A reality based independent journal of observation & analysis, serving the Flathead Valley & Montana since 2006. © James Conner.
Sunny Southern California is ideal for generating electricity using solar energy. Rooftop solar systems and net metering there are popular with homeowners and businesses, but not with investor owned utilities. The Vote Solar Initiative commissioned Crossborder Energy (Berkeley, CA) to produce a 101-page report (PDF), released in January, 2013, on the benefits and costs of net metering in California, that contains an exceptionally clear description of net metering. Below, the key chart from the report, followed by the definitions for each net metering state.
To understand the economics of net metering, it is important to appreciate exactly how a DG system located on a customer’s premises works. Through the course of the day, a net metered PV system will operate in one of three different “states”:
The “Retail Customer State.” The sun is down and there is no PV production. All electricity consumed flows into the house from the grid. The customer is a regular utility customer.
The “Energy Efficiency State.” The sun is up and there is some PV production, but not enough to serve all of the homeowner’s instantaneous load. Here the customer is served both with power from the solar system as well as with power flowing in from the grid. In this state, the solar DG serves as a means to reduce the customer’s load on the grid, in the same fashion as a more efficient air conditioner or other energy efficiency measure.
None of the solar customer’s output flows out to the utility grid. Typically, 50% to 80% of the output of a solar PV system will be used on-site, without touching the utility’s grid.
The “Power Export State.” The sun is high overhead and PV production exceeds the customer’s instantaneous use. In this state, the solar power flows into the house to serve the entire load, with the excess power flowing back out to the neighborhood grid. As a matter of physics, this power will serve neighboring loads with 100% renewable energy, displacing power that the utility would otherwise generate at a more distant power plant and deliver to that local area over its transmission and distribution (T&D) system. It is critical to recognize that the customer’s generation only touches the grid in this third, “power export” state. Typically, just 20% to 50% of the output of a residential PV system will be exported to the grid in this third state.
These exports, in effect, “run the meter backward,” and the essence of net metering is the means by which the utility compensates the solar customer for these power exports. Under net metering, when the meter runs backward and power is exported to the grid, the utility provides the solar customer with bill credits that can be netted against the customer’s imports. Thus, the solar customer is compensated for his power exports in the form of credits at the full retail rate.
Finally, the utility sells the exported power to neighboring loads, thus avoiding the costs of the power that it would have generated and delivered from another source.