As the Trump administration is ever-more adamant about dismantling Obama’s climate legacy, MPP student Kimberly Liu investigates federal and state-level efforts to integrate net-metering, a technology that could potentially safeguard the US against the effects of climate deregulation.
The incessant barrage of eye-catching and sensational headlines coming from the United States over the past few months has caused actual policy debate to take a backseat. One of most overlooked victims of the pablum-centric media vacuum during the first months of Donald Trump’s presidency has been the discussion around the potential environmental impacts of the new administration. With the appointment of Scott Pruitt, a relentless denier of basic climate science, to head the Environmental Protection Agency (EPA), it is safe to say that the United States will not be taking any aggressive measures to combat global warming. Perhaps even more telling were the series of decrees signed by the President to overhaul the climate policies enacted under the previous administration. In this absence of federal direction, states have taken matters into their own hands. Many have looked towards net metering to spur renewable investment, resulting in a solar boom that has exceeded industry expectations. Nonetheless, the system is not perfect. While the solar industry rejoiced–and solar users saved millions–non-solar users were left picking up the tab.
What is Net- Metering?
Net metering, similar to Germany’s feed-in tariff, was initially designed to provide electricity producers (i.e. homeowners) the economic incentives necessary to accelerate investment in renewables. Unlike the feed-in tariff–whereby electricity consumption and production are priced separately in accordance to 10-15 year contracts– the electricity that is produced and sold back to the grid under net metering is compensated at retail value, which has brought about massive reductions in consumers’ monthly electricity bills.
As solar PV installations have boomed in recent years, the extent to which non-users may keep subsidising solar has become a contentious question. Consequently, state Public Utilities Commissions have begun to reevaluate the retail net metering remunerations currently in place. Under normal circumstances, this would be a small victory for many American energy consumers, as the majority of citizens are not directly benefitting financially from net metering but still bear its burden. These, however, are fairly unusual times—leading many to wonder whether or not tinkering with the incentive structure is appropriate, considering the current political and environmental climate.
Controversy Surrounding Net- Metering
Currently, 41 states, DC, and four U.S. territories have mandatory net metering rules and for good reason. Net metering policies have overall been greatly successful in increasing the amount of distributed solar projects nationwide. But with such great success has come an unforeseen consequence. According to the Louisiana Public Utility Commission, net metering customers do not pay the full costs associated with service and use of the grid. Additionally, Nevada regulators reported that net-metering subsidies were costing non-solar residents $16 million annually in charges to their monthly electricity bills. What was initially pitched as small financial burden to non-users has grown to be a great one, spurring a debate around the policy. The controversy surrounding net metering is further exacerbated by the fear that as more distributed energy resources go online, there will not be enough customers left to cover the fees associated with grid usage and upkeep. The current structure, utilities argue, benefit a minority at the cost of the majority.
Net- Metering in Nevada
In 2014, Nevada was 14th in the country in terms of residential solar market share, and rose to 2nd in 2015–largely due to the success of net metering. In an attempt to redistribute the costs of solar more evenly amongst both users and non-users, the Nevada PUC issued a ruling last February (2016) that would increase the fixed charge of solar from $12.75 to $17.90 per month and decrease net metering credits from 9.1 to 2.6 cents per kilowatt-hour over the course of the next 12 years. Naturally, the decision has been met with widespread criticism and outrage amongst the solar community. “It’s the death of solar,” said Dale Matz, a Nevada solar owner. Following the announcement, SolarCity and SunRun decided to pull out of the solar market in Nevada, driving SolarCity stocks down 37%. “No one is going to invest money in solar now, knowing they’re not going to get it back”, Matz added.
By 2020, faced with higher fixed charges and lower compensation, solar-users are expected to pay more for electricity monthly than had they not invested in a solar PV installation in the first place. Changes to the compensation structure have led many to question the economic sensibility of solar in Nevada. This undoubtedly undermines the sole purpose of net metering: to accelerate and increase residential solar capacity. In a state that was experiencing a massive spike in newly installed solar capacity, many are questioning why Nevada’s PUC would stunt such a remarkable growth spurt. According to Bob Greenlee, a spokesperson for the Bring Back Solar Alliance, “89 percent of Nevadans believe that the Public Utilities Commission made the wrong decision when it ended net metering (…) [They] destroyed one of the fastest-growing solar sectors in the country.”
Implications for the Nation
The ruling issued in Nevada has prompted regulators nationwide to reassess their solar compensation policies. Hawaii has since shut down its net metering program. Conversely, California – the country’s largest market for solar – recently sent a positive message to potential prosumers following the ruling to preserve retail net metering rates until 2019. It is clear that current compensation methods for renewable energy resources are far from perfect. There needs to be ongoing dialogue to develop pricing mechanisms that more accurately represent the costs and benefits of distributed solar. With that being said, however, state commissions need to be wary of undercutting the incentive structures that have allowed for the overwhelming growth of the renewable sector at the household level. It is arguably more crucial now than ever for low-carbon initiatives to not only have state backing, but to also have the support of the people. Unfortunately, the battle against climate change is anything but a zero sum game, and when electricity generation from solar is disincentivised, everyone loses.
- February 2, 2017: The Maine PUC approved a proposal to phase out solar credits over the next 15 years, putting a halt to net metering
- March 1, 2017: Indiana’s Republican controlled senate voted to end the state’s net metering program by 2027
Kimberly Liu is a 2018 Master of Public Policy candidate at the Hertie School of Governance. She completed her undergraduate studies at Duke University, majoring in Environmental Science and Policy and minoring in Economics and Visual Arts. Her interests include energy – particularly the challenges that accompany increased renewable integration – and brunch.