Market Views
Net Metering is a Net Good
October 20, 2020 • DE Energy
By Mathew Mazhuvanchery, CEO and Co-Founder, Distributed Energy
Renewable developers and traditional utilities are feuding about net metering, yet this is an arcane struggle to most people outside the energy sphere and most don’t even understand the term. Indeed, while the struggle seems to be inconsequential to laymen and laywomen, however for the concerned parties it is an existential struggle.
Net-metering is a mechanism which is used by utilities which allow a customer with a solar array (the renewable generator) to get the same retail value for every unit produced, whether or not the unit of energy is used by the customer-generator or passed back through the utility meter and fed onto the grid. Most utilities use net-metering to allow a customer to receive a unit credit on the month’s bill which can be used toward usage in future months. Gross metering on the other hand allows a less than full value to be paid towards the unit generated.
Since 2008, U.S. installations have grown 35-fold to an estimated 62.5 gigawatts (GW) today.[i]In the United States, 41 states have mandatory net metering rules. A general trend we see is that states which have net metering provisions have higher cumulative solar installations. Non-residential solar PV deployment forecasts indicate by 2024 it will reach close to 6000 MW.[ii] Maine, a state in the USA, in the past had removed net metering in favor of gross metering. However, within just a few years, the Governor reset the solar policy by signing a bill to undo the gross metering policy and restore the net metering policy. The main driver for the reversion was due to a decline in solar deployments and the state falling short and lagging behind other states in deployment targets.[iii] A similar event also occurred in Nevada to revive net metering as a means to catalyze solar deployment in the state.[iv]
Most states in India are actively working toward improving the process for net metering, including Maharashtra where gross metering was introduced and then revoked.[v] Kerala has introduced a progressive policy for net metering with exemptions to payment of transmission and wheeling charges and cross-subsidy surcharges for the electricity generated and consumed under the net metering facility.[vi]The one state (Uttar Pradesh) where gross metering was introduced has not been very successful.[vii]The realization of savings came down by 50% to INR 4.0/Kwh which has dissuaded investment in solar assets in the state.
It is clearly evident from the International and National examples that gross metering does not enhance the spread of renewable energy. This policy harms the environment as this energy deficit has to be made up by using thermal power plants and runs counter to the national goal as articulated by The Ministry of New and Renewable Energy. There is also a plethora of expert opinions that net metering is crucial for India if it is to achieve the goal of energy security articulated in the national energy vision 2020. It is a popular and simple way of kickstarting the journey to clean energy. Net metering helps avoid capital and capacity investment (mostly coal so highly polluting) reduced financial risk and electricity prices, increases grid resiliency by decentralizing the grid, and avoids added environmental costs to consumers in the future in way of clean-up costs. Gross metering schemes will defeat the objective of increasing take-up of renewable energy and thus we think that net metering is a net good.
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