A ruling last year in Nevada reducing reimbursement rates for owners of grid-tied photovoltaic (PV) systems gutted the state’s solar industry, cutting the installation of new PV systems by 90% in the first quarter of the year.
In reaching their decision, utility regulators accepted arguments that net metering amounted to a subsidy for solar customers and a $160 million burden for non-solar customers. But according to two new studies, the Public Utilities Commission of Nevada was wrong — distributed solar offers a benefit to all ratepayers, whether they own solar systems or not.
One of the reports is a collaboration between SolarCity, the country’s largest solar installer, and the Natural Resources Defense Council. Their conclusion, vetted by academics at Stanford University, was that residential solar systems deliver net benefits to ratepayer of between 1.6 cents and 3.6 cents per kilowatt hour of electricity, according to a summary of the findings published by Utility Dive.
The PUC last December reduced net-metering rates from the retail to wholesale level and increased base service charges. The changes also affected existing solar customers even though they had invested in solar on the assumption they’d get full retail price for electricity fed into the grid. The PUC’s decision prompted SolarCity, Vivint Solar, and Sunrun to stop doing business in Nevada altogether. SolarCity also closed a training center for solar workers it had just opened in Las Vegas.
NV Energy, the state’s main electric utility, argued that retail net metering shifted the costs of maintaining the grid to non-solar customers and was, therefore, unfair. Not so, the new report claims.
“While a net cost would indicate that NEM [net energy metering] is providing a subsidy to solar, our results conclude that the opposite is true: rooftop solar provides a net benefit to all Nevadans in the range of 1.6 to 3.4 cents per kilowatt of solar production,” the study says.
“Assessing this full set of ongoing costs and benefits from the roughly 257 megawatts (MW) of existing NEM solar systems already deployed or in the pipeline in Nevada, we calculate a net value of $7-14 million per year to all Nevadan utility customers,” the joint report said.
New study takes more factors into consideration
SolarCity said earlier findings on the value of solar in Nevada were incomplete. The new study, it said, used an assessment tool provided by the Nevada PUC and took into account 11 different benefit variables that could be used to quantify the costs and benefits of distributed solar, UtilityDive said.
The analysis used by regulators in their decision late last year used only two of the 11 variables because there wasn’t enough time or available information to use all of them.
“[I]n December 2015, the [PUCN] stated in their NEM tariff order that ‘For other than the avoided energy and energy losses/line losses, there is insufficient time or data in this proceeding to assign a value to the other nine [benefit] variables,'” the report says. “Going forward, we offer our analysis as a resource to assign values to the ‘other nine variables’ identified by the PUCN.”
Noah Long, director of NRDC’s western energy project, said in a blog that the new study was an effort to “calm the debate, and add a measure of reason” to the bitter proceedings in Nevada.
“The ‘solar wars’ in Nevada have been heated, and as in many heated debates, reason is often the first victim,” Long said. “Advertisements on both sides have attempted to demonize the other…
“This report shows that a policy that fairly compensates consumers for their production of clean distributed (onsite) energy and the excess they return to the grid serving all NV Energy customers has big benefits for all Nevadans,” Long continued. “The full value of those benefits ought to be part of the discussion when it comes to setting utility rates for NV Energy customers. That’s why this study includes a range of benefits not previously considered by the Public Utility Commission of Nevada, including: Cutting the amount of energy the electric utility needs to purchase and the number of new power lines that need to be built; and reducing fossil fuel power plant emissions and their health impacts.”
Long said the NRDC was initially “a bit apprehensive” about taking part in the study when approached by SolarCity but in the end decided to join as a co-author “because we saw a need for a thorough analysis of the costs and benefits of rooftop solar generation in Nevada that could improve a contentious debate.”
He adds that Nevada regulators said that they needed more information about the costs and benefits of distributed solar, and that they would consider the “full scope of benefits” in upcoming rate cases.
Brookings study also finds value in solar
A second study from the Brookings Institution notes that the dialogue over net metering in some states has been thoughtful, but in others “the ferment has prompted a cruder set of backlashes.”
“All of which highlights a burning question for the present and future of rooftop solar,” the authors said, “Does net metering really represent a net cost shift from solar-owning households to others? Or does it in fact contribute net benefits to the grid, utilities, and other ratepayer groups when all costs and benefits are factored in?
“As to the answer, it’s getting clearer (even if it’s not unanimous),” the study continues, “Net metering — contra the Nevada decision — frequently benefits all ratepayers when all costs and benefits are accounted for, which is a finding state public utility commissions, or PUCs, need to take seriously as the fight over net metering rages in states like Arizona, California, and Nevada.”
Although net-metering does raise legitimate cost-recovery issues, the paper says, “far from a net cost, net metering is in most cases a net benefit — for the utility and for non-solar ratepayers.”
The Brookings report cites studies in Vermont, Mississippi, Minnesota, Maine and even Nevada that found that net metering generally benefits all utility customers. A study by the Lawrence Berkeley National Lab concluded that even substantially higher numbers of net-metered solar customers than exist today would have a “relatively modest” impact on average retail rates.
“In short, while the conclusions vary, a significant body of cost-benefit research conducted by PUCs, consultants, and research organizations provides substantial evidence that net metering is more often than not a net benefit to the grid and all ratepayers,” the Brookings report says.
“As to the takeaways, they are quite clear: Regulators and utilities need to engage in a broader and more honest conversation about how to integrate distributed-generation technologies into the grid nationwide, with an eye toward instituting a fair utility-cost recovery strategy that does not pose significant challenges to solar adoption.”