Net Metering - University of Pittsburgh School of Law

Transcript Net Metering - University of Pittsburgh School of Law

LEGAL ISSUES IN DISTRIBUTED ENERGY & NET METERING

Presented by:

Dan Clearfield, Esq.

Energy Law & Policy Institute University of Pittsburgh School of Law August 2, 2013

What’s Coming    Distributed Energy – Basic ABC’s Net Metering Basics Net Metering Legal Issues      Who can install net metering?

Eligibility/generation types Can a net metering customer shop?

How is net output price calculated?

What are the longer-term prospects for net metering?

What is Distributed Energy?

  Distributed energy resources are parallel and stand-alone electric generation units located within the electric distribution system at or near the end user Examples of Distributed Energy Systems:  Combined heat and power     Photovoltaic Wind Geothermal Hydroelectric 3

Source: The California Energy Commission

Projected Growth in Distributed Energy   Distributed generation is approximately 5% of total U.S. power generation.

In a recent survey by Black and Veatch, more than 40% of the responding utilities indicated that they expected to see distributed generation to be about 10% (or more) of total U.S. power generation by year 2020.

Benefits of Distributed Energy  Cost savings for owner/customer  (Potential) increased reliability of grid overall  Increased energy efficiency (line losses)  Environmental benefits 6

Distributed Energy Concerns   Makes generation and transmission planning difficult Shifts costs of central station generation and transmission system  Remaining customers responsible for costs of system 7

Distributed Energy – What’s the Best Configuration?

 Utility Side/Wholesale  Sell @ Wholesale     Interconnect to transmission and/or distribution Clearly have right to sell ancillary services More complicated Requires developer to be LSE in PJM (or other ISO) 8

Distributed Energy – What’s the Best Configuration?

 Customer Side/Retail  Net Metering  Usually provides pricing subsidy  Limits use of output 9

What is Net Metering?

  Net energy metering is an important incentive program that can maximize the amount of distributed energy on the grid.

Net metering allows customers with distributed

generation

systems to be compensated when their systems generate more electricity than the customer is using onsite.

What is Net Metering    Net Metering “Customer Generator” receives full retail rate credit for outflow (each kWh generated) Amount purchased by customer generator @ same rate Customer generation receives payment at some level for net annual outflow 11

Source:

U.S. Energy Information Administration, based on Database of State Incentives for Renewables and Efficiency

Source: U.S. Energy Information Administration, Electric Power Annual

Net Metering Legal Issues: Who Can Install Net-Metering ?

  General Rule: Retail Customers Only  Generally, retail customer must be an owner or operator States may allow third party financing/ ownership  Pennsylvania will allow third-party owner/operator in limited circumstances  Third-party owned and operated systems are limited to 110% of the utility customer’s annual electricity consumption.

Net Metering Legal Issues: Eligibility of Net Metering Requirements     States may limit net-metering to certain technologies to reflect policy choices Systems typically sized to on-site load (or a little more) Generally, limited to small-scale systems States may limit aggregate capacity, based on utility peak load 16

- Eligibility Technologies OH PA TX WV MD

Solar Wind CHP Fuel Cell Biomass Geothermal

√ √ √ √ √ NJ NY √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ * √ √ √ * √ √ √ √ √ √ * √ 17

Coal

√ √

Summary of Net- Metering

State

CA CT D.C.

DE IL

System Size Cap

1 MW; 10 MW for 3 biodigesters

Suppliers Required to Offer ?

No 2 MW 1 MW 2 MW 40 kW Yes No Yes Yes

Applicable Scenario

Dual-Bank, if supplier offers net-metering; likely Partial Netting otherwise Utility-Side Netting Dual-Bank Netting Utility-Side Netting Dual-Bank or Utility Side Netting

Monthly Carryover Rate

Monetized credit on full retail rate 1:1 kWh credit Retail for 100 kW or less; generation rate for 100 kW to 1 MW 1:1 kWh credit 1:1 kWh credit 18

Summary of Net- Metering (Cont.)

State

ME MD MA MI NH NJ

System Size Cap

660 kW 2 MW 10 MW for gov’t 2 MW for others 150 kW 100 kW Yes No Customer’s average annual load Yes

Suppliers Required to Offer ?

No Not addressed Not addressed

Applicable Scenario

Utility-Side Netting Utility-Side Netting (current) Hybrid Utility-Sde up to 20 kW Unclear, probably Partial Netting Utility-Side Netting

Monthly Carryover Rate

1:1 kWh credit 1:1 kWh credit Monetized credit based on calculation ( ~ retail rate) 1:1 kWh credit 1:1 kWh credit 1:1 kWh credit 19

Summary of Net- Metering (Cont.)

State

System Size Cap

2 MW

Suppliers Required to Offer ?

Not addressed No

Applicable Scenario

Utility-Side Netting

Monthly Carryover Rate

1:1 kWh credit OH PA RI No specific limit 5 MW for commercial systems 3.5 MW No Not addressed Hybrid or Partial Unclear, probably Partial Netting Unclear, possibly Hybrid Unbundled generation rate 1:1 kWh credit Monetized credit, based on calculation ( ~ retail rate) TX No state-wide rules for net-metering Source: Justin Barnes & Laurel Varnado, “The Intersection of Net-Metering & Retail Choice: An Overview of Policy, Practice and Issues,” Interstate Renewable Energy Council (2010), at p. 7-8, Table 1 (footnotes omitted) 20

Net Metering Legal Issues: Net Metering Customer – Shopping or Non-Shopping?

  Rules vary from state whether competitive suppliers are required to offer net metering and, if so, does competitive supplier need to provide subsidy?

PA: EGS not required to offer net metering; if EGS does, the rate it charges/pays for generation is up to parties.

Are Net-Metering Customers Shopping?

 PPL Electric Utilities had the following numbers for net-metering customers as of April 30, 2012:

Rate Class Residential Small C & I Large C & I Totals Number of Customers Using Net Metering in Conjunction with: Default Service from PPL Service from EGS

1,430 789 (64.44%) 284 (62.56%) 1 (35.56%) 170 (37.44%) 27 (3.57%) 1,715 (63.50%) (96.43) 986 (36.50%)

Totals

2,219 454 28 2,701 22

Net Metering Legal Issues: Calculations of Net Output Price  PA (and other states) current rule: customer generator receives yearly net output at “price to compare” (“PTC”)  PTC is default service price PLUS transmission  What happens when there is no more default service?

Net Metering/Distributed Generation Legal/Policy Issues

 What Are the Longer-Term Prospects for Net Metering 24

Net Metering Arguably Produces Benefits     Lower, more predictable energy bills Reduces strain on electric grid Encourages alternative energy production Net metering customers may be more aware of consumption 25

Net Metering Creates Issues    Tilting market in favor certain resources Remaining ratepayers paying subsidies to encourage net metering  E.g., California’s three major electric utilities estimate that burden that will be shifted is about $7.6 million – an extra $185 per year if evenly spread  “Death Spiral” With advent of abundant domestic natural gas supply some question need to continue to provide regulatory incentives 26

Will Net Metering Incentives/Subsidies Continue:  Net metering key part of encouraging “all of the above” strategy  Like Twitter and crowd sourcing, net metering is (increasingly) popular    Unlikely that grid will move back towards more centralization Home owners/small business/developers can make money  More of them than utilities But, future of rich subsidies in doubt  Especially as generation pricing becomes more market reflective and competitively sourced 27

Questions?

Dan Clearfield, Esq.

(717) 237-7173 | [email protected]