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Background
Recently, new concerns have
been raised about the dangerous environmental and human health impacts
of fossil fuel-fired power plants. At the same time, there is growing
uneasiness about the stability of our current energy supply. Current conditions
make it clear that we must accelerate our transition to a cleaner and
more sustainable energy future.
With this in mind, there have
been many state-based initiatives to try to move our energy sector away
from harmful fossil fuels and toward a more stable and environmentally-sensitive
system. Such initiatives include Renewable Portfolio Standards (RPS),
tax incentives for renewable energy, and programs to make it easier for
customers to install their own green electricity generators. The latter
initiative is commonly known as net metering.
Net metering is a simple and
effective way to increase investment in renewable energy technologies
without placing an excessive burden on electric service providers. While
the federal government has considered national-level authorization of
net metering, Congress has so far failed to pass any such provisions into
law. In the absence of federal leadership on this issue, states have once
again taken the lead in advancing a progressive and environmentally-friendly
energy policy. Presently, there are 36 states that provide their electricity
customers with a net metering option from either all or selected utility
providers.
These programs allow individual
homeowners to receive credits for the electricity that their renewable
energy generators produce during the day, while many of them are at work
and therefore using little electricity. These credits help to offset the
evening electricity consumption of these same homeowners (particularly
those with solar systems), while reducing the overall burden on electric
utilities during peak daytime hours by feeding power into the grid when
it is needed most. In this way, net metering programs provide benefits
not only to individual homeowners who maintain renewable energy generators,
but also to the electricity system as a whole.
Despite some differences,
each state initiative has the same core components. These include designations
of eligible customer classes (e.g., residential, commercial, industrial),
limits on the size of the generating system, and instructions on how excess
energy generated by the customer will be credited or compensated, if at
all. Most states also limit the generating systems by the source of energy,
not just the size of the system. Iowa, New Hampshire, Texas, and California,
for instance, limit the eligible generating systems to renewable sources
only (e.g., wind, solar, geothermal). This critical provision ensures
that diesel generators or other environmentally-harmful energy systems
are not inadvertently encouraged through these net metering laws and that
only those systems intended to be encouraged, the cleanest and greenest
renewable energy systems, qualify under state law. Another critical feature
of net metering bills is a streamlining of the interconnection requirements
establishing equipment standards and limiting charges and fees that utilities
can levy.
State programs can differ
with respect to billing, however. Some states allow credits for excess
energy consumed or produced to roll over to the next month. This continues
monthly until the end of the year when the net energy purchased is calculated
and the customer must pay the utility for the amount that they have consumed.
If, however, the customer produced more energy than they consumed, some
states require the utility to compensate the customer for any excess energy
that was sent to the grid. Many states require utilities to pay the equivalent
of the wholesale cost of the excess electricity generated by a net metering
customer.
Annual billing allows for
the seasonal variations in output that are typical of wind, solar, or
micro-hydro generators. Absent annual billing methods that roll over monthly
energy use, customers would have to pay utilities for the energy used
during more energy-intensive months and would not be compensated for months
when their electricity production is in excess of their use. With the
annual billing method, seasonal differences in energy use and production
are accounted for and an excess production in one month can cancel out
a month of decreased production and increased consumption of electricity.
Hence, customers who have installed renewable generators are able to take
full advantage of their investment in renewable energy with annual billing.
Net metering is a promising
program that can help decrease our reliance on fossil fuels, clean our
air of dirty fossil fuel emissions, and contribute to the growth of new
manufacturing and service economies in states. However, wide discrepancies
in the structure and implementation of these laws limit the environmental
and human health benefits associated with net metering. The sample legislation
provided in this policy issues package incorporates many of the best elements
from the most progressive state laws, and seeks to maximize the environmental
and economic benefits of a net metering program.
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