By Cynthia Clark, Manager of Utilities & Incentives

Net energy metering programs are the backbone of American distributed electricity generation policy. Regulatory trends that develop as existing capacity limits on these programs are reached will have a significant impact on the future of distributed solar energy.

Utilities in New York and Massachusetts are starting to reach their mandated net metering caps, and in response, these states are looking to expand the limits on their programs. The California Public Utilities Commission (CPUC) recently did just that, by implementing a more generous method of calculating the current cap of 5 percent. The cap is based on “aggregate customer peak demand,” a term that was historically left to utilities to define. The definition favored, and thus used, by utilities until now was based on system-wide peak demand. The recent ruling by the CPUC has now defined it as the sum of individual customers’ peak demands (“non-coincident” peak demand). The difference between these two definitions is more than 2,000 megawatts by some estimates. According to the CPUC, the decision effectively doubles the number of PV installations that can participate in net metering in California. This decision was nearly undone just weeks later by provisions in a bill sponsored by San Diego Gas & Electric, but solar advocates were able to rally support to remove the controversial provisions. Clearly, the debate is far from over.

Where’s the controversy? For utilities, net metering can mean lost revenue due to reduced electricity sales as well as increased administrative costs. Ratepayer advocates shed light on net metering program designs that increase the overall cost of electricity and unfairly shift costs from distributed generation system owners onto customers who do not, or cannot, own such systems. Solar energy advocates argue that net metering simply provides compensation for contributing valuable clean power to the grid. At the heart of the issue is how to quantify the economic value of system-wide benefits associated with net metering, including reduced transmission losses, environmental benefits, and avoided energy purchases and infrastructure investments.

As utilities in some states interconnect enough distributed solar projects to meet the established net metering caps, further project development in those markets could shut down unless the caps are expanded. State regulators set important precedents as they consider the concerns of utilities, ratepayers, and solar stakeholders in decisions about the future of net metering. Will net metering become a finite one-time initiative or an ongoing “renewable” policy resource?

The debates underlying these policy decisions will require careful monitoring to understand where solar deployments should be considered in the near future and beyond.

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