Monday, June 15, 2009

Net Metering & Feed-in Tariff

If you have solar photovoltaic (PV) panels on your home and they are making more electricity than your home is using, what happens to that energy? With modern grid-tied systems, that energy flows into the grid, to your neighbors' homes and the utility charges them for it. Yes, the utility gets paid for the electricity that you produced. So what do you get from them in return? That depends on where you live.

This same question applies if you have any sort of residential grid-tied ability to generate electricity, such as a wind turbine or a stream hydro-turbine. There are 3 options the utility has for recognizing micro-generators.
  1. Do Nothing - Any energy sent to the grid is simply donated to the utility.
  2. Net Metering - When you feed the grid, your meter runs backwards at the current rate. This may have monthly or annual limits.
  3. Feed-in Tariff - Here the utility pays you more than the going rate. This is an incentive method.
Do Nothings
There are 6 "Do Nothing" states, shown as white in the map above: Alaska, South Dakota, Kansas, Tennessee, Mississippi, and Alabama. In these states, you can either use batteries to prevent your surplus energy from being stolen, or you can size your system so that that it rarely exceeds your homes needs and little or no energy is given away. Neither of these are good choices since batteries add to the system cost and making sure you are not feeding the grid during peak sun, means the system would be undersized the rest of the day.

Net Metering
Some level of net metering is available in 44 US states and Washington D.C. With net metering, when you are feeding the grid, your meter is spinning backwards and lowering or eliminating your electricity bill. Generally with net metering, you cannot be paid for your power production; it can only offset other electricity use (such as nighttime). For example, if your PV system generated 30kWh during a day and you used 15 of these as they were produced and the other 15 were fed to the grid. Then that night you used 15kWh from the grid, this would be a net zero day. The rules for net metering vary from state to state. Often there are connection fees and taxes that cannot be offset.

In some states, the net calculations are done each month. In others, they are done annually. In 2007, Oregon's net metering was changed to annual reconciliation in March of each year, meaning you are allowed to carry surplus generated kWhs from the sunny months to the solar bleak winter months. When July generates about 10 times the amount of electricity as December, this is required for net metering to work well.

Feed-in Tariffs
The third option your utility has to recognize your contribution to the grid is a feed-in tariff. With a feed-in tariff, for each kWh you supply, you get paid! It is a contract for a fixed amount of time for a fixed pay rate. Feed-in tariffs are what caused the explosion of solar in Germany. Why? Because tariffs can make solar ownership profitable. With the right tariff, you can even borrow money to install the system and the tariff money can be enough to make the loan payments. After ~5 years, the loan is paid off and the next 15 years of the tariff money is profit to you. With Germany's tariff, residence installed PV systems on their homes, leased space on their neighbor's houses for panels, and farmers put elevated systems on their grazing lands so they performed double duty.

Would tariffs work in the USA? Parts of Florida and Michigan may soon find out. Gainesville Florida has implemented a tariff of 32-cents per kilowatt hour of solar energy. The statewide average cost is 12-cent per kWh for residential customers. Each kWh sent to the grid pays for nearly 3 kWh from the grid. A PV system can pay its owner $1280 per year under their program. Consumer’s Energy, a relatively small utility in Michigan, also recently proposed a feed-in tariff.

If a region is serious about making solar a part of their energy solution, a tariff is one way to do it. Solar panels distributed throughout the area generate energy right where it is being used. This reduces the demand on the grid and allows for growth without a new power plant. There is no big upfront cost for the utility like they would have if they built a new generation project.

Feed-in tariff legislation is in the works for California, Hawaii, Oregon, and Washington. If these pass, you will hear about it here.


1 comment:

  1. hi. loved reading such a coherent and relevant blog post. will be back for more updates.

    Solar PV Mount


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