Debates have raged across the country around the value and/or need for net metering. Most conversation has focused exclusively on the residential perspective. However, Graham Smith, CEO of Open Energy, asks about the impact of the ever-changing net meeting policies on commercial solar?
Net Metering Backgrounder
According to the Solar Energy Industries Association (SEIA):
“Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. For example, if a residential customer has a PV system on the home’s rooftop, it may generate more electricity than the home uses during daylight hours. If the home is net-metered, the electricity meter will run backwards to provide a credit against what electricity is consumed at night or other periods where the home’s electricity use exceeds the system’s output. Customers are only billed for their ‘net’ energy use. On average, only 20–40% of a solar energy system’s output ever goes into the grid. Exported solar electricity serves nearby customers’ loads.
“Net metering allows residential and commercial customers who generate their own electricity from solar power to feed electricity they do not use back into the grid. Many states have passed net metering laws. In other states, utilities may offer net metering programs voluntarily or as a result of regulatory decisions. Differences between states’ legislation and implementation mean that the benefits of net metering can vary widely for solar customers in different areas of the country.”
Smith points out some states offer different net metering policies for specific commercial solar segments and for nonprofits. Regarding this, he discussed with me why commercial solar needs to be part of the net-metering legislation discussions and offered insights on the value of such net metering for the growth of the commercial solar sector.
What follows is a brief discussion concerning net metering for the commercial sector.
Meyers: Why should net metering be regarded as more than a residential issue?
Graham Smith: The solar market is made up of three sectors: residential, commercial and industrial, and utility scale. When designing and negotiating policies for the solar industry, we need to make sure that we consider the impacts on all of these market segments.
Meyers: Please elaborate on this issue.
Graham Smith: The majority of energy produced during the day is consumed not by the residential sector, but by the commercial and industrial sectors. This makes commercial solar comparatively efficient as solar energy generation, which is highest during the day, aligns with energy consumption cycles. However, commercial solar panels continue to generate energy on weekend days when business’ energy consumption is lower. During those times, net metering is particularly valuable to non-residential solar customers.
Meyers: Open Energy is a lender; what is the interest in net metering policy?
Graham Smith: Open Energy provides long-term debt financing solutions that take into consideration the current state and federal solar regulatory landscape. We also anticipate what that will look like in the next 10 to 15 years. Reliable and predictable policies are important because they reduce the risk inherent in our loans and ensure that our investors will have steady returns over the years to come. The more comfortable investors and lenders are with commercial solar, the more readily they will deliver the capital needed to fuel growth in the industry.
Meyers: Can you provide us with examples?
Graham Smith: The state of New York has done a great job of involving various stakeholders in policy considerations via the New York Reforming the Energy Vision (REV) initiative that launched in early 2015. Any organization involved in energy – whether that is renewable energy generation or energy storage – has the opportunity to participate in crafting the policies that will shape the region’s energy future. This is an excellent example of legislators taking into account different perspectives when determining policies such as net metering.
Meyers: What state net metering examples should we consider for this story, both on the positive and negative side of the scale?
Graham Smith: Across the United States there is a wide variety of net metering policies. We find the current policy in place in New York, which allows virtual net metering, to be resulting in a very positive environment for the growth of the solar industry.
On the other hand, it is no coincidence that Florida, a state that does not have net metering in place, has experienced near-stagnant growth in solar. Tenuous and inconsistent net metering policies can negatively impact the solar industry as well by reducing developer and investor confidence, as is evident in Arizona and Nevada.
Meyers: What suggestions do you have for other states to spur interest in similar sustainable and renewable energy programs?
Graham Smith: I think the message to other states is find a system that works that saves you time. … The message is take what has worked somewhere else. Choose the one that causes the least legislative challenge and administration headaches to get going and put it in place. That would be the suggestion for commercial participants.
I would like to thank Mr. Smith for participating in this discussion. As he points out, in the US there is a patchwork of regulations and systems, from net metering programs, rebates, and none being better or worse than the other. “They’re just different. New states coming in can save themselves the brain damage by replicating the ones that have worked.”
Images via Open Energy
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