Since we had our solar system installed last year, whenever I can’t find my husband, I know where to look. He’s gazing at the electric meter outside our house, checking to see which way the arrow is facing. If it’s facing right, that means that we are drawing electricity from the grid. If it’s facing left, it means we’re making more electricity than we’re using. Our surplus electricity is getting sent to Pasadena Water and Power (PWP) for use by other customers, and we get a credit on our bill. Yay!
How It Works
Net energy metering (NEM) is that simple. Or almost that simple. The credit is for “net energy,” which is the difference between the energy we produce and the energy we consume. That’s why it’s called “net.” If the meter shows that we make more than we use, we get paid.
There are some complexities—including the rate at which net energy is compensated. Does the solar rooftop customer receive a credit for the “retail rate” that customers pay to the utility, or some other rate? But the basic concept is that NEM makes my family into energy producers in a “distributed energy system.” We supplement the electricity that PWP buys from energy supply companies and that travels on transmission lines from as close as Glenarm Street here in Pasadena and as far as Utah and British Columbia. Instead of wasting electricity, we harvest it. In addition, our solar energy is clean and doesn’t emit greenhouses gases that are suffocating the planet, while PWP’s energy is “mixed.”
Net metering is an incentive system to encourage private investment in solar energy generation. Even with federal rebates, installing solar panels and associated equipment is expensive. When my family made the decision last year to install solar, we considered the cost and benefit. With net metering, we figured the investment was worth it because our utility bills would be reduced and over six to seven years, our investment would pay off. And there was a consideration we could not put a dollar sign on: Our primary motivation was our concern about climate change and its effects on our children’s future. But the promise of future economic benefit helped. The decision to go solar was both idealistic and pragmatic.
We also liked the idea of local generation of electricity. “Centralized generation”—the opposite of distributed energy—seems anything but central. Transmission lines have environmental impacts and must be constructed and maintained, so that adds cost. As the Environmental Protection Agency (EPA) website explains: “When connected to the electric utility’s lower voltage distribution lines, distributed generation can help support delivery of clean, reliable power to additional customers and reduce electricity losses along transmission and distribution lines.” Losses along transmission lines potentially increase cost. Also, energy supply companies are usually for-profit businesses, so they mark up their product—electricity delivered to local distribution lines—which means additional cost to energy consumers.
These are all reasons to appreciate the combination of net metering and rooftop solar. But not everyone loves net metering. Some utility companies claim that it is inefficient and unfair, and they support state legislation to make it unavailable, to limit it, or to burden it with a surcharge.
What are the arguments against net metering?
Opponents argue that net metering means that the utility companies are not being fairly compensated for their cost in maintaining the grid. As George Washington University’s Solar Institute explains:
Utilities . . . argue that the rates they charge are set by state regulatory commissions that assume a certain number of customers that both guarantees them a fixed rate of return and enough revenue to pay for the investments they made in long-lived centralized generation facilities. In other words, when solar owners generate their own electricity, they are no longer paying utilities as much as they expected, upsetting the underlying business proposition the utilities previously agreed to with their regulators.
The counter to this argument, offered by supporters of net metering, is that utilities are regulated monopolies that are guaranteed a return on investment in infrastructure that they build of around 10 percent. They don’t make a guaranteed return from energy that their customers produce themselves. So utilities are motivated to use centralized energy and charge customers for it. Utilities want their guaranteed rate of return on infrastructure investment, but they won’t give ordinary citizens, like my husband and me, a reasonable return on our investment in solar panels that generate local energy. Utilities knew about climate change and should have begun diversifying their energy sources years ago. When utility companies failed to make a timely transition to renewable energy, citizens stepped up to create electricity from solar panels on their rooftops. Why reward poor business judgment?
Recently, opponents have added another argument, that solar energy is elitist because only property owners who can afford to install solar systems can benefit. But this argument ignores that many cities have implemented “community solar” programs to make solar benefits available to renters and low-income utility customers. Tenants benefit from solar energy because their utility bills are lower. We could go even further and commit to workforce development to create jobs in solar energy, as have cities like Cincinnati, Austin, and Denver.
The more sophisticated argument that net metering opponents make is that net metering shifts the cost of solar electricity transmission to all users, including poor people. This is called the “cost-shifting” argument. In short, they say that people with solar panels are free-riding off other customers because they are not paying their fair share for upkeep of the grid. But this ignores the fact that these customers have invested in distributed energy solar systems. Further, studies show that distributed energy actually reduces costs for all utility customers. Other studies claim that utility-scale solar is more efficient and less expensive.
Last month, Assembly Bill 1139 brought the arguments for and against net metering to a head. The bill, which was backed by utility companies and some labor organizations, would add a monthly “solar fee” and require the California Public Utilities Commission to “reform” net metering, drastically reducing the net metering credit. Opponents of the bill said that AB 1139 would destroy the growing solar industry in California and that we need to create more incentives for solar, not fewer. Pasadena Assemblyman Chris Holden, who is chair of the Assembly Utilities Commission, voted for 1139. The bill lost, but only because the vote was tied.
Backing up and looking at the big picture, we have only a limited time to transition from fossil fuels to renewable energy. Why not use strong incentives to help us make that transition?
What do you think about net metering and solar energy? Let us know your views or join us at a meeting of the Natural Resources Committee!
—Cynthia Cannady, Natural Resources Committee
