EXAMINING CHALLENGES WITH RESIDENTIAL ROOFTOP SOLAR PHOTOVOLTAICS AND NET METERING Systems Are More Complex than Simply Plugging in Solar Panels By Will Kirby, PE, ENV SP and Brad Jensen, PE

The rise of rooftop solar photovoltaics (PV) has highlighted the intertwined technical and financial barriers in regards to the practice of net metering, or the flow and accounting of electricity back into the grid from residential customers utilizing solar PV. Recent decisions at the state and federal levels may significantly stunt the growth of rooftop solar PV adoption. The implications of these decisions could have a substantial impact on the solar industry and on the overall fate of renewable energy growth in the United States.

Generating your own power using rooftop solar PV is not a new technology but, because of improvements in technology, policy and economics, it has become an increasingly popular renewable energy choice. It is a viable option to utilize renewable energy sources and possibly even save money depending on location, geography and system setup. Typically customers must still rely on their connections to the grid for peak loads and periods when solar energy is not available (e.g., at night). During the day a customer is 10,000 likely not utilizing all of the power generated 9,332 by the solar PV panels, a time when many 9,000 residential customers are at work. But their solar 8,000 2,235 PV panels still may be producing electricity and 7,097 7,000 transmitting it back to the grid. 6,000 1,949 5,147 Energy storage solutions are in development 5,000 1,468 for the residential market, but in most cases are 4,000 3,680 not economical. Therefore excess power must 7,097 3,000 2,495 1,184 be fed back into the grid, and this is where net 5,147 2,000 1,037 3,680 metering (or net energy metering) comes into 1,000 2,495 the picture. Most states allow net metering, 1,459 0 which is the process by which excess electricity 2011 2012 2013 2014 2015* from renewables — such as rooftop solar — turns back your electricity meter as it is fed existing capacity capacity additions *Preliminary totals back into the grid [1]. If a customer uses more power than is generated by the home’s solar PV, Figure 1: Solar PV net metering capacity existing and additions the customer is charged only for the difference. in megawatts. Source: U.S. Energy Information Administration Regardless of the time of day or need on the grid, customers are allowed to sell their excess power back into the grid. This also means they can sell their excess energy during peak times (midday) and buy needed energy during package to help homeowners determine the off-peak hours (night). Models and regulations equipment, performance estimates and financial differ depending on which state and regional implications of residential solar [3]. For starters, governing body the customer resides in, but as output from the solar energy system must be of 2013 voluntary or mandatory net metering regulated and converted from direct current policies were available in 43 states as required (DC) to alternating current (AC) to be usable by the Energy Policy Act of 2005 [2]. The Public by the homeowner and for connection to the Utility Regulatory Policy Act of 1978 (PURPA) grid. That means a typical system must include laid the groundwork by requiring power converters, AC/DC inverters, transformers and providers to purchase excess power from grid- other equipment [3]. Utilities require that all Will Kirby, PE, ENV SP, is a connected small renewable energy systems [1]. of this equipment is properly designed, tested staff transmission engineer at and sized to allow for the connection to the grid Burns & McDonnell, where he Net Metering Challenges and to provide protection for the grid. Such is co‑leader of the Sustainable provisions include protection for the customer A rooftop solar PV system can be overwhelming Energy Solutions team, which in case there is an interruption on the grid itself to the average customer; it is not simply identifies partnerships and [3]. While a developer may handle installation made up of panels and wiring connected to opportunities to drive positive, and design, the utility ultimately must approve your house’s circuit breaker. A general lack of clean and responsible growth in and verify that the rooftop PV and metering customer education regarding such systems is the power and energy arenas. He is are in compliance with technical regulations a major barrier to adopting this technology. The pursuing a Master of Engineering and specifications. This is a cost to the utility National Renewable Energy Laboratory (NREL) degree in Sustainable Systems that will be discussed in the context of specific and other organizations have put together Engineering, with a focus on state regulations. documents and software like their PVWatts Energy Production and Distribution, from the University of Wisconsin.

For more information, please email [email protected].

2 Even though net metering is ultimately an Battleground States energy incentive, or accounting tool, driven Many states have recently made headlines by states or utilities to encourage customers for battles being fought among solar to generate their own electricity, the physical developers, utilities and commissioners. meter arrangement may vary to reflect that Among them are three states in what could be local policy. Essentially there are two scenarios called part of the solar belt of America: Arizona, for providing excess power back to the grid: California and Nevada. • Net metering

• Net purchase and sale, similar to a In early 2016 Arizona Public Service (APS), the feed‑in tariff largest utility in Arizona, withdrew its request to the Arizona Corporation Commission for

Net metering is the most economical for the increasing a monthly solar fee from $5 to $21. customer. For example, a single bidirectional The proposed increase (outside of a rate case) meter can measure the electricity utilized was originally attributed to a claim by APS that (purchased) from the grid and the excess solar users were not paying their fair share for electricity produced by the customer and upkeep of the grid. The utility maintained that exported (sold) back to the grid. If the amount the cost for increased solar deployment — and exported to the grid is the greater of the two decreasing revenue due to net metering — was at the end of the month, then the utility pays being shifted to non-solar customers. The utility the customer for the excess power sold to said that solar customers either should be paid the grid. Some utilities even allow the balance wholesale rates for power sold to the grid, or to be carried over each month, and pay the pay additional fees on their monthly bills — customer annually. both of which would dramatically change the economics of rooftop solar. Solar developers

Using the net purchase and sale structure, two were fighting to keep the current structure single direction meters are installed at the grid intact, with net metering and low fees [4][5]. tie. The difference in this setup is that the meter This battle had been raging for some time in measuring the electricity utilized from the grid the state, dating back to 2014 with the millions would correspond to the utility’s standard retail of dollars pumped into the elections for two rate, while the second meter would measure of the Arizona Corporation Commissioners. the rooftop solar PV when the customer is Some allege that APS or its parent company, producing an excess amount. This rate, however, Pinnacle West, has contributed millions of Brad Jensen, PE, is a staff electrical is set at the utility’s avoided cost, or wholesale dollars into the election campaigns of the very engineer at Burns & McDonnell, rate — typically much lower than the retail rate commissioners who have been fighting solar where he is co-leader of the [1]. This difference in rates is one of the focal developers in the ugly and very public battle. Sustainable Energy Solutions points of hotly contested regulatory battles On the other side, solar developers have funded team and has project experience across the country. Solar advocates want to their own negative ads and political watchdog with substations, distribution maintain retail rates for net metering electricity campaigns [5]. For now it appears the two and renewable energy transmitted back into the grid, while utilities say sides have called a ceasefire and reached transformers. He received his this model shifts costs to non-solar customers. an agreement to drop their latest competing bachelor’s degree in engineering Utilities are forced to invest in new infrastructure ballot efforts. A compromise is said to be from Iowa State University. and technologies in order to accommodate this in the works between the utilities and solar leasing companies [6]. For more information, please email newly added generation. According to utilities, [email protected]. these costs are currently borne primarily by the remaining non-solar ratepayers.

\ 2016 NO. 2 3 The state of California is the largest rooftop reference to Assembly Bill 327, a California bill solar market, so any decisions made by the to require the CPUC to re-evaluate how much state regulator, California Public Utilities solar customers are paid for excess energy. Commission (CPUC), are bound to generate Solar advocates say that rooftop solar PV large ripples through the solar industry. The has other financial benefits, such as reducing industry scored a major victory in February climate change effects and lessening the 2016 when the CPUC determined, on a 3-2 need for building more transmission lines and vote, that utilities must keep paying full retail generation. Included were two concessions rates to customers with solar PV for the favoring utilities: a one-time interconnection electricity they produced. This decision also fee ranging from $75 to $150, and a non- means that these customers won’t pay for the bypassable charge ($8 to $9 per customer) upkeep of transmission lines, which resulted that all utility customers pay. These charges in the withdrawal of a transmission fee that fund programs for low-income residents and remains applicable to non-solar customers promoting efficiency. In addition, any new solar [7][8]. Some utility advocates say this could customers must utilize time-varying or time-of- lead to a “utility death spiral,” in which a use electricity rates, meaning rates will adjust utility is obligated to maintain the grid while depending on demand (i.e., real-time markets). continuing to lose revenue to rooftop solar California plans to revisit its solar incentives PV and other distributed generation. One policy in 2019 [9]. utility spokesperson said the CPUC “ignored state law and the clear direction from the Fellow sun-soaked state Nevada went the other state legislature, which called for them to direction recently. In late 2015 the regulator reform net energy metering to ensure benefits Public Utilities Commission of Nevada (PUCN) are balanced with the costs.” This was in voted unanimously to adopt a new rate

4 structure for customers with rooftop solar PV. References This new phased-in structure would reduce by 75 percent what NV Energy, the largest electric 1. Energy.gov, “Grid-Connected Renewable utility in the state, would pay customers for Energy Systems | Department Of Energy.” the excess electricity they put back into the N.p., 2016. Web. Feb. 27, 2016. grid via net metering. The electricity would 2. L. Stevens, “Net Metering 101 — IER.” IER. be purchased for the wholesale rate instead. N.p., 2014. Web. March 11, 2016. Flat service rates for customers also would 3. K. Sedghisigarchi. “Residential Solar change. The commission’s decision was due to Systems: Technology, Net-metering, and the belief that Nevada’s current rate structure Financial payback,” Electrical Power & unfairly shifted costs from solar users to non- Energy Conference (EPEC), IEEE, 2009. solar users. The commission denied a demand 4. R. Randazzo, “Arizona Regulators Seek charge, a decision attributed to a desire to cut Solar Net-Metering Compromise.” down on major customers at one time [10]. azcentral.com. N.p., 2015. Web. Solar developers are unhappy that this new Feb. 27, 2016. rate structure applies to customers who have previously bought solar panels and that all of 5. R. Leingang, “APS Drops Bid For Solar Fee them will not be classified as a separate class Increase, Blames ‘Political Gamesmanship.’” of ratepayers [11]. Like California, Nevada will Arizona Capitol Times. also start utilizing time-of-use pricing. 6. R. Randazzo and M.J. Pitzl, “Rooftop solar cease-fire takes ballot measures off table Conclusions for now.” azcentral.com. N.p., 2016. Web. Rooftop solar PV is at a major crossroads and June 29, 2016. net metering is at the crux of whether it will 7. S. Roth, “Final Decision: CPUC Won’t Raise continue its historic growth and development. Rooftop Solar Costs.” Desert Sun. N.p., Regulators must decide if they want to spur 2016. Web. Feb. 27, 2016. N.p., 2016. Web. an industry that stakeholders would almost Feb. 29, 2016. unanimously agree has a place in America’s 8. Penn, Ivan, “California Solar Owners Face clean energy future, or if they want to impose New Fees, Utilities Say Costs Should Be costs that might severely diminish the Higher.” latimes.com. N.p., 2016. Web. momentum and technological advancement of March 11, 2016. solar. The net metering and cost-shifting issue is not a simple one. Data is required from both 9. J. St. John, “California Net Metering 2.0 sides to help policymakers understand the Keeps Retail Rates For Rooftop Solar.” full picture and make educated decisions that Greentechmedia.com. N.p., 2015. Web. protect not only the current ratepayers and Feb. 29, 2016. customers, but future stakeholders as well. 10. Tdworld.com, “Nevada Commission Approves Rooftop Solar Rate Structure.” N.p., 2015. Web. Feb. 29, 2016.

11. State of Nevada Public Utilities Commission, “PUCN to consider revised rates for customers who participate in net energy metering.” http://Pucweb1. State.Nv.Us/PDF/Aximages/PRESS_ RELEASES/300.Pdf. 2015. Print.

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