What is Net-Metering?

 Net-Metering describes a billing mechanism between a utility and a customer who is self-generating electricity with photovoltaic (PV) solar modules or some other form of small-scale renewable energy. It generally requires a bi-directional meter that spins forward as the business/house consumes grid-supplied power, and backwards when the PV system is supplying power back to the grid. When the meter is spinning backwards (Yay!) utilities will often credit these consumers for these kilowatt hours (kWh) at the same rate, or “retail rate” in which the customer purchases a kWh. For example, if you typically pay $.10 a kWh before taxes and set fees, the utility will credit you $.10 for every kWh that your system supplies to the grid. However, some utilities pay less than the retail rate per kWh, or they require a “buy all/sell all” arrangement that means you buy all your energy from the grid, and you sell all the energy you self-generate to the utility. 

Why is this Important?

The higher the net-metering rate translates to higher financial value for every self-generated kWh! That means a faster pay-back period on the PV system- typically less than ten years with tax and utility incentives. But lower rates mean longer payback periods- boo! Currently, Duke Energy’s net metering program in North Carolina credits at the full retail rate- but those credits, if unused, get wiped to zero in June. Therefore, it is important to size the system to meet most of your energy needs, but not so big that it will generate more credits than you can use in typical year. If your utility requires a “buy all/sell all” arrangement, then you are likely to be paid significantly less for the self-generated kWh which in turn significantly lowers the financial value of your system.  

Who does Net-Metering benefit?

 As rooftop solar becomes more prevalent, some state regulators (the Public Service Commission in Alabama and NC Utilities Commission in North Carolina) are grappling with how to balance incentivizing distributed energy (e.g. PV solar) with regulated utilities’need for a fair rate of return of capital. Net-metering is really the intersection of these two public policy goals. The argument for net-metering at the full retail rate is that as distributed energy continues to grow, there is going to be less need for the vast financial resources required for additional utility-scale generation plants and the construction/maintenance of thousands of miles of transmission and distribution lines to carry those electrons. Some utilities counter that such a policy unfairly penalizes non-solar customers as they could end up shouldering more of the cost for the reliability of the grid; still others view distributed energy as threat to their business model.

The Brookings Institute published a thoughtful piece that puts some empirical evidence behind the idea that net-metering is good for all consumers; and like all good policy debates the rebuttal is here. No matter which side of the policy debate ends up “winning” in each state, distributed energy is going to be a disruptive force in the energy world. It is up to state regulators, with input from federal agencies and stakeholders, to learn from each other on how to strike the right balance that allows for the growth distributed energy and maintain the reliability of our grids in an equitable manner. This debate will happen in North Carolina sometime in early 2019 when Duke Energy submits its new proposal for net-metering per HB 589.

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