributed Solar into Context, Berkeley, CA: Lawrence Berkeley National Laboratory, https://emp.lbl.gov/publications/ putting-potential-rate-impacts. 91 SeeChapter 3 for more information.
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On an individual household level, an increase in household energy security and resilience for rooftop solar adopters can also have public health benefits. As discussed in Chapter 4, net metering tariffs can be designed to reflect some of these benefits, but these are often evaluated in aggregate.
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Another consideration is the impact of DG on the operations of and emissions from specific power plants. While distributed solar that displaces fossil generation reduces GHG and air pollutant emissions overall, widespread adoption of variable technologies, such as solar, may increase the need in certain locations for rapid ramping of power plants when the sun sets or is covered by clouds, causing an increase in emissions than would otherwise occur with steady-state operation.96,97,98 The distribution of public health impacts of power plant emissions (and the benefit of a reduction in emissions)
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Household-Level Health Benefits from Clean DG Adoption The adoption of BTM solar, storage, and other clean DG, supported by net metering, rarely reduces on-site air pollutant emissions, except in the case of solar + storage systems being used to displace a diesel generator used for off-grid electricity or backup power.101 However, BTM solar may provide indirect human health benefits and/or facilitate costeffective home electrification, although these may be hard to quantify. Depending on the net metering policy in place, the installation of BTM solar can provide lower and more consistent energy bills for adopters and limit the risk of shutoffs.102 In addition, the adoption of solar + storage resources can provide resilience in the case of emergencies, further ensuring access to power during critical periods and for elderly, disabled, medical device-dependent, and other vulnerable customers.
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To mitigate both the health risks and everyday inconveniences posed by extended grid outages, increasing numbers of households have begun to adopt combined solar and energy storage systems with the capability to island from the grid and provide backup power.a Much like the trends seen for rooftop solar adoption,b however, energy storage adoption is more widespread in wealthier, whiter communities in California,c and similar trends are likely elsewhere. Disabled, elderly, low-income customers, and others facing high socioeconomic and public health burdens may be the ones most in need of resilient power systems, but they are least likely to have access.
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d Incentives such as California's Self Generation Incentive Program (SGIP) can support the adoption of energy storage for resilience, and SGIP includes carve-outs for disadvantaged communities, low-income households, households in wildfire zones, those who have faced multiple public safety power shutoffs in recent years, households with electric water pumps, and customers needing power for medical devices CPUC.
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2020. "The Impact of Policies and Business Models on Income Equity in Rooftop Solar Adoption." Nature Energy 6(1)
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For example, Virginia has a minimum bill for community solar participants, but low-income customers are exempt from it.107 Programs and incentives could also be offered outside of net metering to support rooftop solar adoption by LMI customers.108 • California's Single Family Affordable Solar Homes program bought down the upfront costs of solar for income-qualified customers,109 and its multifamily counterpart the Solar on Multifamily Affordable Housing (SOMAH) program 105 Burger, S., I
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who install energy storage in their homes. Higher incentives are given to vulnerable customers who are in regions with high risk of wildfires and power shut-offs to help ensure these households and communities can remain resilient during outages.111 • Low-income households could be exempted from paying interconnection or application fees for distributed solar.112 • Virtual net metering and community solar projects can provide carve-outs for LMI customers.
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2022b. "State Clean Energy Policy Tracker." https://www.naruc.org/nrri/nrri-activities/ clean-energy-tracker; Zitelman, K., and J
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One way to address procedural equity is to create opportunities for dialogue with broad representation. Development of alternative net metering design features in 116 NYSERDA (New York State Energy Research and Development Authority)
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Equity Considerations of Net Metering On-line and in- Facilitated focus Scenario co- Outreach to Participatory co person surveys in groups to identify development organizations and assessment to focal needs, vision, and including equity neighborhoods by explore outcomes neighborhoods build consensus framing, program trained connectors and implications and policy of their programs identification and policies FIGURE 5-3 Typical steps in knowledge co-production to enhance procedural equity. NOTE: Dollar designs indicate steps where incentives to participants should be considered due to the significant effort which may be needed for success.
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Environmental Protection Agency to create a national Office of Environmental Justice and External Civil Rights to consider how communities have been impacted over time, considering how counties that are poor in income, health, and political power, and are mostly minorities, have been targeted for environmentally toxic storage tanks, coal plants and their combustion residues, and other environmental injustices. The Biden administration has called on all federal agencies to ensure disadvantaged communities receive 40 percent of the benefits from federal investment in a range of areas including renewable energy.
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These equity concerns exist across a variety of dimensions: distributional equity, including who receives net metering benefits and what impacts net metering has on energy burdens, energy insecurity, and energy poverty considerations; procedural equity, related to whether diverse voices are included in the process of setting rates; structural equity, reflecting issues such as barriers to net metering introduced by historic disinvestment in infrastructure; and intergenerational equity, involving considerations that arise when considering long-term impact of decisions, such as those regarding climate change. To produce more equitable outcomes, policymakers need to build equity considerations into the design of net metering, its variants, and alternatives, inclusive of companion policies such as legislative and taxpayer-funded programs.
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Finding 5-4: The trends show that both inclusive financing techniques and community solar are helping to enable lower-income households to access the benefits of renewable energy and electricity bill savings in more meaningful numbers. Finding 5-5: Community solar programs provide an opportunity for renters, homeowners with a shaded or poorly maintained roof, and households without access to capital to receive some of the benefits of distributed solar.
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Recommendation 5-2: Decision makers on electricity rates should consider both the impacts of the distribution of benefits and costs, as well as total benefits and costs when designing net metering policies, and ensure that adequate data are collected and made publicly available to do so. These benefits and costs should include and balance, among other things: public health impacts, job impacts, land use impacts, and the future options that will be enabled or precluded.
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In addition, incentives that focus on income-qualified customers and renters can help reduce inequities due to lack of access.
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