Net Metering and Valuing Rooftop Solar

Net Metering and Valuing Rooftop Solar
09 October 2013

The debate over rooftop solar in Utah rages on. Because Rocky Mountain Power is a monopoly, it has to request permission from the Utah Public Service Commission (or PSC) if it wants to change its prices (aka electricity rates). Utah Clean Energy wants your electricity rates to reflect good policy—that is, we want to see price signals (for all you economics geeks out there) that encourage smart energy behaviors, like energy efficiency, electric plug-in vehicles, and rooftop solar.

The Latest

Since the close of the 2016 Legislative Session, and with it, the passage of SB 115 (“STEP”), we’ve received many questions from installers, businesses, and homeowners about the status of solar in Utah – the net metering program in particular. We hope this will help.

First and foremost, solar is alive and well in Utah. Rocky Mountain Power’s enormous STEP bill passed, but without the damaging net metering provisions that would have allowed the utility to impose a net metering fee outside of a normal rate case. What this means is that we were able to maintain the status quo for solar in Utah. The Utility may, and likely will, propose a fee for net metering customers in the near future, but that fee will have to be evaluated by the Utah Public Service Commission thoroughly and in a comprehensive manner in a general rate case. Utah Clean Energy will work with all of you to ensure that any changes to net metering are fair for rooftop solar.

Utility Solar Incentive
While STEP does not impact Utah’s net metering program, it does end Rocky Mountain Power’s Utah Solar Incentive Program a year early in order to pay for utility investments in electric vehicle charging infrastructure, battery storage pilot projects, and “clean coal” technology (among other things). This does not affect State or Federal tax incentives for rooftop solar installations, but the Rocky Mountain Power lottery will no longer be available after the end of this year.

Utah State Tax Incentive for Solar
Finally, Representative Jeremy Peterson introduced a bill to phase out Utah’s State tax incentive for solar installations. After discussing it with industry representatives, he agreed to hold the bill for additional study over the summer. We look forward to working with you to make sure Representative Peterson understands the tremendous benefits this tax credit provides to the State.

To sum up:

Utah’s net metering program did not change as a result of the 2016 legislative session.
Rocky Mountain Power’s proposed net metering fees will be evaluated in the utility’s next general rate case.
Rocky Mountain Power’s Utah Solar Incentive Program will end this year.
Federal and State tax incentives are still available for solar installations.
The Utah State tax incentive will be evaluated over the Legislative Interim Session (May-November).  

 

A huge thanks to all of the members of the Clean Energy Business Coalition who got involved during the 2016 Legislative Session in support of clean energy. Please stay tuned for opportunities to get involved during the Interim session and in the regulatory arena.

Municipal Utilities & Net Metering

Municipal utilites differ from Rocky Mountain Power in that they are not required to offer net metering and do not need to seek Commission approval to make changes to their net metering programs. Several municipal utilities in Utah are making changes (or considering changes) to their net metering programs.  When considering rooftop solar, consult your municipal utility for information about their net metering policies.  For more information about municipal net metering programs email Utah Clean Energy's Solar Program Coordinator Kate Bowman.

Net Metering Cost-Benefit Analysis Working Groups

The analysis of Rocky Mountain Power's net metering program began with a series of working groups to delve into the challenges, solutions and opportunities that come with integrating rooftop solar into our energy system. It’s technical, it’s complex, and oh so important for the future of solar energy in Utah! We had four working group meetings to discuss issues related to net metering. For the energy nerds reading this, here is an update on the more technical aspects of the working groups.

First Working Group  - Who Can Talk Utility Distribution for 7 Hours?
We can!  The first working group kicked off by focusing on challenges and opportunities related to solar and the utility’s distribution system (how electricity gets from the transmission system to your house). Essentially, we discussed how rooftop solar is different from other sources of power, how the utility gets power from source to customer, and what impacts increased rooftop solar will have on this process.  For our contribution, Utah Clean Energy brought in two technical experts to give presentations on lessons learned by areas like Hawaii and California, who are seizing their rooftop solar potential while successfully managing its impacts on utility transmission and distribution.  Our expert from Clean Power Research showed how rooftop solar can actually help a utility avoid transmission and distribution costs as it provides energy on-site. It may not sound like a page-turner to you, but it was a thought-provoking presentation that outlined a win-win pathway for increased solar in Utah.

Download Ben Norris' presentation.

Second Working Group (May 12)
The topics of the second workgroup were (1) cost-benefit analyses and (2) how NEM is evaluated and valued through existing utility planning analyses, including IRP and Cost of Service studies.  Dr. Thomas Vitolo with Synapse provided an overview of cost and benefit categories that can be considered in a net metering cost-benefit analysis.  Jason Keyes with IREC outlined the key differences between a cost-benefit analysis and a cost of service study and highlighted best practices for both.  A cost of service study is designed to determine the cost of providing electricity service to a particular class of customers to help determine prices for each type of customer based on how they use energy.  A cost-benefit analysis takes a broader look at the costs and benefits of net metering, including benefits like avoiding delivery line losses, providing grid support, and avoiding or deferring transmission and distribution investments.

Download Dr. Thomas Vitolo’s presentation: Avoided Costs Associated with Distributed Generation

Download Jason Keyes’ presentation: Cost of Service Studies vs. Cost Benefit Analysis

Third Working Group (June 25)

This working group focused on existing cost tests, which are used to evaluate energy efficiency programs and whether (and how) these tests could be used to evaluate net metering. The DSM (or "Demand Side Management"—a fancy way of saying energy efficiency) tests tell us whether a given energy efficiency initiative - like incentives for more efficient lightbulbs - is a good deal from the perspective of the utility and its customers. These tests can tell us whether a program is a good investment, but when the time comes to recover the costs from customers, regulators must do so by establishing prices in a process called “ratemaking.” More of an art than a science, ratemaking requires utilities and regulators to balance many different, sometimes competing goals (for example, providing low-cost, reliable service; mitigating long-term risk; and ensuring access to electricity to low-income Utahns).

Download Tim Woolf's presentation: Cost-Effectiveness of Net Energy Metering

Fourth Working Group (July 8)

You may not scrutinize your electricity bill, but if you did you would discover that there are many different components to it: energy charges, customer charges, minimum bills, seasonal and time of use pricing, and for commercial customers, a demand charge or a facilities charge.  Simple, right?  When electricity bills are structured well, they incent good behaviors (like conservation) and discourage electricity usage that is wasteful or costly. When the cost-benefit analysis is completed, the findings of the analysis will need to be converted into electricity prices (“rates”).  A good electricity rate will provide adequate compensation for solar energy, protect low-income customers, reward smart energy choices, and also be simple and understandable to the average human. There are many ways to design rates for net metering customers, and it's important that we get it right.

Download Melissa Whited's presentation: Rate Design, Options for Addressing Net Metering Impacts