Net metering strikes back

A solar homeowner at his electric meter.

In the cutting edge of renewable energy, many states are experimenting with regimes to replace, limit, or reduce net metering—the bedrock policy that enables roof-top solar by allowing homeowners to reduce their bill 1-to-1 for every kilowatt hour of electricity they produce. These new efforts, sometimes known as net metering (or NEM) 2.0, are still in the early stages.

New York struggles with the dark side

In New York, where they are experimenting with an alternative to net metering known as the Value of Distributed Energy Resources, or VDER (pronounced “Vee-der”), they are experiencing unintended consequences. VDER employs a complex and, its critics claim, incomplete and unpredictable formula for estimating the value of distributed energy generation. Many opponents, in fact, deliberately mispronounce the acronym VDER as “Vader,” in a nod to the Jedi who went to the dark side. This new mechanism has had the effect of discouraging solar development. Many developers claim that VDER creates such uncertainty in the industry in New York that they have no idea whether their solar projects will “pencil out” as ultimately profitable.

Public opinion against VDER has risen to such a pitch that the New York State Assembly recently passed a new bill putting net metering back in effect for the next three years for customers subscribing to community solar programs while also raising the arbitrary net metering cap. The bill would allow solar customers to opt-in to VDER if they chose to continue with the program. During the three-year transition phase, the bill would have mandated a complete evaluation of VDER by the state Public Service Commission (PSC) to make sure the method more accurately reflects the true value of renewable energy by taking additional factors such as security, resilience, and overall environmental impact into consideration.

A memorandum by the Alliance for Clean Energy New York (ACE NY) states that “this bill would assist the state in equitably achieving its 50% by 2030 clean energy goal by providing market certainty and predictability for developers of solar and other clean energy technologies, and ensuring greater access to clean, affordable power for communities across the state.”

Ultimately, the bill failed to pass the State Senate before the session ended in June, leaving advocates to look to action from the Governor and PSC in hopes of finding a solution to VDER’s unforeseen consequences.

States take different approaches to market penetration

Another key aspect of the evolution of net metering and the emergence of NEM 2.0 is what to do when an extremely large number of systems get built. How do you integrate all of that solar into the grid? In California and Hawaii, we are seeing profound policy changes, with Hawaii phasing out net metering entirely and replacing it with a strong preference for systems with combined solar plus storage and no export to the grid. As a result, rooftop solar installation has declined sharply.

Most states have arbitrarily imposed caps on net metering at around 2% of the total load, far lower than technically necessary. In recent years, Massachusetts has seen its solar market stifled as net metering caps failed to rise with demand. In mid-June, the Massachusetts State Senate unanimously approved an energy bills package that would remove the state’s net metering caps, while setting a 100 percent renewable energy standard by 2047 and raising the state’s energy storage mandate to two gigawatts by 2025.

Emily Rochon, a board member of MassSolar, a Massachusetts-based nonprofit renewable energy organization, strongly supports the decision of the Massachusetts Senate to eliminate the cap. She pointed out that the last time caps were raised, in 2016, they were reached almost immediately in the utility National Grid’s territory, because of the utility’s backlog of projects.

Rochon thinks that the Senate understood that the caps do more harm than good. “The removal of net metering caps will stop the start-and-stall solar development process that has been a feature of the Massachusetts market for at least the past five years.” She indicated that larger systems like community solar and low-income solar projects are not exempt from the caps, and thus many such projects in the past few years have been stalled or canceled. Abolishing net metering caps, she believes, will remove a key element of uncertainty in the market.

Rochon said that the Massachusetts House of Representatives, which needs to pass the legislation for it to become law, tends to be more conservative on these issues and may not address all energy issues in a single, omnibus bill. She hopes that, before the session ends in July, they will at least pass legislation which addresses net metering caps, eliminates regressive demand charges on residential solar customers, and requires utilities to offer customers time-of-use rates.

She praised the State Senate for the bill’s passage but also gave credit to “a strong community of environmental, solar, low-income, and social justice interests” for raising the issue, meeting with legislators, and organizing to build support for this and other renewable energy-friendly laws.

“Net metering works,” concluded Rochon. “It’s the simplest, most transparent way for people to realize the benefits of solar. Nothing else works better.”

As more and more solar gets on the grid, the complexities of managing the entire system and fairly compensating participants in the system increase. Stay tuned as we see many more rapid changes and experiments in the coming years.

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