NET METERING IN OHIO: CONSUMER PERSPECTIVES Ohio Green Energy Policy Conference April 7, 2016 Wilson Gonzalez, President Tree House Energy and Economic Consulting
CONSUMER PERSPECTIVES* *For a more comprehensive discussion of the issues outlined in this presentation see the RAP paper shown above.
OUTLINE OF REMARKS I. Regulatory History of Net Metering (NM)in Ohio Current PUCO Rulemaking II. Balancing the Interest of Distributed Generation (DG) and Non-DG customers III. DG Subsidization Issues and Low Income Community Concerns IV. Future Paths for Distributed Generation and Net Metering in Ohio
I. HISTORY OF NET METERING IN OHIO NET METERING History in Ohio: Ohio s original net-metering law was enacted in 1999 as part of the state s electric-industry restructuring legislation, Senate Bill 3. In June 2002, the Ohio Supreme Court decided that this exchange was illegal (Case No. 01-0573) and ruled that each utility must credit net excess generation (NEG) to the customer at the utility's unbundled generation rate. Initially, the Public Utilities Commission of Ohio (PUCO) required utilities to credit customer (NEG) at the utility's full retail rate. The PUCO later revised its net metering rules in March 2007, prompted by the federal Energy Policy Act of 2005 (Case No. 05-1500-EL-COI) Legislation enacted in May 2008, S.B. 221 further amended Ohio's net metering law by: (1) removing the 1% aggregate capacity limit for all customer-generators; and (2) removing all limitations related to energy generation technology and system size on systems sited at hospitals. See http://www.dsireusa.org/incentives/incentive.cfm?incentive_code=oh02r.
NET METERING RULEMAKING AT PUCO Net metering rules: OAC 4901:1-10-28 Current Rulemaking: Case No. 12-2050-EL-ORD Major Issues: What is correct remuneration for Net metering customers? What is appropriate size for Net metering customer generation that corresponds with the Is intended primarily to offset part or all of the customer-generator's requirements for electricity in ORC 4928.01(A)(31)(d)?
NET METERING RULEMAKING AT PUCO On remuneration for excess NM generation Utilities take position that only energy should be remunerated for excess electricity. Others argue the full generation rate (energy, capacity, other) and any generation riders should be paid. On sizing of NM systems Utilities prefer no more energy than actual usage Draft rule has a more flexible 120percent of electricity consumption Others are less comfortable with any limit given the benefits of renewable DG systems.
II. BALANCING THE INTEREST OF DG AND NON- DG CUSTOMERS Assure the financial integrity of the utility Fairly compensate DG customers for the net value of their contribution to the grid Ensure that rates and bills remain fair and affordable for non-dg customers and provide proper price signals to minimize long-term costs
SCOPE OF LOST REVENUE IN OHIO Less than ½ of one percent of electricity sales through 2027 for solar (ORC 4928.64(B)(2)) Solar net-metering is a fraction of that The majority of the renewable standard will be met by utility scale projects and PPA s (no lost distribution revenues) Small compared to 22% of electricity sales for energy efficiency through 2027(ORC 4928.66 (A))
HOW REVENUE EROSION IS TREATED FOR ENERGY EFFICIENCY Revenue Decoupling AEP-Ohio (Case No. 11-351-EL-AIR) and Duke Energy Ohio (Case No. 11-5905-EL-SSO). Both are three year pilots. Lost Distribution Revenue Mechanism FirstEnergy (Case No 12-1230-EL-SSO) and DPL (Case No. 11-833-EL-POR) Decoupling in Ohio ORC 4928.66(D)
GROWTH IN RENEWABLE DISTRIBUTIVE GENERATION TEMPERED IN OHIO No utility incentive programs Low natural gas prices (lower generation rates) REC Prices down after Senate Bill 310 Little or no access to time of use pricing
SOLAR VALUE PROPOSITION
VALUE OF SOLAR TARIFF CONT.
PRAGMATIC CONTINUATION OF NET-METERING State Average Residential Retail Electricity Rate Conventional Compensation Method Level of Compensation Based on Range of Value of Solar Studies Recommended Rate Design Should Externalities Be Added to Value of Solar Studies for PV Compensation* Low Cost State (<10 cents/kwh) Net-Metering (power supply plus distribution) Under Compensation Zero Customer Charge and Inclining Rate Design (or time varying rate) to Conventional net-metering Optional: State by State Determination Average Cost State (10-20 cents/kwh) Ohio at 14 cents average Net-Metering (power supply plus distribution) Fair Compensation Low Customer Charge and Conventional netmetering Optional: State by State Determination Hi Cost State (>20 cents/kwh Net-Metering (power supply plus distribution) Over Compensation Time varying prices for power supply and distribution services. Pays full retail rate when taking power from the grid. Receives just power supply cost (no distribution) when supplying power to grid. Bi-directional Meter Optional: State by State Determination
WHAT DO CUSTOMERS THINK OF NET METERING?* Should solar customers receive credit at the retail rate? 82 percent surveyed said yes (across all customer groups regardless of income, rent/own, education, geographic region, and attitudinal segment) Credit above the retail rate? Millennials: 43 percent said yes 55+ group: Only 27 percent said yes Bill LeBlanc, Net Metering Wars: What Do Customers Think?, E-Source 2015.
III. DISTRIBUTED GENERATION SUBSIDIZATION ISSUES AND LOW INCOME COMMUNITY CONCERNS* Some worry that net-metering policies overcompensate customer generators, and lead to subsidization by non-participating customers. These [DER] customers are using the services of the electricity grid, but they are not paying for it. In practice, this shifts many costs to non-dg customers. ** They pose the question, can we have efficiency and justice? *Only 22-27% of residential customers can host on-site solar, NREL 2008 **The National Black Caucus of State Legislators, The Need to Develop & Implement Equitable Energy Policies, 2014 White Paper, page 5.
DISTRIBUTED GENERATION SUBSIDIZATION ISSUES AND LOW INCOME COMMUNITY CONCERNS The NAACP National Board of Directors approved a resolution entitled Promoting Equitable Access to Clean Energy Alternatives. This resolution supports the ability of residential and business customers to generate their own electricity through solar panels (i.e., distributed generation) as a key pathway to energy democracy whereby communities can own solar panels and be partners in the nation s electricity infrastructure. Support for this measure will provide opportunities for job creation and growth for local workers and minority owned businesses in the clean energy economy, as detailed in the NAACP national and 23-state Just Energy Policies Reports released last year. NAACP Board Passes Clean Energy Resolution, March 11, 2015, http://www.naacp.org/press/entry/naacp-board-passes-clean-energyresolution1
COMMUNITY/SHARED SOLAR* Medium scale projects (1 to 5 MW) Leverages private capital Customers can partially own shares or lease Low income communities can participate Called the next gigawatt-scale growth opportunity See Model Rules for Shared Renewable Energy Programs, IREC
INCREASED CUSTOMER CHARGES (SFV) ARE PUNITIVE Monopoly pricing & Anti-competitive behavior Now more costly for customers to invest in energy efficiency and DG, reduced customer control Can Hurt Low Income,* low usage customers, apartment & urban dwellers Predicted increase in usage because of lower energy charge (as much as 15%), leading to increased electricity costs Against goal of universal service *An analysis prepared by the National Consumer Law Center shows that typical households below 150 percent of the federal poverty level use between 3 percent and 9 percent less electricity than the average of all households
COMMON MYTHS SUPPORTING HIGH FIXED CUSTOMER CHARGE* Most Utility costs are fixed Fixed costs are unavoidable The fixed charge should recover distribution costs Cost of service studies should dictate rate design Low usage customers are not paying their fair share Fixed charges are necessary to mitigate costshifting caused by DG From M. Whited, T. Woolf and J. Daniel, Caught in a Fix, Synapse, 2/9/2016
CONCERNS WITH RESIDENTIAL DEMAND CHARGES* Severe cost shifting can occur if following items not addressed: Customer Diversity Impact on Low-use Customers Multifamily Dwellings (around 30% of all households) Time variations Time of Use Energy Rates preferable More equitable cost allocation Reduced bill volatility Improved customer understanding See Jim Lazar, Use Great Caution in Design of Residential Demand Charges, RAP 1/2016
PERSPECTIVE ON DG CROSS-SUBSIDY ISSUE
PERSPECTIVE ON DG CROSS-SUBSIDY ISSUE i. ii. iii. i. ii. Utility rates have always contained cross-customer subsidies, a by-product of simplified class-by-class pricing. Examples are: a. Urban vs. Suburban vs. Rural Within a single utility, uniform pricing creates cross-customer subsidies Development of rural utilities (with higher prices) made universal service possible (and has been heavily subsidized in the US and elsewhere) Canadian and Alaska rural subsidies for non-integrated systems b. Overhead vs. Underground Most utilities have common prices for higher-cost, higher-amenity, higher-reliability underground service. A few do not c. Old vs. New: Customer served by depreciated plant are lower-cost than customers served by newer plant, but new subdivisions and older service territories pay the same rates. d. Industrial Special Contracts are many times subsidized.
IV. FUTURE PATHS FOR DISTRIBUTED GENERATION AND NET METERING IN OHIO Integration of Distributive Generation with Smart Grid/Microgrids Utility as UBER for Distributive Energy Systems Smart Inverters can Provide Ancillary Services Specter of Customer Bypass of the Grid
INTEGRATION OF DISTRIBUTIVE GENERATION WITH SMART GRID/MICROGRIDS
Utility as UBER for Distributive Energy Systems New York s Reforming the Energy Vision (REV) aims to give Utilities new primary role with regard to DERs: distribution system platform providers that facilitate the integration of DERs and the creation of distributed energy markets at the distribution level.
SMART INVERTERS CAN PROVIDE ANCILLARY SERVICES
SMART INVERTERS CAN PROVIDE ANCILLARY SERVICES Simple Max Generation Level Control Volt-Var Function Volt-Watt Function Frequency-Watt Function Configurable Voltage Event Ride-through Dynamic Reactive Current Peak Power Limiting (with battery system) Power Smoothing Brian Seal, Smart Inverters, 7/11/13 EPRI
SMART INVERTERS CAN PROVIDE ANCILLARY SERVICES Jeff St. John, A State by State Snapshot of Utility Smart Inverter Plans, 11/6/15 gtm
SPECTER OF CUSTOMER BYPASS OF THE GRID Navigant Research has called home battery storage "one of the fastest-growing markets for energy storage," and predicted the distributed energy storage systems would undergo rapid growth. According to the firm, annual revenues are expected to rise from $450 million last year more than $16.5 billion in 2024. (Utility Dive, March 21, 2016) Tesla Power Wall, ElectrIQ and Others One-third of residential solar systems being installed in Germany have storage
CONCLUSION Which Future Path will Ohio Choose? Case No. 10-3126-EL-UNC (8/21/13): PUCO encouraged all utilities to file an SFV rate design in their next rate case Recent FirstEnergy Energy Security Plan Approved by PUCO contains an SFV Provision New York s Reforming the Energy Vision is looking towards integrating DG into grid in a manner that does not harm customers or inhibit new technology