2. Goals of Literature Review
• Identify the current state of net metering
• Identify past studies on the costs and benefits of
net metering
– Their goals, motivations, assumptions, methods, and
findings
• Determine costs and benefits of net metering policy
for ratepayers
• Identify a framework that can be used to quantify
the impact of net metering on ratepayers
3. Net Metering Overview
• Incentivizes renewable energy production and distributed
generation (DG)
• Allows solar PV systems to be connected to the grid
• Compensates customers who export energy to the grid
Crossborder Energy (2013)
http://www.everblue.edu/sites/default/files/u441
93/net-metering-diagram.jpeg
4. COUs and IOUs
• Community Owned Utility (COU)
– All 36 COUs have net metering policies
– Policies vary between COUs, acts as a barrier
• Investor Owned Utility (IOU)
– PacifiCorp and Portland General Electric (PGE) largest
– Bill credits given to customers at avoided cost rate
– Estimate 7,000 net metered systems in Oregon
5. Cross-Subsidization
• Definition: Charging higher prices to one group of
consumers in order to subsidize another group.
• Subsidy paid by non-participating ratepayers
• Only benefits net metered customers
6. Quantifying Cross-Subsidization Effect
• Energy and Environmental Economics (2010): Introduction to
the Net Energy Metering Cost Effectiveness Evaluation
• Crossborder Energy (2013): Evaluating the Benefits and Costs
of Net Energy Metering in California
• Lawrence Berkeley National Lab (2010): The Impact of Rate
Design and Net Metering on the Bill Savings from Distributed
PV for Residential Customers in California
7. Energy and Environmental Economics (2010)
• Prepared for CPUC
• Goals
– Determine if cross-subsidization concerns are founded
– Quantify effect on ratepayers
• Assumptions
– Costs to ratepayers
• Compensation to net metered customers
• Increased administrative/operational costs
– Benefits to ratepayers
• Avoided costs from energy production/infrastructure
8. Energy and Environmental Economics (2010)
• Methods
– Calculated on an hourly basis
– Uses net present value, annualized costs, levelized costs
– 2% inflation rate
– Discount rate from weighted average cost of capital (WACC)
• Findings
– Average $20 million cost to ratepayers per year
– $0.00011 per kWh impact from net metering, relative to $0.144 per
kWh overall average rate
– 0.08% of the total utility revenue on an annual basis
9. Crossborder Energy (2013)
• Prepared to The Vote Solar Initiative
• Goals
– Update analysis of net metering costs to ratepayers using
new rate structure and avoided cost model
• Assumption
– Costs to ratepayers
• Compensation to net metered customers
• Increased administrative/operational costs
– Benefits to ratepayers
• Avoided costs from energy production/infrastructure
10. Crossborder Energy (2013)
• Methods
– Calculated on an hourly basis
– Climate zones used to calculate bills
– NREL’s PVWATTS model for PV output
– 7.57% discount rate from WACC
• Findings
– Small net benefit for residential markets
– Substantial benefit commercial/industrial market
– $0.013 per kWh cost from NM to PG&E customers due to rate design
11. Lawrence Berkeley National Lab (2010)
• Work funded by US DOE
• Goals
– Compare bill saving from net metering to other incentives
– Determine costs of net metering
• Assumptions
– Costs
• Bill credits to net metered customers
– Benefits
• Avoided transmission and distribution
• Avoided line losses
12. Lawrence Berkeley National Lab (2010)
• Methods
– Calculated on an hourly basis
– Sample of 215 residential customers
– PV production simulations from 73 weather stations
• Findings
– Significant cost savings compared to market-rate feed in tariff and
monthly netting
– $0.38 per month impact on non-participating ratepayers
– Less than $0.01 per kWh cost from net metering
– Bill savings greater for high-usage customers
13. General Framework
• Costs
– Bill credits or other form of compensation
– Administrative costs
• Benefits
– Avoided energy production costs
– Avoided costs for transmission and distribution (T&D), including
reduced investment in facilities
– Avoided cost from line losses
– Reduced costs for ancillary services
– Lower costs for the utility’s purchase of other renewable generation
– Others
14. General Framework
• Things to consider
– Rate structure
• Tiers
• Time-of-use
– Amount of energy acquired from net metered systems
• Dependent on weather/climate
• Size/number of systems
• Orientation
– Benefits of net metering more difficult to quantify
15. Policy Considerations
• Simplification of rate structures
– Narrowing difference between rate tiers
– Non-tiered time-of-use?
– More time-of-use adoption?
• Elimination of barriers
– Start up costs
– COU policy inconsistency
16. Wrapping Up
• Net metering policy incentivizes solar PV
adoption
• Cost to ratepayers is a fraction of per kWh rate
• Costs from compensation to net metered
customers
• Benefits from avoided energy/infrastructure
costs
• Policy considerations
– Rate structure
– Elimination of barriers
