Report for ERMF questions long-term sustainability of net metering
The grid benefits of rooftop solar power decrease as penetration increases, diminishing the long-term value of net metering, according to a new report from Meridian Energy Policy for the Electric Markets Research Foundation.
The report, The Sustainability of Net Metering, says the most substantial benefit offered by rooftop solar is displaced marginal fuel costs followed by contributions to reliability.
The report also found that distributed solar reduces equipment loading of the distribution system at modest penetrations, though the cost savings are difficult to quantify because most distribution systems are not near their capacity limits.
At the National Association of Regulatory Utility Commissioners’ annual meeting last month a new report added to the debate.
In the report, Meridian Energy Policy created two electricity models to simulate the utilization of electric infrastructure as a function of electricity demand and solar supply, using a dispatch model of the PJM interconnection.
The model was used to identify and quantify the generation displaced by solar energy at increasing levels of market penetration, then quantify the marginal savings of the displaced generation.
The authors argue that if the value of rooftop solar electricity is less than the retail rate and an appreciable number of consumers participate in net metering, the revenue required to maintain the fixed costs of the grid must come from the shrinking revenue base of non-participating consumers.
This, they expect, would exacerbate cross subsidization and lead to economic inefficiency.
Key to the results, the authors write, are locational and temporal variables, such as marginal fuel costs and when solar feeds back into the grid
Some of the assumptions in the report may be questionable, PV Magazine notes, such its expectation that solar does not correspond with peak demand and its electricity price models. Most markets are also not yet near the levels of solar penetration where a significant cost shift exists, according to the outlet.
The Meridian authors note that their work is preliminary, and they intend to extend their work by modeling to two more locations in order to identify “the circumstances that determine the sustainability of net metering.”
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