State Net Metering Policies
Net metering policies can assist states in meeting their renewable portfolio standards (RPS) or targets since a number of states have specific requirements for distributed generation. While a majority of states and territories have authorized net metering, they have taken differing approaches to policies with variations in capacity limits, eligible technology, net metering credit retention and renewable energy credit (REC) ownership.
Thirty-eight states, Washington, D.C., and four territories offer net metering, and utilities in two additional states—Idaho and Texas—have voluntarily adopted net metering programs. Seven states—Arizona, Georgia, Hawaii, Indiana, Nevada, Maine and Mississippi—have statewide distributed generation compensation rules other than net metering. These states' distributed generation compensation rules do not qualify as net metering because they do not offer full retail rate compensation or because their policies use an alternative compensation structure, such as a "buy-all, sell-all" approach. Additionally, although Minnesota offers conventional net metering, the state has also created a value of solar rate, or tariff, as an alternative to net metering. For more information regarding these policies see the “Emerging Compensation Methods” and “Value of Solar” sections below.
Value of Solar
The Value of Solar (VOS) rate (or Value of Solar tariff) is an alternative to net metering designed to capture the value solar installations provide to the electric system. Under existing VOS program designs, solar customers continue to purchase all of their electricity from the grid at the utility’s retail rate and receive credit for the solar electricity exported to the grid at the approved VOS rate.
The VOS rate attempts to include the variety of costs and benefits that solar may create for the grid rather than simply paying the fixed retail rate. The VOS rate is locked in for a specified period of time—for example, at least 20 years in Minnesota—whereas net metering credits fluctuate with the retail price. By including both costs and benefits, the VOS rate addresses the concerns of cost-shifting to non-solar customers.
Finally, VOS allows utilities to better understand and manage customer electricity generation, since the VOS decouples the solar electricity generated by the consumer from the electricity purchased for on-site consumption. Minnesota allows utilities to compensate rooftop solar and community solar garden systems at either the VOS or net metering rate. Only Minnesota and Austin, Texas, have adopted VOS policies, however no eligible utility has chosen to implement a VOS rate.
States have implemented net metering policies using a range of terminology and definitions. For example, California enacted legislation authorizing “net energy metering,” defined as “measuring the difference between the electricity supplied through the electrical grid and the electricity generated by an eligible customer-generator and fed back to the electrical grid over a 12-month period.” Florida legislation defined "net metering" as "a metering and billing methodology whereby customer-owned renewable generation is allowed to offset the customer's electricity consumption on site."
Capacity limits regulate the individual system size of net metered installations in a variety of aspects and vary widely across states. Capacity limits can be determined by a kilowatt-based limit or a percentage limit. For example, Wisconsin has authorized net metering for systems up to 20 kilowatts (kW) while Arizona caps systems at 125 percent of a customer’s total connected load. New Jersey and Ohio have authorized net metering with no capacity limit. South Carolina, Virginia and Wisconsin have authorized net metering for systems up to 20 kW in capacity while Massachusetts allows for systems up to 10 MW and New Mexico authorizes net metering for systems up to 80 MW. Nearly half of states with net metering policies authorize net metering for systems up to one or two MW in capacity.
Capacity amounts can also vary with regard to utility type, customer type, technology and system type. For example, a majority of states have adopted requirements that are only applicable to certain types of utilities, such as investor-owned utilities. States also have adopted capacity limits based on customer demographics. For example, West Virginia established different limits for commercial, industrial and residential customers, which are then based on the size of the utility serving the various customer demographics. Several states have established capacity limits based on technologies, such as in New York where solar, wind, micro-hydroelectric, fuel cell, biogas and micro-combined heat and power (CHP) systems all have different capacity limits (which then vary based on customer type).
States can also adopt different capacity limits for individual systems, aggregate net metering systems and community or virtual net metering systems, which are discussed under “Shared Renewable Energy” later in this document. Pennsylvania, for example, limits aggregate net metering to 200 percent of a customer's cumulative consumption across all aggregated meters.
States include a variety of technologies in net metering policies. While all states with net metering include solar energy in their policies, they may also include: wind and micro-turbines, combined heat and power or cogeneration, biomass, biogas, landfill gas, municipal solid waste, anaerobic digesters, geothermal electric, fuel cells, small hydroelectric, tidal energy, wave energy, ocean thermal and renewable fuel cells.
State policies also have addressed how long customers can maintain or “roll over” bill credits for net metered electricity. Virtually all states credit excess generation to the next monthly billing period or allow distributed generation customers to select this option. North Dakota, an exception to this practice, reconciles excess generation monthly at avoided cost rate.
An important distinction in states’ policies is whether credits for excess generation can expire or can be carried over indefinitely; states have taken a range of approaches to address this. For example, Alaska credits excess generation to a customer’s next bill and credits may be carried over indefinitely. In Hawaii, excess generation is credited to a customer’s next bill at retail rate but excess credits are granted to the utility at the end of an annual billing cycle. California credits excess generation to a customer’s next bill at retail rate. After a 12-month period customers can choose whether to roll credits over indefinitely or receive a payment for credits at the wholesale rate. If no option is selected, credits are granted to the utility with no customer compensation.
States vary compensation policies based on factors such as system size or technology. For example, Minnesota determines net excess generation policies based on the capacity of the distributed generation system, while New York differentiates net excess generation policies based on technology.
Net metering policies may specify ownership of renewable energy credits (RECs) created by the system. Renewable energy producers earn RECs for electrical generation and states can determine if the distributed generation customer, or the utility that purchases excess electricity, owns the REC. REC ownership can be important to meeting state renewable portfolio standards (RPS), whether the requirements are for distributed generation carve-outs or broader utility requirements. In Colorado, where the state RPS requires a percentage of retail sales to come from distributed generation, RECs are owned by distributed generation customers. Utilities in Kansas, where there is no distributed generation requirement in the state RPS, own distributed generation RECs. A majority of states with net metering have determined that distributed generation customers own RECs.