Net metering gives renewable energy customers credit on their utility bills for the excess clean power they deliver to the grid to be used by their neighbors. This simple billing arrangement has long been one of the most important state policies for empowering customer investment in distributed renewables. And with state subsidies winding down in many parts of the country as solar approaches grid parity, net metering has become an increasingly critical policy for continued solar adoption.
In many states, participation in net metering is capped in relation to the aggregate load on the grid, typically as a percentage of a utility’s peak load. Once these program caps are reached, utilities are no longer required to provide net metering to additional renewable energy customers. These caps, which are typically based on utility operational and financial “concerns” with virtually no supporting data, place an unnecessary barrier to private investment in distributed renewables and limit the many economic, environmental and grid benefits associated with net-metered systems. Moreover, these aggregate program caps ignore the fact that many large systems do not export energy yet count towards meeting a cap, which limits the number of small systems that are eligible for the program.
As a result, we have long recognized that best practices in program design would not limit cumulative generating capacity of net-metered systems. While not going so far as to uncap their programs, two states took commendable action this year to raise their aggregate net metering caps and ensure that more energy customers get full credit for their clean energy investment.
The Empire State’s primary market-building policy is the NY-Sun Initiative, an incentive program designed to achieve solar scale and affordability for New Yorkers. Originally conceived of as a four-year program (2012-2015), Governor Cuomo and his administration have committed to extending the program through 2023 to provide the long-term market certainty necessary for robust investment and sustainable growth in the state’s solar industry.
It’s an exciting growth trajectory; however, the state’s 1% net metering cap would be hit long before NY-Sun’s ambitious goals would be met. In fact parts of the state were on track to hit the existing cap before the end of 2013. To address this near-term barrier to growth, the New York Public Service Commission approved a decision in June 2013 to triple the state’s net metering cap to 3% for five of the state’s major electric service providers. The action will keep NY-Sun shining by clearing the way for New Yorkers to invest in an additional 462 megawatts (MW) of net-metered generation.
California is the nation’s largest solar market, with more than 1.5 gigawatts (GW) of net metered solar installed at homes, businesses, schools and other buildings. In October 2013, Governor Brown signed into law AB 327, a rate reform bill that provides a framework for continued rooftop solar success by expanding customer access to net metering.
California’s net metering program is currently capped at 5% of the sum of each utility’s customers’ maximum demand. Prior to AB 327, state regulators at the California Public Utilities Commission (CPUC) were considering suspending the program even earlier: as soon as the end of 2014. The new law ensures that California’s net metering program will now stay in place until customers of the three large utilities do indeed hit the 5% cap, likely around 2016 or 2017. Furthermore, it gives the CPUC authority to remove caps on net metering participation altogether. The law specifically directs the CPUC to ensure that after the existing 5% program cap has been met, rooftop solar customers will continue to receive some form of fair credit on their utility bills. The details will be determined during the implementation process, but we hope that the CPUC will continue to take an approach—consistent with Freeing the Grid best practices—that retains the essential driving force that has made net metering so successful: to compensate solar customers fairly for the valuable power they are delivering to the grid.