Solar power, net metering, & fixed rates

Who uses the energy that comes from a solar installation on a rooftop house in a Wisconsin neighborhood, and how does the owner get compensated? For some Wisconsin residents, the rules governing those decisions are changing.

A conversation with RENEW Wisconsin's Tyler Huebner

The Solar Energy Industries Association describes net metering this way:

“Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. For example, if a residential customer has a PV system on the home's rooftop, it may generate more electricity than the home uses during daylight hours. If the home is net-metered, the electricity meter will run backwards to provide a credit against what electricity is consumed at night or other periods where the home's electricity use exceeds the system's output. Customers are only billed for their ‘net’ energy use.”

Tyler Huebner
Tyler Huebner

Simple, right?

Not necessarily.

Power Points recently sat down with Tyler Huebner, executive director of the renewable energy advocacy and education organization Renew Wisconsin, to talk about net metering and solar growth across the U.S., as well as to get his take on the future of the solar market in Wisconsin and beyond.

According to Huebner, some utilities consider net metering an unfair subsidy. Utilities produce power for three to four cents per kilowatt-hour (kWh). But solar producers generally offset their use at the retail rate, which is about 12 cents per kWh for a residential user. Utilities argue not only that solar producers who capture power during the day are getting credit for electricity used at night (when their solar panels aren’t operating), but that they can also provide daytime electricity for less.

Solar advocates such as Huebner, on the other hand, say net metering is a form of “rough justice” that benefits everyone. Solar producers generate power when power plants have the highest expenses, in the middle of the day, and especially on the hottest days of the year. Advocates also argue that private owners spending their own money to build solar power capacity saves the utility more than the three or four cents per kWh the utilities might otherwise spend. A third potential benefit is that because the sunshine itself is free, solar panels provide cost certainty throughout the life cycle of the units, avoiding the market uncertainty associated with the cost of, say, natural gas.

At the heart of the net metering debate, however, is one question – about how we measure solar’s value – that gets asked different ways:

  • What is the value of solar? Is it 4 cents per kWh or is it 12 cents per kWh?
  • Or how do we measure the societal benefit of an individual putting solar panels on their home or business to provide power for themselves and others?

Tyler Huebner: Another way to ask this question is: are we looking backwards and measuring what we’ve already built, or are we looking forward at how we can avoid the need to build more power plants in the future? There are major benefits to producing power on a residential level.  One is the environmental benefits, because natural gas and coal have various levels of carbon emissions and air pollution that carry with them their own societal costs.

There’s also the benefit of capacity. Solar installations are meeting future energy needs by building the load capacity that the utilities would otherwise have to build. For example, Brooklyn’s utility, Consolidated Edison, recently rejected a proposal to build a billion-dollar substation in favor of locally-sourced solar energy.

Power Points: How has net metering been assessed by states? Are there federal conventions being adopted?

Tyler Huebner: 44 out of 50 states have some form of net metering, so the state of net metering in the U.S. is strong.  Yet there is still a very low level of adoption in most places which makes it difficult to measure net metering’s impact. In Wisconsin, for example, solar penetration is still a fraction of one percent. This makes it hard to perform an analysis on aggregate benefit versus aggregate cost. We’re still in the early stages of this conversation.

The future of solar in Wisconsin and beyond

Power Points: Wisconsin recently allowed utilities to raise the “fixed charge” for ratepayers. How does this impact Wisconsinites?

Tyler Huebner: Utilities charge customers a flat fee, or “fixed charge,” to connect to the grid, which used to be $7-$10 per month for most Wisconsin customers. Since 2014, our major utilities have been raising these to $14-$21 per month.  When first proposed, this was sold by utilities as a need to make up for lost revenue from a few hundred solar installations, when their customer base has 400,000 to 1 million Wisconsin residents. Unfortunately, folks that feel these high fixed charges the most are those who use very little electricity in the first place: those on a fixed income, senior citizens, and those who live in apartments.

Power Points: What do you see as the future of solar, in Wisconsin and across the nation?

Tyler Huebner: Policy matters. At the federal level, the solar tax credit - 30% in 2017, 2018, and 2019 before stepping down to 26% in 2020, and 22% in 2021 - provides incentive for growth. Meanwhile, solar prices are continuing to drop – we’re now seeing a potential payback within a decade – which demonstrates that solar is here to stay. Some renewable energy analysts say solar can expand to provide up to 40% of the state’s electricity usage. From less than one percent today, that’s a tremendous opportunity for economic growth in Wisconsin.