Through the roof 

As residential solar surges, the net-metering debate heats up

Our new electricity meter doesn't have dials. It's digital. So it didn't "spin" backward soon after having a solar array installed on our south-facing garage roof in April 2015. I'd looked forward to that first indication that our 10 panels were producing more power than our house in Missoula consumed. Instead, the "net meter" displays arrows pointing left and reads "Received" when the grid is taking on excess power. The display points right and reads "Delivered" when pulling power from the grid.

Still, seeing for the first time the equivalent of a backward spin delighted me considering the months I'd spent weighing whether it made economic sense to go solar.

Did it make sense?

That's one question now that I have a year's worth of NorthWestern Energy bills to tally and compare to prior energy usage and my installer's projections.

But much bigger questions loom for states, utilities, the solar industry and anyone inclined to produce renewable energy from the sun or wind while remaining tied to the grid.

click to enlarge 1-i21cover.jpg

Residential solar in the U.S. grew 66 percent in 2015 over 2014, the largest annual growth rate to date, according to a recent report by GTM Research and the Solar Energy Industries Association, or SEIA. In 2015, residential solar installations amounted to 2,099 megawatts, which, when converted, equals more that 1,600 megawatts. By comparison, Montana's coal-fired Colstrip plant, the second-largest power plant west of the Mississippi River, has a peak output of 2,100 megawatts. The International Renewable Energy Agency reports that between 2010 and 2015 the cost of solar photovoltaic panels dropped 80 percent, fueling the solar surge around the world.

Forty-one states and the District of Columbia have mandatory net-metering rules, but the rapid growth in residential solar has states from New York to Montana wrestling with how to promote this renewable, distributed resource in a way that placates utilities challenged by integrating the power and apportioning the associated costs.

"[W]hile a growing number of state markets are picking up steam, an even larger number of states are considering reforms to net metering rules that threaten the market's ability to maintain a hockey-stick growth trajectory," the GTM and SEIA report states.

Nevada, for example, the fifth-largest residential solar market in 2015 with 17,000 producers, recently implemented drastic changes to its net-metering policy that the Alliance for Solar Choice, in challenging the decision in court, called "a stake in the heart of future rooftop solar development."

The crux of the debate is how much net-metered customers should be credited for putting excess energy onto the grid. Utilities and renewable energy advocates clash on cost-benefit analyses.

That may be an understatement. Dan Brandborg of SBS Solar, which installed our system, says, "The war's about to begin."

click to enlarge PHOTO BY MATTHEW FRANK
  • photo by Matthew Frank

In Montana, state Sen. Pat Connell, responding to what he calls an "avalanche" of floated but failed net-metering bills during the 2015 legislative session, sponsored a resolution tasking the Energy and Telecommunications Interim Committee with studying the costs and benefits of net metering. Connell cites challenges faced by utilities in Nevada and Hawaii as the impetus for the study. Last fall Hawaii ended the state's net-metering program for new customers.

"I am a great believer in the concept of dispersed energy generation," Connell says. "I could make a strong argument that it is in the national security's interest to have this type of energy generation scattered all over. Having said that, it's got to be done right.

"There is no question, based on the evidence we've seen, that we are on the cusp of explosive growth in solar energy generation and other means of dispersed energy generation," he continues. "As a result, I want to ... establish a framework that will be the basis for people considering the investment."

It's no small investment. My family's 2.85 kWp (kilowatt peak) system cost roughly $10,500. But we got a lot of help.

NorthWestern Energy, Montana's largest utility, gave us a $2,000 grant from the state-mandated Universal Systems Benefits fund, created to promote energy conservation and renewables, among other things, when the Montana Legislature deregulated the state's electricity supply in 1997.

That $8,500 was then reduced to $5,950 thanks to the federal government's 30 percent tax credit. Montana chipped in another $1,000 with its renewable energy credit, bringing the total cost down to $4,950. We financed the full $8,500 (because we only recently received the tax credits) through Montana's Alternative Energy Loan Program, which offers 10-year loans at 3.25 percent.

Our first electric bill, in May 2015, was for $5.25, the minimum "delivery service" fee. The "supply service" fee was $0.00. The solar panels had produced 45 kWh more than we'd used, and NorthWestern credited us those kilowatt hours, which mounted over the course of the summer before we used them up in the fall when our solar production dropped.

Montana law, dating back to 1999, dictates that NorthWestern credit net-metered customers at retail rates. In other words, what we pay for energy pulled from the grid equals what the utility pays us for energy we put on the grid. That 1:1 arrangement is critical to solar investments penciling outand controversial.

Over the course of a full year, between last May's bill and this April's, we netted 2,456 kWh of power consumed. NorthWestern can't differentiate between the total power its net-metered customers produce and use. The utility's net meters only calculate the net, a problematic limitation for reasons I'll explain later. So we're left looking at the prior year to estimate how much solar energy offset our usage. We consumed 6,055 kWh over those months in 2014 and 2015, which suggests our solar panels produced roughly 59 percent of our power. Our installer had originally estimated 54 percent.

click to enlarge The author had solar panels installed at his house in April 2015. His first electric bill totaled $5.25, the minimum “delivery service” fee. But he still estimates it will take more than 13 years to pay off his initial investment. - PHOTO COURTESY OF DENNIS SCHROEDER/NREL
  • photo courtesy of Dennis Schroeder/NREL
  • The author had solar panels installed at his house in April 2015. His first electric bill totaled $5.25, the minimum “delivery service” fee. But he still estimates it will take more than 13 years to pay off his initial investment.

In terms of dollars, we paid a total of $331 for electricity in the year since we installed solar panels, compared to $700 the year before. If we save about $370 every year, back-of-the-napkin math says our roughly $5,000 investment in solar will be paid off in about 13 and a half years. That's a long time, but there's good reason to believe the payoff period for the panels, manufactured near Portland, Ore., and warrantied for 25 years, will be shorter.

One factor is that NorthWestern, in 2014, paid $900 million to acquire 11 hydroelectric dams, resulting in a 5 to 7 percent rate hike. And while the utility says owning those generating assets will protect customers from market volatility, retail electricity prices are projected to continue rising. We avoid paying higher rates to the extent that we produce our own power.

"It's very clear that investing in solar means you're locking in your energy costs for 25 or 30 years," says Ben Brouwer, the Montana Renewable Energy Association's policy director. "You're protecting yourself from an uncertain and historically massively fluctuating energy market."

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