Thursday, December 5, 2013

Net Metering, Good or Evil?

I bet that if you walked up to 100 random people and poked them in the side with a knitting needle, you'd get a pretty consistent reaction.  Some of them might just yelp and jump away, and some of them might take a swing at you, but all of them would react negatively.

The point of this observation is that consistent response to stimuli doesn't mean it's a conspiracy, or even a coordinated effort.

What brings this to mind is the recent formation of the Alliance for Solar Choice, a Net Metering advocacy group. Net Metering advocates have very little trouble painting Utilities as evil conspirators for generally opposing Net Metering.  Don't get me wrong, some Utilities have fought "dirty" in this battle.  Just like some people will just complain when you poke them, and some will automatically take a swing at you.

A consistent negative response to stimuli isn't the same as a conspiracy, and  calling an opportunity to exercise a benefit to everyone doesn't make poking people with knitting needles a good idea.

For those who aren't up on the issue, Net Metering is in place in most of the 50 states, and means that for every watt of energy that a rooftop solar or end-user wind turbine generates that gets fed back into the grid, the customer gets a bill credit for the fully loaded retail rate that would be paid for power taken from the grid.

On the face of it, it sounds fair, you take a kilowatthour, you pay the retail rate for it, you put a kilowatthour back, you get paid the same amount.  It's easy to sell the idea to legislators, regulators and the public.

Now I have, and work with, a lot of friends in the Solar Industry, and I want to put rooftop solar on my house when I get other improvements taken care of.  I like Solar energy, for all the reasons that are advocated for it.  It is a source of electrical generation that makes no noise, emits no pollution at the point of generation (though the production of solar panels can be a pretty environmentally nasty process, if not handled properly), and avoids a fair amount of distribution loading when it's running.  It's also way cool.

But, to me, Net Metering is a lousy idea.

Net Metering shifts costs away from the owner of end-point generation, and to everybody else.  Some say that's fine, since it provides a societal benefit.  When you shift costs to provide a societal benefit, that's a hidden subsidy, and I really dislike hidden subsidies, because they tend to be rife with unintended consequences.  You don't know whether the savings exceed the costs and provide a real net benefit.

Net Metering advocates say that Net Metering provides benefit to non-solar owners by allowing Utilities to avoid costs associated with building new generation.  But avoiding one kind of cost, or one kind of construction cost, isn't the same as an overall benefit.

Sometimes it is clearer when you look at a single case.  Take a look at the first two paragraphs of this article in businessweek.com.  Mr. Greenfield has paid exactly nothing for electrical service in the year since he had rooftop solar installed.

Does anyone really think that there were no costs associated with his service for a year?  If that were the case, he should be able to disconnect from the grid completely.  Heck, that would even save the Utility more money because they wouldn't have to do the accounting and paperwork associated with his account.

Of course, he used utility services all year.
  • He used Utility energy generation, load balancing and delivery services to carry him through cloudy days and keep the lights on after dark (or really, whenever the sun was at a bad angle) because his system doesn't have adequate energy storage.
  • He used Utility voltage and frequency regulation services to avoid having his system screw up everyone else's energy quality, because his rooftop solar installation doesn't do load-following for any loads but his own.
  • He used Utility distribution services to take delivery of power when he wanted it, and to deliver power when he had it to spare.
That last one is a kicker to me.  It's a bit like FedEx not getting paid when I use them to get 5 pounds of eBay purchases, because I use them to ship a 5 pound eBay sale.  I'm pretty sure FedEx would pitch a fit at the idea.

The problem with Net Metering is that it buries all the details of service, and the devil is in the details.  Break it out, break it down, get to the details.  Then you'll know.  Here's one way to do it:
  • When he takes power, charge Mr. Greenfield a fully loaded retail rate for that power.
  • When he generates power, pay Mr. Greenfield the spot price of power and charge him the spot rate for load-following, regulation and other ancillaries.
If you want simplicity, make Transmission and Distribution a flat monthly charge that includes ancillary services, independent of power taken or delivered (which more closely matches the cost variability anyway), and charge Mr. G the spot price (or some equivalent) for power when he takes it, and pay him the spot price (or some equivalent) when he sells it.

Of course, setting up that change in retail energy systems has details of its own, where different devils reside.  In the process we would need to find those and root them out, too.

Mr. Greenfield might make more money under such a system, or he might save less.  It might even cost him.  If he saves less, that means that others were subsidizing him under Net Metering.  If it costs him, then the subsidies under Net Metering were huge.  If he makes more, he's providing a genuine, traceable and identifiable net societal benefit.

The point is, he'll know, and Solar energy will be implemented where it's the best technology for the job, rather than wherever it can get the best subsidy.

UPDATE:  This article hit my inbox just as I published this entry.  It's another view of the same idea, and worth consideration.  This whole thing will require a rebalancing of the industry.

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