New law enhances payback for net metering

A growing number of homes and other buildings connected to the grid are using solar panels, without the hassles or expenses of a bank of batteries in the basement or a backup generator in a shed. Photo by Jodie van de Wetering.

Solar electricity is no longer for back-to-the-landers living in the woods, off the electric power grid. A growing number of homes and other buildings connected to the grid are using solar panels, without the hassles or expenses of a bank of batteries in the basement or a backup generator in a shed. When the building uses more electricity than the solar electric system can provide (like at night, or during these rainy days we’ve seen enough of), then the power on the electrical grid makes up the difference. And when the sun is out and the building’s own load is light, then the electric meter spins backwards.

Since the electric meter spins forwards at times and backwards at other times, at the end of the month it shows not the total electricity consumed, but the net of production and consumption—and it’s the net amount that the electric utility issues its bill for.

This type of system is called “net metering,” and it works not only for solar electricity, but wind, small hydro, and anything else that generates electricity on a small scale.

Vermont’s new energy bill has a host of provisions that make the state’s net metering program friendlier to consumers by increasing the relative size of the system that they can get financial paybacks from, paying a bonus to owners of solar electric systems and making it easier for groups to share net metering facilities.

It also raises the cap on the percentage of a utility’s electricity that it must accept from net metering from 2 percent to 4 percent.

Vermont began 13 years ago to require utilities to net meter customers who wanted renewable home electricity systems. Some utilities resisted the mandate, and they were mollified with limits capping their requirement when their customers’ total net metering capacity reached 2 percent of peak demand.

Other early limits hobbled the spread of solar electric systems. For example, the law mandated that during those months that the meter went backwards on net, the utility would issue kilowatt-hour credits to the customer. Those credits could be applied to get “free” kilowatt hours in subsequent months. The catch was that all the credits evaporated on December 31—and the months of January, February, and March are not known in Vermont for long, sunny days.

Starting the new year credit-free meant that the building owner who had invested in enough solar capacity to cover, on average, the entire year’s electricity needs, would nonetheless end up paying the utility in dollars for the first several months of the year, only to see some of the excess power generated during the sunny months given to the utility as an involuntary, post-Christmas gift.

This provision was amended several years ago to make the credits valid for a year after the month in which they were earned. Credits from July of one year are now carried on the bill through to July of the following year, so they are available to offset consumption during the darkest days of winter. In the rare case that a system’s production is very close to the building’s consumption, it’s possible that the system owner would lose some credits when there were two particularly sunny years in a row, but in general, the new provision ensures that the customer, not the utility, benefits from the months with a net surplus generation.

A provision in the new energy bill benefits the customer even more. Instead of kilowatt-hour credits during months that their meter runs backwards, customers will receive monetary credits. For most present systems, the system will operate identically to the credit system. Every kilowatt hour will be converted into dollars at the rate the customer is paying for electricity—and on months when the meter runs forward, the customer pays the same rate for those kilowatt hours. However, the monetized credits never evaporate, and they can be applied not only to the electricity itself, but also to the monthly service charge and other items on the bill.

Together, the two changes mean that there are financial paybacks to investing in a net metered system sized “too big” for the building, because the customer can capture some value from net sales of electricity to the utility. There’s a limit, however, to how big the system can be and still generate further payback. The utility is never required to cut a check to the net metered customer; the lowest a bill will ever get is zero.

Everyone will own a percentage of the system. Every month, we will notify Green Mountain Power of a list of account numbers and what percentage of that month’s production from the solar system should be credited to each personal account.”
- Gaelen Brown

Green Mountain Power has been offering their customers with solar electric systems a six cent bonus per kilowatt-hour, and the new energy bill extends a similar offer to customers everywhere in the state. With the bonus and the retail cost of electricity, residential customers at GMP have been getting a credit plus bonus worth a total of about 20 cents per kilowatt-hour. Customers of other utilities will receive the same total value of 20 cents per kilowatt hour; if the utility’s retail rate per kilowatt-hour is lower than GMP’s, the bonus will be correspondingly higher.

Why did GMP lead the way with a solar bonus? Solar net metering is cost-effective, explains GMP spokesperson Robert Dostis, “because when people are producing solar on those hot days, we’re not on the market buying what would normally be expensive and dirty power.” And the way the wholesale electric market is constructed, utilities pay every power generator the cost of the most expensive electricity that they’re buying at any given time. So if utilities avoid buying that next most expensive megawatt on sunny, hot days when air conditioners are cranked up, they keep the cost of all their power sources down.

Washington Electric Cooperative’s service territory overlaps significantly with GMP’s, except that WEC’s customers tend to live on the dirt roads and GMP’s live on the paved roads. WEC welcomed net metering when it was introduced, and executive director Avram Patt says that they have had the highest proportion of net metered customers of any utility in the state. According to Patt, however, although WEC has not calculated their benefit from solar net metering, he expect it is less than GMP’s.

“Although we do have a summer peak, it’s not our system peak,” Patt said. “We’re still a winter-peaking utility. We have much less air condition penetration than a utility that has a lot of commercial or industrial property, condo developments or something like that. We’re not quite as vulnerable to the summer peak, but our peak is growing, and it is an issue for us. I think it is, at least for PV (photovoltaic), or solar electric an advantage.”

WEC also invests its member-owners’ money in helping members with energy conservation and efficiency. That commitment, Patt says, means that net metering has been financially attractive to WEC in an additional way. “It reduces our demand. Up until the changes that were just made, where the value of net metering is now monetized, someone who net metered just looked like someone who used very little electricity to us, and that was good. It basically looked like it had a conservation impact. And we didn’t have to invest anything in it; the investment was made by the member.”

Many utility customers don’t have access to cost-effective renewable energy on their own property. The sun doesn’t hit it for very long, the wind is mostly calm, and they don’t happen to have a small stream or river running through it. For them, group net metering has provided a way to get on the net metering bandwagon — in theory. With group net metering, multiple customers of the same utility can pool their resources and invest in electricity generation on whichever of their properties makes the most sense. If one of them lives at 2,000 feet near the top of a ridge, they might invest in a wind turbine. Or if one owns a field sloping to the southwest, they might cover it with solar electric panels. Everyone shares the investment and shares the rewards.

Except that sharing the rewards has not always been easy. Gaelan Brown is the solar consultant to the Mad River Valley Energy Network , a nascent solar group net metering program. He said that Sugarbush has given them the use of a 20-acre field for setting up solar panels, and at least 25 households have said they want to participate. A problem in launching the effort has been, said Brown, that GMP has been reluctant to administer the allocation of the credits to the participants’ energy bills.

With the new energy bill, doing basic group net metering bookkeeping is no longer optional for utilities.

“This was the final critical piece that needed to happen for our project to be able to move forward,” Brown said. As he envisions the process, “everyone will own a percentage of the system. Every month, we will notify Green Mountain Power of a list of account numbers and what percentage of that month’s production from the solar system should be credited to each personal account.”

All GMP customers, even those far from the Mad River Valley, are eligible to participate in the Energy Network. “The possibilities of having significant scale really go up with this whole concept,” Brown enthused. He anticipates building out the system in 150 kilowatt chunks, with construction starting next spring.

The net metering bill also makes it faster for owners of solar electric systems under 5 kilowatts to get a Certificate of Public Good (essentially an operating license) from the Public Service Board.

In some places, utilities are bumping up against the current net metering cap of 2 percent of peak demand; the bill raises the cap to 4 percent and allows the PSB to raise it even further.

Disclosure: Etnier’s home is powered in part by a net metered 0.0015 megawatt solar electric facility. It was sized to provide just two thirds of the home’s annual consumption, because it was installed during the period when kilowatt-hour credits disappeared on December 31.