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LEGAL ISSUES IN DISTRIBUTED ENERGY &
NET METERING
Dan Clearfield, Esq.
Energy Law & Policy Institute
University of Pittsburgh School of Law
August 2, 2013
Presented by:
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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?
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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
Source: The California Energy Commission
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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.
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Benefits of Distributed Energy
Cost savings for owner/customer (Potential) increased reliability of grid
overall Increased energy efficiency (line
losses) Environmental benefits
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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
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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)
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Distributed Energy – What’s the Best Configuration?
Customer Side/Retail Net Metering Usually provides pricing subsidy Limits use of output
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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.
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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
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
Source: U.S. Energy Information Administration, Electric Power Annual
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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.
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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
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- Eligibility TechnologiesSola
rWind CH
PFuel Cell
Biomass
Geothermal
Coal
MD √ √ √ √ √
NJ √ √ √ √ √
NY √ √ √ √ √
OH √ √ √ √ √
PA √ √ √ √ √ √ √
TX √ √ * * √ *
WV √ √ √ √ √ √ √
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Summary of Net- Metering
State System Size Cap
Suppliers Required to Offer ?
ApplicableScenario
Monthly Carryover Rate
CA 1 MW; 10 MW for 3 biodigesters
No Dual-Bank, if supplier offers net-metering; likely Partial Netting otherwise
Monetized credit on full retail rate
CT 2 MW Yes Utility-Side Netting 1:1 kWh credit
D.C. 1 MW No Dual-Bank Netting Retail for 100 kW or less; generation rate for 100 kW to 1 MW
DE 2 MW Yes Utility-Side Netting 1:1 kWh credit
IL 40 kW Yes Dual-Bank or Utility Side Netting
1:1 kWh credit
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Summary of Net- Metering (Cont.)
State System Size Cap
Suppliers Required to Offer ?
ApplicableScenario
Monthly Carryover Rate
ME 660 kW No Utility-Side Netting 1:1 kWh credit
MD 2 MW Not addressed
Utility-Side Netting(current)
1:1 kWh credit
MA 10 MW for gov’t2 MW for others
Not addressed
Hybrid Monetized credit based on calculation( ~ retail rate)
MI 150 kW Yes Utility-Sde up to 20 kW
1:1 kWh credit
NH 100 kW No Unclear, probablyPartial Netting
1:1 kWh credit
NJ Customer’s average annual load
Yes Utility-Side Netting 1:1 kWh credit
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Summary of Net- Metering (Cont.)State System Size
CapSuppliers Required to Offer ?
ApplicableScenario
Monthly Carryover Rate
NY 2 MW Not addressed
Utility-Side Netting 1:1 kWh credit
OH No specific limit No Hybrid or Partial Unbundled generation rate
PA 5 MW for commercial systems
No Unclear, probably Partial Netting
1:1 kWh credit
RI 3.5 MW Not addressed
Unclear, possiblyHybrid
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)
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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.
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Are Net-Metering Customers Shopping?
PPL Electric Utilities had the following numbers for net-metering customers as of April 30, 2012:
Rate Class Number of Customers Using Net Metering in Conjunction with:
Totals
Default Service from PPL
Service from EGS
Residential 1,430
(64.44%)
789
(35.56%)2,219
Small C & I 284
(62.56%)
170
(37.44%)454
Large C & I 1
(3.57%)
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(96.43)28
Totals 1,715
(63.50%)
986
(36.50%)2,701
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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?
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Net Metering/Distributed GenerationLegal/Policy Issues
What Are the Longer-Term Prospects for Net Metering
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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
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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
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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
