NET METERING in ILLINOIS

NET METERING in ILLINOIS Catie HeindelEnergy Law Spring 2008 April 30, 2008

Net Metering – A Summary • What is net metering and how does it work? • Why is net metering important? • What are the benefits and costs of net metering for utilities and consumers? • What are the applicable laws regarding net metering? • Federal • Illinois • How does the IL plan measure up to other states?

What is Net Metering? • Net metering is a electricity policy for consumers who own renewable energy systems, such as wind or solar power, or use vehicle-to-grid systems.

How does Net Metering work? • The renewable energy system (ex. solar panel or wind turbine) generates direct current (DC), the same kind of electricity youget from a battery. • An inverter changes the electricity to alternating current (AC).This is the type of electricity that comes into your home from the utility grid. The inverter is connected to the main circuit-breaker panel in your home.

How does Net Metering work? • When you use electricity, you use the power generated by the solar panels first. • If you need more, you use power coming from the utility. The inverter is responsible for this. • If you are generating more power than you need, power flows back to the utility grid, spinning the existing electricity meter backwards.

Solar electric systems • Solar electric systems generally consist of solar panels installed on a building’s roof to capture energy produced by the sun. • The size and complexity of solar electric systems vary - most residential systems have a capacity between 1 and 5 kW. • These systems deliver an average of 1,200 to 1,300 kW hours of electricity for every kW of capacity. • A 2 kW solar power system would cover an average of one-third of a typical household’s electricity use.

Rooftop Wind Tower • Wind systems typically consist of individual turbines and vary widely in size and height. • While they have the potential to deliver up to 2,000 kW hours of electricity for every kW of capacity, how the system is placed is important to estimating how much electricity will be generated.

Vehicle-to-Grid Systems

Alternatives to Net Metering – Off the Grid • Commonly, wind speeds are low in the summer when the sun shines brightest and longest. • The wind is strong in the winter when less sunlight is available. • Because the peak operating times for wind and solar systems occur at different times of the day and year, hybrid systems are more likely to produce power when you need it.

What happens with excess electricity? • When the consumer produces any excess electricity beyond what is needed to meet their own electricity needs at that moment, the utility purchases that excess electricity at the wholesale or “avoided cost” price. • Generally, the avoided cost price is generally much lower than the retail price. • Additionally, net metering allows the consumer to use any excess electricity to offset electricity used at other times during the billing period.

Why is net metering important? • As increasing numbers of primarily residential consumers install renewable energy systems in their homes, there needs to be a simple, standardized protocol for connecting their systems into the electric grid that ensures safety and power quality.

Renewable Energy Use in US The Role of Renewable Energy Consumption in the Nation’s Energy Supply, 2004

Non-Hydro Renewables make significant gains billion kilowatthours 356 286 Geothermal Solar Wind 169 Biomass 97 MSW and Landfill Gas Annual Energy Outlook 2008

Renewable Portfolio Standards Renewable Portfolio Standards and State Mandates by State, 2005

But, there are safety issues… • Workers repairing downed power lines must be protected from "downstream" sources, in addition to being disconnected from the main "upstream" distribution grid. • Additionally, the phase of the outgoing power must be synchronized with the grid, and a mechanism must be included to disconnect the feed in the event of grid failure.

Inverters can help… • Sources that produce direct current must be coupled with an electrical inverter to convert the output to alternating current, for use with conventional appliances. • Inverters now include all the necessary protective relays and circuit breakers needed to synchronize safely and reliably with the utility grid, and to preventing “islanding” by automatically shutting down when an utility grid suffers and outage.

Why is net metering important? • Net metering can provide a simple, inexpensive and easily administered incentive mechanism for encouraging the use of renewable energy systems, which provide important local, national and global benefits. • Provides several benefits that offset costs to both consumers and utilities that provide the programs.

Incentives? • Net Metering is generally a consumer-based renewable energy incentive. • STRUCTURE: The structure of a net metering program is an important in assessing the economic incentive for residential customers, rural electric cooperatives and private investors to generate their own electricity by using renewable resources. • CONSISTENCY: In the past, over-burdened energy agencies were not providing incentives on a consistent basis. • It was difficult for individuals to negotiate with large institutions to recover their net metering credits and/or rebates for using renewable energy. • Effectively placed the burden of pioneering renewable energy upon fragmented consumers.

If structured correctly and consistent…. • Net metering programs could be used as incentive mechanisms for: • Significant reduction in global greenhouse gas emissions due to use of renewable energy sources. • Other benefits: Stimulating the economy, reducing dependence on foreign oil and reducing billions of dollars of health care costs associated with air pollution.

Incentives for Residential Customers • Many residential customers are not at home using electric during the day when their systems are producing power. • Net metering allows them to receive full value for the electricity they produce without installing expensive battery storage systems.

Utilities: Benefits and Costs • Benefit: Simplified programs provide the avoidance of complicated administrative and accounting procedures for metering and purchasing the small amounts of excess electricity produced by these small scale renewable facilities. • Can help a utility to comply with Renewable Portfolio Standards • Cost: Obviously - the customer buys less electricity from the utility, meaning less revenue for the utility.

Less Revenue for Utility • Amounts to less revenue because customer is using their own generated electricity to offset electricity they would have purchased at the retail price. • But, the company is able to purchase their excess electricity at a wholesale price. • Not so much loss - revenue loss is somewhat equal to having the customer reduce electricity use by investing in energy efficiency levels, such as installing compact florescent lights and efficient appliances.

Consumer: Benefits • Consumers benefit by getting greater value for some of the electricity they generate and by being able to interconnect using widely accepted technical standards. • In some cases, the benefits may be offset by initial installation fees of net metering equipment. • Electricity bill savings depends on a variety of factors, particularly the difference between the avoided costs and retail prices.

Avoided Cost • FERC defines avoided costs as “the incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or facilities, such utility would generate itself or purchase from another source.” • Better wording - The utility’s “avoided cost” is the cost the utility would have paid to purchase the electricity from another source if the customer hadn’t provided it.

How much money can customers really save? • Annual savings estimates depend upon the amount of electricity that the customer uses and the amount of electricity that the customer generates. • Most net metering customers will receive energy credits for the excess electricity their system generates. • All such customers must pay certain fixed costs to connect to the electric grid and, of course, must also pay their public utility for any electricity they use and can’t offset.

Example #1 • HYPO: A residential solar panel system in the Commonwealth Edison service territory can offset an estimated 32% of annual consumption. • PV System Size = 2 kW (DC), or 1.54 kW (AC) • Estimated Annual Consumption = 7,600 kWh • Estimated Annual Production = 2,458 kWh AC • Estimated Total Charges Offset by PV Installation = $248

Example #2 • HYPO: A small business wind turbine system in the AmerenIP service territory can offset an estimated 55% of annual consumption. • Wind System Size = 10 kW • Estimated Annual Production = 23,652 kWh • Estimated Annual Consumption = 43,076 kWh • Estimated Total Charges Offset by Wind Turbine Installation = $2,950

Is the price right? • Electricity cannot be stored efficiently. If not consumed instantly, it is grounded and lost. • The utility may be making money, but most home systems can’t store enough extra electricity to utilize it efficiently. • Yet, some argue that the avoided costs charged don’t always reflect the actual value of the electricity either. • Ex. A distributor generator exchanging power to the utility after midnight, when the power has its least value and may not be capable of resale and thus valueless, does not have the same market value as a distribution generator taking power from a utility at noon.

Federal Requirements for Net Metering • Under Section 1251 of the Energy Policy Act of 2005, all public electric utilities are now required to offer net metering on request to their customers. • (11) NET METERING. Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves.

Net Metering DSIRE: www.dsireusa.orgApril 2008 100 VT: 250 NH: 100 MA: 60* RI: 1,000/1,650* CT: 2,000* 100 * * 50 100 * 25/2,000 40 20 * 25/100 * 30 * NY: 10/25/125/400 PA: 50/3,000/5,000* NJ: 2,000* DE: 25/500/2,000* MD: 2,000* DC: 100 VA: 10/500* 25 * no limit 500 * 1,000 * * 2,000 40 25 10 * * 25/2,000 1,000 co-ops, munis: 10/25 100 15 * 20/100 * * varies 80,000 100 25/300 * 10/100 * 50 25/100 FL: 2,000* 100 (KIUC: 50) Net metering is available in 42 states + D.C. State-wide net metering for all utility types * State-wide net metering for certain utility types only (e.g., investor-owned utilities) Net metering offered voluntarily by one or more individual utilities (Note: Numbers indicate individual system size limit in kilowatts. Some states’ limits vary by customer type and/or technology)

Net Metering for Wind22 states have net metering for all rural electric consumers Settlement of Net Excess Energy: Monthly Annual Varies by utility 25 25 15/150 100 100 10/50 40 60 25 20 25/100 25/125 25 30 25 100 500 varies No Limit 30 10 2,000 25 40 25 2,000 10/500 1,000 200 20/100 100 25/ 100 10 10 Size limits for each statenoted in kW 10/ 100 50 25/ 100 10 50 Revised: 6Mar06 Source: www.dsireusa.org None Individual Utilities Investor-Owned Utilities Only, Not Rural Cooperatives Investor-Owned Utilities and Rural Cooperatives

Applicable Illinois laws and incentives for net metering • How it began: 2000 ComEd Wind & Photovoltaic Generation pricing experiment • Illinois Renewable Portfolio Standard (RPS) • Proposed Rule - SB 680/HB 1386 • The NEW Net Metering Rule (83 IL Admin Code, Part 465)

Early Net Metering in Illinois ComEd’s Wind & Photovoltaic Generation Pricing Experiment • In April 2000, ComEd, the investor-owned utility serving the city of Chicago and surrounding areas, offered net metering on a limited basis for wind and photovoltaic systems of up to 40 kW in size. • Pricing Experiment: • Monthly - ComEd paid customers its avoided costs for any excess power put back into the grid each month; OR • Annually - Paid each customer for the total kilowatts put back into the grid – but limited this to be no more than the amount of power the customer received from the utility. • Customers were paid at a rate representing the difference between the average avoided cost paid to the customer and the average retail rate paid by the customer during the year.

Illinois Renewable Portfolio Standard (RPS) • June, 2001 - Renewable Portfolio Requirements: • 2% of retail load to be renewable in 2007 • Increase 1% each year reaching 8% in 2013. • 75% of the renewable energy used to meet the RPS must come from wind power. • July, 2005 - the ICC adopted a resolution creating a voluntary renewable portfolio goal of 8% by 2013, and an energy efficiency portfolio goal that utilities should reduce load growth by of 25% during 2015-2017.

Public Act 095-0481 • In August 2007, Illinois enacted legislation creating the Illinois Power Agency. • The purpose of this agency is to develop electricity procurement plans for state utilities supplying over 100,000 Illinois customers to ensure “adequate, reliable, affordable, efficient, and environmentally sustainable electric service at the lowest total cost.” • The Agency is charged with competitively procuring energy supply according to the plans and with meeting a renewable portfolio standard of 25% by 2025.

NEW Net Metering Rule83 IL Admin Code, Part 465 • Effective April 1, 2008, eligible residential and non-residential electric customers of Illinois are able to make utilities and alternative retail electric suppliers (ARES) offer net metering for the purpose of off-setting the customer’s own electric demand. • Residential and non-residential customers who own or operate a renewable fuel-powered generator of 2,000 kW capacity or less, located on the customers’ premises and is used to offset some or all of their electric usage. • Eligible renewable fuels are solar, wind, dedicated crops grown for electricity production, anaerobic digestion of livestock or food processing waste, fuel cells or microturbines powered by renewable fuels and hydroelectricity.

Still no rule - IL Commerce Commission Approves “Emergency Rule” • On March 19, 2008, the Illinois Commerce Commission tentatively finalized its net metering order (Case 07-0483), and forwarded its proposal to the Joint Legislative Committee on Administrative Rules for final comment and approval. • This net metering rule is intended to meet the requirements of legislation enacted in S.B. 0680, which requires all electricity providers, except munis and cooperatives, to offer net metering to all customers by April 1, 2008. • The ICC expects to have the permanent net metering rule in place by the revised deadline of April 29, 2008, if not sooner.

Effect of the Net Metering Rule • Commonwealth Edison, the Ameren Illinois Utilities, and MidAmerican Energy Company must now offer customers credits on their electric bills for electricity generated by renewable energy systems. • Cap: Each utility must provide net metering and dual metering until the load of its net-metering customers and dual-metering customers equals 1% of the total peak demand supplied by the utility during the previous year. • All three utilities have an open enrollment program until May 1, 2008, after which applications will be accepted. • The number of new eligible customers with generators that have a nameplate rating of 40 kW or less is limited to 200 total new billing accounts for Ameren Companies, ComEd and MidAmerican for the period of April 1, 2008, through March 31, 2009. They will be accepted on a first-come, first-serve basis.

Residential Customers • For residential customers, net metering is typically accomplished through use of a single, bi-directional meter. • If a customer’s current meter cannot record the electricity generated on site, they can obtain a dual-channel meter from their electricity provider, as long as their system only provides 40 kilowatts (kW) in capacity and is intended primarily to offset the customer's own electrical requirements. • Customers with a larger system are required to purchase the dual-channel meter on their own

Non Residential Customers • For nonresidential customers, net metering is typically accomplished through the use of a dual meter. • Dual metering is required for nonresidential customers with systems greater than 40 kW but not greater than 2 MW. • The utility must provide the necessary metering equipment for systems up to 40 kW in capacity. • Customers with systems greater than 40 kW but less than 2 MW must pay for the costs of installing necessary metering equipment. • Net metering and dual metering are not available to systems greater than 2 MW.

IL Customer Compensation • What Compensation Do Customers using Renewable Fuels to Generate Electricity Receive? • The Net Metering Rule requires utilities and alternate retail electric suppliers to provide financial credits for renewable fuel-generated electricity that offset the amounts that otherwise would have been supplied by customer’s electricity provider during a billing period. • Credits in excess of a customer’s monthly usage will be carried over to future billing periods.

Earning energy credits through net metering • Eligible generators of 40 kW or less: Customers will receive a one-to-one retail rate credit for their excess generation. • Eligible generators between 40 kW and 2 MW: Customers will receive credits equal to the utility’s avoided cost for their excess generation. • Customers with service under time-of-use rates will receive net metering credits at time-of-use rates. • Credits will be carried over month to month, with the annual period running from May to April, or November to October, at the customer’s discretion.

ComEd Wind and Photovoltaic Generation Program • The Wind and Photovoltaic Generation Pricing Program provides financial incentives to participants who have installed photovoltaic or wind turbine systems on their premises that are under 40 kW in capacity. • These include the purchase of any excess electricity your system may produce, and an annual payment based partly upon the amount of electricity you receive from and provide to ComEd during the year.

“Best” Net Metering Policies • New Jersey and Colorado are widely considered to have the best net-metering policies in the United States. Both: • Have no limit on enrollment (less than 2MW each); • roll over month to month; and • pay annually for excess generation at avoided-cost rate (NJ) or incremental cost (CO).

Also…Model Net Metering Rules • Interstate Renewable Energy Council has developed model net metering rules. • These have been used in both New Jersey and Colorado. • 2 requirements – • Rated capacity of generator does not exceed 2MW • Rated capacity of generator does not exceed the customer’s service entrance capacity. • Service Entrance Capacity: The rating in amps of the service entrance equipment. • Pretty similar to IL, no?

NET METERING in ILLINOIS