In 1999 Governor Christie Whitman signed into law the Electric Discount and Energy Competition Act (EDECA), which led to the break up of once-monopolistic electric and gas utilities. One of the lesser-noted clauses in that omnibus 100-page law provided for something called “net metering,” which allows property owners to sell back excess energy produced through solar or other renewable energy sources.
Net metering is the option EDECA makes available to all utility customers to install a Class I renewable energy generation facility, such as a solar photovoltaic (PV) electric system or a wind-powered turbine, on a rooftop, in a parking lot, or in a side yard and to have the electric meter “run backwards,” selling power not used by the customer back to the utility.
With net metering every customer can in effect become its own green utility company, supplying renewable electricity to the local electric utility — re-christened “electric distribution company” (EDC) by EDECA. The EDC is limited to the “wires and poles” business. It meets customer needs by buying from competing power sources throughout the state and region, including net-metered “customer generators” using renewable energy.
For most of Mercer County and the Route 1 corridor, EDC is good old PSE&G, one of the most pro-solar utilities in the nation. PSE&G has invested heavily in solar PV with the placement of thousands of solar panels on utility poles.
As a result of EDECA and regulations by the Board of Public Utilities (BPU), each EDC and alternative power supplier must “offer net metering to their customers that generate electricity on the customer’s side of the meter using [solar PV or wind], provided that the generating capacity of the [facility] does not exceed the amount of electricity supplied by the [EDC] to the customer over an annualized period.”
In other words, that net-metered solar or wind unit may be no larger in generating capacity than the “annualized” power purchase needs of the customer, as measured in the year before installing solar panels or wind turbine. Size is measured in two ways — by the peak load demand, in kilowatts of capacity, and by the total hours of electricity usage over a year’s period, in kilowatt-hours.
As stated in the regulations, the net metering process works this way:
“If in a given monthly billing period, a customer-generator supplies more electricity to the [EDC] than the EDC delivers to the customer-generator, the EDC shall credit the customer-generator for the excess. To do this, the EDC shall reduce the customer-generator’s bill for the next monthly period to compensate for the excess electricity from the customer-generator in the previous billing period.”
In short, the utility meter can run backwards if the PV system produces more electricity than is consumed by the customer. Best of all, this sell back is at the EDC’s retail rate, not the wholesale cost of the EDC buying power in bulk on the grid for resale to consumers.
Since the retail rate is three or four times the wholesale rate, the advantages of net metering through on-site renewable energy production should be obvious.
And it gets better. Just last year the BPU removed a capacity cap on net metering power that had been set at 2 megawatts (enough for a shopping center). Now even large commercial, industrial, and institutional customers (such as colleges) can net meter and become power suppliers, not just saving money but earning it every time the sun is out.
So, with all that going for it, why doesn’t every customer turn to self-generation and net metering? First, there are physical limitations. Not every customer has a rooftop or open land with good south-facing orientation. Or if they do, it may be blocked by a beloved oak tree or shaded much of the day by the nearby buildings. Or maybe the roof is covered with HVAC equipment or can’t support solar racks.
The solar industry is solving these problems with swivel-axle mounted systems that can track the sun’s rays, like Texas sunflowers turning to face the sun. And rooftops can be reinforced and equipped with solar units that actually reduce static loading per square foot (see sidebar on Charlie Yedlin’s installation).
Second, despite the savings, capital cost for a solar installation can be daunting — especially with the expected end of federal incentives (30 percent tax credit or grants) and the BPU’s decision to terminate hugely popular solar rebate programs.
But many a solar PV developer will install a system, at least partly at its own cost by recouping the up-front investment through the sale of “solar renewable energy credits” (SRECs). SRECs are tradeable rights to sell power in the New Jersey market by complying with a renewable portfolio standard that each electric supplier must meet — mixing a set percentage of solar with other sources such as gas, coal, or nuclear — or pay a penalty.
Third, along with every net-metered project comes the need for an interconnection of the project with the EDC’s distribution system of power lines, transformers, and substations. This must be done without causing safety or reliability problems or upsetting the steady flow of electrons to neighbors.
Many an “ideal” solar installation has been frustrated by interconnection disputes, despite BPU regulations. Some EDCs — though not PSE&G — balk at interconnecting solar projects unless the customer-generator agrees to pay for costly system upgrades that can upset the economics of the solar deal.
While some system upgrades are critical for safety and reliability, and while the costs of those upgrades are properly imposed on the solar developer, this is not always so. The EDC may try to extract costs from the solar developer that exceed what BPU regulations permit. These limit cost-shifting to the actual costs of only those system upgrades necessary to safely interconnect. But determining what is necessary can, by itself, be costly and time-consuming if consultants are retained to perform electric flow calculations.
Moreover, the EDC may refuse to credit the solar installer for the system benefits provided by the solar unit. For example, in one recent study of a 3-megawatt solar project, a consultant found that the solar unit reduces the EDC’s line losses virtually to zero. Putting a dollar sign on those line loss savings would pay for all the system upgrades demanded by the utility.
What’s to be done when EDC demands leave the customer-generator to face the prospect of abandoning or scaling back a project? Call the BPU. It may be time to file an informal complaint with the BPU or even a formal petition asking the BPU to step in and resolve the matter.
Taking the EDC to court is not an option, as the BPU has exclusive or primary jurisdiction. In this attorney’s experience, the informal complaint route has worked by bringing the parties together and mediating the dispute fairly and quickly.
Net metering is a useful tool for helping a hard-pressed customer — be it a high school, an office complex, a farm, or a household — to reduce its utility bills and even to become a “net seller” of power. But the rush to net metering has pitfalls that can discourage those without enough staying power to overcome surprises along the way to a greener, more affordable energy future, as envisioned by the authors of EDECA way back in 1999.
Bill Potter is a partner at Potter & Dickson, a law firm based at 194 Nassau Street. Potter specializes in alternative energy development and has represented a variety of customers in net metering and interconnection disputes.
#b#Yedlin’s Solar Story#/b#
On a cold day this past January Charlie Yedlin, president of the Yedlin Company, a construction firm based at 1000 Herrontown Road, saw the first savings from his newly installed solar photovoltaic (PV) power plant on the roof of his office building. Since then, according to the computer program on his desk, his net-metered solar PV units have generated 50,000 kilowatt-hours of silent, renewable, pollution-free electricity. That’s equivalent to saving 4,000 gallons of gasoline or turning off 285 light bulbs.
To get this done, Yedlin signed up with Geopeak Energy, a Somerset-based firm that is one among scores of alternative energy firms to have sprung up across New Jersey since the passage of the Electric Discount and Energy Competition Act (EDECA) of 1999. (See story, 10). After that, all Yedlin had to do was obtain local approvals for the installation of the 58-kilowatt solar panels on his roof, which Princeton Township zoning officials were glad to provide so the project could quickly proceed.
Even on cloudy days the solar panels produce some energy. The Geopeak software shows that it generated 102 kWh on Sunday, August 28, the day after Hurricane Irene struck. This jumped to 330 kWh on the sunny Monday as the region started to dry out — while many homes and business were still without power — and rising to 335 kWh the day after, where it has hovered ever since.
Yedlin credits PSE&G for its hassle-free cooperation and encouragement. On May 24 PSE&G sent him a short letter confirming that the utility would credit the 58-kilowatt system for all power produced since January. PSE&G reads the meter as it runs backwards and measures the “netting” of power produced and consumed on site versus what is pumped back into the utility system.
Yedlin’s system, which sits on the roof of one of the three buildings that make up his complex at 1000 Herrontown Road, cost $360,000 to install. The federal government contributed $108,000 to the project.
Yedlin has no complaints about his decision to go solar. An early concern was the added weight on the building roof, but Yedlin was about to replace the 25-year-old roof anyway. When he did, he was able to reduce the static weight load by 40 percent, even with the solar collectors — from 10 pounds per square foot to 6. Only one penetration was needed for the “combiner box” of wires in and out, so leakage is not a problem.
Between the sale of the SRECS and the reduced energy purchases, Yedlin anticipates a five-year pay-back. That’s equal to a 20 percent annual rate of return. Not bad, especially in these challenging times.
Since the system went active in January Yedlin says it has cut his energy costs by about 25 percent, meaning he has a long way to go before he can start selling energy back to the grid. The remainder of his power is supplied by an alternative electric power supplier, a deal he says saves him $1,200 to $1,500 a month on his three buildings. “It’s like having a rent-paying tenant who doesn’t take up any space and never complains,” he says of the savings. Moral of this story: Going green has a dual payback for many a business — for the environment and for the company’s bottom line.