NET METERING Policy Recommendations for Indiana Prepared by: Eric Cotton, ECI Wind and Solar and Laura Ann Arnold, The Arnold Group Prepared for: Indiana.

NET METERING Policy Recommendations for Indiana

Prepared by:

Eric Cotton, ECI Wind and Solar and

Laura Ann Arnold, The Arnold Group

Prepared for:

Indiana Distributed Energy Advocates, Inc. (IDEA)

Revised: December 29, 2009

Authors of this Report

• Eric Cotton, Partner, ECI Wind and Solar (765) 702-0231, [email protected]

• Laura Ann Arnold, Owner, The Arnold Group (317) 635-1701, [email protected]

What is Net Metering?• A billing arrangement between a utility company and a customer - with a grid-

tied, renewable energy system - where 1 kilowatt hour generated by the customer has the same value as 1 kilowatt hour consumed by the customer.

• Basically, the meter rolls backward and forward recording the energy flowing between a customer’s renewable energy system and the utility’s power grid. The utility company then allows the customer to receive credit for excess energy produced.

• Without net metering, a customer’s net excess generation is essentially donated to the utility company, or sold for pennies on the dollar.

• In the following few slides, 9 key points of any net metering policy will be described.

Interconnection vs. Net Metering:

• Interconnection = the technical rules and procedures for customers to “plug in” to the grid.

• Net Metering = the billing arrangement by which customers realize savings from their systems where 1 kWh generated by the customer has the same value as 1 kWh consumed by the customer.

1. Individual System Size

• Customer load and demand should determine system size specifications.

• There is no need for arbitrary system limits.

In an ideal net metering policy, the individual system size limit would be 2 MW or greater.

System Size Limits for State Interconnection Policies*

*Connecting to the Grid, October 2009, Vol. 12, No. 10, Interstate Renewable Energy Council (IREC), p. 2.

System Size Limitations*

*Connecting to the Grid, September 2009, Vol. 12, No. 9, Interstate Renewable Energy Council (IREC), p. 2.

2. Total Program Size Limits

• Having a total capacity limit (e.g. a percentage of a utility’s peak demand) jeopardizes the expansion of on-site renewable generation,

• The unknown factor of when that arbitrary limit will be met prohibits customers from effectively planning for future renewable installations.

An ideal net metering policy would have no limit on total program size.

3. Treatment of Net Excess Generation

• A successful program should facilitate “indefinite rollover”, at retail rates, so customers receive full credit for excess generation during seasons when renewable output is highest, and apply it toward their consumption when output is the lowest.

• Why indefinite rollover? Why not an annual payout for net excess generation?– Annual payouts could encourage over sizing systems in

an effort to make money from the utility company. This would be in the best interest of no one.

An ideal net metering policy would allow for indefinite rollover – at retail rates – of net excess generation.

4. Eligible Renewables

• There is no reason to exclude any type of renewable energy source.

In an ideal policy, all types of renewable energy would be eligible for participation in net metering.

Technology Eligibility*

*Connecting to the Grid, September 2009, Vol. 12, No. 9, Interstate Renewable Energy Council (IREC), p. 2.

5. Eligible Customers• No customer class should be excluded from net metering. • Utilities may argue for the exclusion of commercial

customers because of the significant revenue loss from that customer. Conversely, net metering plays an important role for commercial customers who invest a substantial amount for renewable energy generation. It is counterproductive to protect the economic interests of one sector while harming the economic interests of another.

In an ideal net metering policy all customer classes would be eligible to participate.

6. Utilities Required to Participate

• Some states only require certain utilities to offer net metering.

• The most common example is states only requiring investor-owned utilities (IOUs) to participate.

In an ideal policy, all utilities would be required to offer net metering.

7. Metering• Customers may be required to pay for additional meters,

adding no value to the customer-generator or the utility.

• There may be a requirement to switch to a time-of-use rate, where the customer pays differing rates depending on the time of day. This can be a disadvantage to customers and discourage renewable energy generation.

In an ideal net metering policy there would be no requirement for additional meters or time-of-use rate.

8. Ownership of Renewable Energy Credits (RECs)

• Frequently, customer-generators qualify for renewable energy credits (RECs) that can be used for marketing purposes or to meet legal renewable energy targets.

An ideal net metering policy would not allow utilities to take these credits without paying for them.

States on REC Ownership*

*Connecting to the Grid, September 2009, Vol. 12, No. 9, Interstate Renewable Energy Council (IREC), p. 3.

9. Standby Charges or Other Fees• A “pay-to-play” model has been adopted by some

utilities.

• Fees can be so costly that they diminish the economic incentive net metering is intended to offer.

• Example: An REMC in Indiana charges net metering customers a monthly Delivery Charge of $38.50, but their regular residential electric rate customers are only charged a monthly “Facilities Charge” of $30.00. Over-all there is a $8.50 “fee” per month to net meter.

An ideal net metering policy would not permit utility companies to impose standby charges, or other fees, on participating customers.

Ideal Policy vs. Minimum Needed Changes Now

• Goal: Show SOME progress towards invigorating Indiana’s net metering policy in 2010, by doing the following:

• System Size: 100 kW• Utility Types: IOU’s only• Customer Classes: All• Eligible technologies: Expand• Maximum Enrollment: 1% of Sum. Peak*• * approx. 200 MW

Alternative: Minimum System Sizes by

Installation Type

• 50 kW for residential customers

• 100 kW for commercial customers

• 2 MW for industrial & agricultural customers

• 5 MW for governmental entities including state & local government, K-12, school corporations & higher education

Understanding System Sizes

• 10 kW = 1,000 kW hours/month = The power consumed by a 1000 – 1500 square foot home. (higher if all electric)

– Approximately an 800 square-foot solar array made up of about 45 solar modules.

– Approximately an 800 pound wind turbine (12 foot blades) on a 60 – 120 foot tower.

Understanding System Sizes

• 50 kW = 5,000 kW hours/month = The power consumed by a 5000 – 6000 square foot home. (higher if all electric)

– Approximately a 3,900 square-foot solar array made up of about 215 solar modules.

– Approximately a 6,000 pound wind turbine (30 foot blade) on a 100 – 120 foot tower.

Understanding System Sizes

• 100 kW = 12,000 kW hours/month = The power consumed by a 6,000 square foot office building. (higher if all electric)

– Approximately a 7,800 square-foot solar array made up of about 430 solar modules.

– Approximately a 15,000 pound wind turbine (69 foot blade) on a 120 – 140 foot tower.

Understanding System Sizes

• 1,000 kW = 120,000 kW hours/month = About 1/3 the power used by a small school. (higher if all electric)

– Approximately a 78,000 square-foot solar array made up of about 4,300 solar modules.

– Approximately a 150,000 pound wind turbine (125 foot blade) on a 150 – 200 foot tower.

Net Billing vs. Net Metering

• Intentional Deceptive Marketing Campaign: “Wolf in sheep’s clothing.”

• Customers often confuse it with true net metering.

• Some REMC’s have adopted this phrase.

• Nothing “NET” about it.

• Uses Avoided Cost!

Net Metering or Feed-in Tariff

• Net-metering is designed to create incentives to install systems that generate power equal to or less than the predicted on-site load.

• Feed-in tariff (FiT) is designed so that systems can be installed at sites with no load, and generate electricity that is purchased, under contract, by the local utility.

Net metering vs. Feed-in Tariff

• Net metering and Feed-in Tariffs (FiT) can co-exist and are not mutually exclusive.

• Net metering and FiT programs in place simultaneously can deliver great options to a wide group of potential renewable energy system owners.

• They can exist together, and consumers will send clear messages to policy makers about their preferences.

Advantages of a Strong Net Metering Policy

• Provides a market-based incentive that encourages renewable energy production.

• Facilitates growth of consumer participation and cumulative capacity of renewable energy systems.

• Gives consumers incentive to size their system to provide for their entire load.

• Encourages clean energy production and energy independence.

What is Indiana’s Net Metering Policy?

Eligible Renewables Customers

Size Limit

Overall Enrollment Limit

Utilities Required to Net Meter

Handling of Excess

Indiana’s Policy

- Photovoltaic- Wind- Small Hydroelectric

- Residential- K-12 Schools

10 kW 0.1% of utility’s most recent peak summer

load

Investor-owned utilities

Credited to customers’

next bill

An Ideal Policy

All All 2 MW and

above

None All utilities Indefinite rollover to customers’ next bill at retail rates

• In Indiana, utilities may not charge customers any fees for additional metering for single-phase configurations, for customer’s request to net meter, or for an initial net metering facility inspection.

• While net excess generation is credited to customer’s next bill, Indiana’s rules do not address the rollover of net excess generation for continuous customers.

•There are some positive points to Indiana’s existing net metering policy, but there is enormous opportunity for improvement.

Indiana IOU 2007 Net Metering Summary

Investor Owned Utility (IOU)

Total Number of Net Metering Customers

and Facilities

Number, Size and Type of Net Metering Facilities

Duke Energy Indiana 30 29 – solar ranging from 1.0 to 28.8 kW

1 – 9.0 kW wind

Indiana Michigan Power 1 1 – 1.1 kW solar

IPL 5 Total capacity of 6.86 kW solar

NIPSCO 4

1 – 2.5 kW solar

1 – 1.36 kW solar

1 – 640 W solar

1 – 10.0 kW wind

SIGECO/Vectren 1 1 – 5.0 kW solar

IURC IOU 2008 Net Metering Summary Data1

Investor Owned Utility (IOU)

Total Number of Net Metering Customers

and Facilities

Number, Size and Type of Net Metering Facilities

Duke Energy Indiana 44 42 – solar ranging from 1.0 to 19.8 kW2

2 – wind ranging from 9.0 - 10 kW

Indiana Michigan Power 4 2 - Solar ranging from 1.1 – 2.8 kW

2 – Wind ranging from 1.9 – 5.5 KW

IPL 5 5 – Solar with total capacity of 5.75 kW

NIPSCO7

5 – Solar ranging from 0.2 KW to 3 KW3

3 – Wind ranging from 0.4 KW to 10KW

SIGECO/Vectren 4 3 – Solar ranging from 5.0 – 16 kW2

1 – Wind at 1.8 KW

1 – Represents bets available data from IURC as of 12/28/092 – Corrected Data3 – NIPSCO recorded 8 systems from 7 customers. One customer has 2 systems.

How Do We Measure Up?• 42 states and D.C. have adopted net metering policies.

• Below are statistics comparing Indiana to the other net metering states:– Have More Eligible Renewables: 37 States– Have More Eligible Customers: 40 States– Have Greater Size Limit: 40 States– Have Greater Overall Limit: 36 States

• The following map is from the Database of State Incentives for Renewables & Efficiency (DSIRE). This map highlights individual system limits across the United States.

– DSIRE indicates 44 states (including D.C.) have net metering available. Three states offer net metering voluntarily, and those 3 states are not included in the above statistics.

Net Metering

State policy

Voluntary utility program(s) only

www.dsireusa.org / December 2009

*State policy applies to certain utility types only (e.g., investor-owned utilities)

WA: 100

OR: 25/2,000*

CA: 1,000*

MT: 50*

NV: 1,000*

UT: 25/2,000*

AZ: no limit*

ND: 100*

NM: 80,000*

WY: 25*

HI: 100KIUC: 50

CO: no limitco-ops & munis:

10/25

OK: 100*

MN: 40

LA: 25/300

AR: 25/300

MI: 150*

WI: 20*

MO: 100

IA: 500* IN: 10*

IL: 40*

FL: 2,000*

KY: 30*

OH: no limit*

GA: 10/100

WV: 25

NC: 1,000*

VT: 250

VA: 20/500*

NH: 100

MA: 60/1,000/2,000*

RI: 1,650/2,250/3,500*

CT: 2,000*

NY: 25/500/2,000*

PA: 50/3,000/5,000*

NJ: 2,000*

DE: 25/500/2,000*

MD: 2,000

DC: 1,000

42 states &

DC have adopted a

net metering policyNote: Numbers indicate individual system capacity limit in kW. Some limits vary by customer type, technology and/or application. Other limits might also apply.

NE: 25

KS: 25/200*

ME: 660co-ops & munis:

100

PR: 25/1,000

AK: 25*

www.freeingthegrid.org / November 2009

DC: F

Net Metering Grades 2007

Grade = A Grade = FGrade = B Grade = C Grade = D No Statewide policy

www.freeingthegrid.org / November 2009

DC: C

Net Metering Grades 2008

Grade = A Grade = FGrade = B Grade = C Grade = D No Statewide policy

www.freeingthegrid.org / November 2009

DC: B

Net Metering Grades 2009

Grade = A Grade = FGrade = B Grade = C Grade = D No Statewide policy

Vectren and Duke Energy• Interestingly, two utility companies in Indiana have voluntarily

expanded their net metering tariff.

• Vectren allows Municipal Corporations to net meter. This is in addition to the residential customers and K-12 schools, which are required by the state of Indiana.

• Duke Energy permits small commercial customers to net meter. Again, this is along with residential customers and K-12 schools, which are required in Indiana.

• Compared to Indiana, all states with net metering policies have a larger number of eligible customer classes, and some utilities in Indiana are opening eligibility to additional customers.

• Now is the time for Indiana to catch up with (or surpass) other states, and to align with what utility companies in this state are offering.

Tipmont REMC• Since it is not an investor-owed utility, Tipmont

REMC is not required to offer net metering. However, they have done so voluntarily. Their policy is superior to that of the current Indiana rule in the following ways:– Tipmont REMC allows renewable energy produced by

wind, solar, water and various types of biomass to net meter. Biomass is not an eligible renewable energy source in Indiana’s policy.

– Tipmont allows residences, small businesses and governmental accounts to net meter. Small businesses and government offices are left out of the eligible customer classes in the current Indiana rule.

Hopes for the Future of Net Metering

• Indiana will improve its net metering policy, encouraging utilization of the state’s abundant resources to generate renewable energy.

• More states will adopt a net metering policy.

• Ideally, a national renewable energy policy will be implemented at the federal level.

Want to Learn More?• Interstate Renewable Energy Council

www.irecusa.org

• Database of State Incentives for Renewables & Efficiency www.dsireusa.org

• Network for New Energy Choices www.newenergychoices.org– Freeing the Grid: 2009 Edition Best and Worst Practice

s in State Net Metering Policies and Interconnection

• Indiana Renewable Energy Association www.indianarenew.org

What Can You Do?• Contact your State Legislators and urge they support

legislation to change net metering in 2010. • Send a Letter to the Editor of your local newspaper

urging changes in net metering this year.

Additional Slides

Interconnection of Renewable Energy Systems - SAFETY

• Renewable Energy and Distributed generation systems have well defined safety standards.– IEEE 1547 defines the standards for interconnection

devices.• Tighter standards than the utility company.

• Dictates when a device may interconnect, and when it must disconnect.

– UL 1741 is standard for inverters (interconnection devices).

• Certifies that device meets the standards of IEEE 1547

• Virtually all devices on the market have UL 1741 certification

• Virtually all utilities already SPECIFY UL 1741 devices.

Interconnection of Renewable Energy Systems - SAFETY

1Allocating Risks: An Analysis of Insurance Requirements for Small-Scale PV Systems, American Solar Energy Society Annual Conference, June 2000, Madison WI, pg. 6.

BOTTOM LINE:

“Grid inter-tied renewable energy systems havebeen installed in the United States since the enactment of thefederal PURPA law in 1978. These systems cumulativelyhave over half a billion operating hours, apparently withoutany reported personal injury or property damage claimsattributed to their interconnection and operation.1"