Report: Net metering compensation moves to time-varying and avoided cost rates

The solar net metering headlines have been dominated by California’s NEM 3.0, but net metering compensation is being updated all over the country. The Q1 2023 edition of The 50 States of Solar finds that 41 states, plus the District of Columbia, took some type of distributed solar policy action during Q1 2023, with the greatest number of actions continuing to address net metering policies (59), community solar policies (45), and residential fixed charge or minimum bill increases (34).

This quarterly series from the N.C. Clean Energy Technology Center (NCCETC) provides insights on state regulatory and legislative discussions and actions on distributed solar policy, with a focus on net metering, distributed solar valuation, community solar, residential fixed charges, residential demand and solar charges, third-party ownership, and utility-led rooftop solar programs.

A total of 173 distributed solar policy actions were taken during Q1 2023, with the most actions taken in Connecticut, New Mexico, New York, North Carolina, Arkansas, California, Michigan, Missouri, and Hawaii. The report identifies three trends in solar policy activity taken in Q1 2023:

1. basing net metering successor compensation on time-varying and/or avoided cost rates,
2. addressing community solar project siting in program design, and
3. increasing low- to moderate-income customer participation requirements for community solar programs.

“A pair of net metering decisions in North Carolina and Indiana demonstrate the increasing trend of policymakers trying to better align compensation structures with the value to the grid,” noted Brian Lips, Senior Policy Project Manager at NCCETC.

The report notes the top five distributed solar policy actions of Q1 2023:

• Arkansas lawmakers enacting net metering reform legislation. The changes will move the state to a net billing compensation structure, with electricity exported to the grid credited at the avoided cost rate. The legislation also authorizes monthly grid charges and adjusts system capacity limits.

• North Carolina regulators approving a net metering successor tariff for Duke Energy, which will credit residential solar owners at time-varying retail rates and apply a non-bypassable charge, grid access charge, and minimum bill.
• The Arizona Corporation Commission adopting a community solar policy framework. Customer bill credits would be capped at avoided cost, and low- to moderate-income customers would need to receive 50% of the capacity for a project.

States such as Arkansas, Arizona, Hawaii, Indiana, Louisiana, Michigan, and Utah have approved shifts to compensation at or based on avoided cost rates. While Arizona utilities credit distributed generators at a flat rate, these customers are required to take service on a time-of-use rate. In Hawaii, plans to move all customers to default time-of-use rates are being finalized, as well as revised distributed energy resource tariffs that will incorporate time-varying export credit rates.

• The Indiana Supreme Court upholding a net metering successor tariff utilizing instantaneous netting at 1.25 times the wholesale rate;
• Wisconsin regulators allowing a third-party owned solar project to advance.

“Low- and Moderate-Income (LMI) provisions were a significant part of community solar policy actions this quarter. New options exclusively for LMI customers or adders to ensure they receive tangible benefits have been proposed in several states,” said Vincent Potter, Policy Analyst at NCCETC, “All of the approved pilot projects in New Jersey’s community solar pilot program had at least 51% LMI participation. The draft rules for the permanent program would require that for all community solar facilities in the state.”

— Solar Builder magazine

[source: https://solarbuildermag.com/news/report-net-metering-compensation-moves-to-time-varying-and-avoided-cost-rates/]