Speaking of net metering, the Solar Electric Power Association (SEPA) recently released a report on “net energy metering” that is aimed at helping to provide a common understanding of net metering and underlying regulatory frameworks… in an introductory kind of way. It also shows some of the ways in which net metering policies can be evaluated.

From SEPA: “This paper is an introduction to state utility regulation and principles that are considered during solar valuation, with an emphasis on key concepts and terms. It is designed to ensure that stakeholders engaged in these conversations are more fully informed in those areas in order to have a common understanding of the lexicon used.”

Here’s the preface to the report:

An August 2012 Utility Solar Business Models Bulletin from the Solar Electric Power Association (SEPA) and the Electric Power Research Institute (EPRI) summarized the mechanisms under netenergy metering (NEM) that may create utility revenue losses and ratepayer cost transfers—e.g., the shifting of some utility costs to non-solar customers.

It focused on regulatory cost-recovery tools and NEM-related innovations seen in the utility-solar market to date, but it was limited in providing broader regulatory or solar-industry context. The report welcomed further input and contributed to broad-based discussions, which are ongoing, and which SEPA continues to facilitate.

An early result of those discussions was the recognition that participants approach NEM policy (and, more broadly, all policies on customer energy consumption offset by distributed generation) from different backgrounds and perspectives. Economic and equitable solar integration requires basic understanding of at least two disciplines—state utility regulation (particularly rate-setting) and principles that are considered during the valuation of incremental resource additions, specifically distributed solar resources (and the interplay between those two areas). This paper is an introduction to both of those disciplines, with an emphasis on key concepts and terms. It is designed to ensure that stakeholders engaged in these conversations are more fully informed in those areas in order to have a common understanding of the lexicon used.

This paper is laid out in three sections:

  • Section 1 is an introduction, briefly defining NEM and describing the status of NEM policies across the US.
  • Section 2 deals with state regulatory processes. It focuses on ratemaking and rate design, the locus for many of the current NEM-related efforts across the United States.
  • Section 3 reviews “solar value” concepts and terms. It focuses on the generic definition of terms most commonly identified in the literature exploring values of resources in the distributed setting. These literature resources include plans ordered by state agencies and regulators and analyses submitted by utilities
    and stakeholders for regulatory review. Section 3 describes solar-related value terms as neither costs nor benefits, but as net impacts, which must be assessed for each utility in each regulatory jurisdiction

The goal of each section is to provide an unbiased foundation for broad and productive participation in NEM-related discussions and policy processes. This includes regulators, utility staff, and the full range of solar stakeholders. The authors understand that all parties work under assumptions that need periodic review and that an increasingly diverse group of stakeholders is entering this complex discussion.

The context for this report is a rapidly changing and increasingly dynamic utility environment. In particular, as the penetration of distributed solar generation increases, the debate on NEM policies and impacts is intensifying. Utilities in some regions have observed distributed solar adoption at rates not previously forecast and are now seeing significant amounts of grid-tied solar on their systems. Stakeholders across the energy space are beginning to understand the system impacts of distributed solar and ratepayer equity concerns and are exploring policy alternatives for the immediate and longer term. Solar stakeholders also recognize the need to work with utilities in order to support solar market growth and to maximize the value of this renewable resource. The broad regulatory tenets that guided the US utility industry in the last century are still generally in place in this current age of technical and market complexity. However, as readers will find, the path forward for distributed solar is not simply mapped; it must be created by a broad collaboration of educated and creative problem solvers. A bibliography, included in the Appendix, lists expert texts and references written from distinct perspectives. We hope that this paper will support better critical understanding of those references and more productive communications going forward.