The rationale for reducing Net Metering is based both on unsound math and unsound physics

News on the diddling-with-metering front.

I argued in a comment today that the standard rationale for a change in net metering is based upon accounting and legal contract which is both unsound physics and unsound mathematics. Recall that that rationale claims that residential solar PV ought not to be reimbursed at retail rates because such generators use the grid, and pay no share of the transmission costs which everyone else bears, disproportionately. Accordingly, the proper rate to reimburse is the wholesale rate for electricity, one consistent with what other generators receive.

First, the arithmetical part … To the degree to which residential PV owners remain a minority of the electricity using public, even if they had no generation, the share of total transmission costs would be small. Consequently, the “unfair burden” these additional costs apply to the rates of the homes which do not have PV generators is quite small.

Second, the physical part … The great majority of electricity generated by residential PV owners is consumed in the neighborhood of their homes, principally by neighbors which have no such generation. Consequently, the “use of the grid” they impose is quite small, certainly very small compared to the typical grid participant. Moreover, the benefit of spare electricity is disproportionately allocated to their neighbors, meaning it remains a local phenomenon. To the degree to which “costs of the use of the grid” can be assessed, it’s only common sense that they be allocated in proportion to total network (length) involved, and, so, the costs imposed on the residential PV owner should reflect that locality. Furthermore, to the degree to which the residential PV owner offsets the need for the utility to provide generated electricity over long distances to neighbors who now get their electrons from the PV of the owner means the utility’s transmission costs are reduced in proportion. I have yet to formulate this quantitatively, but I bet it turns out that these savings, via Sankey diagram arguments, are more than the difference between the wholesale cost of electricity and the retail cost.

I have also learned something else recently.

Utility companies make money from commodity fuel arbitrage. What I mean is that fuels like coal, oil, and methane are volatile in price. When price upticks are forecast or anticipated, utilities raise prices early. When prices fall, they decrease prices late. The shave in between is profit. The trouble with solar (and wind) are that they are much steadier in production and cost than any of these fossil fuel sources, even if their prediction is variable on any given couple of days. If much power went to solar (or wind), the utilities would lose this option for making money. On the other hand, as seen in Nevada, if the utility buys solar power in a mix with other energies, they can exploit the fixed costs of solar to their benefit, because they can vary rates, even if some of the electricity they provide is coming from fixed cost solar.

Utilities understand their business models are fundamentally threatened, and they are opposing the expansion of local solar, whether in communities, or on residences, with everything they have.