Regulatory Considerations Surrounding Net Metering in California

1. Regulatory Considerations Surrounding Net Metering in California Metering, Billing, CRM/CIS America Pre-Conference Seminar: METCOGEN West Coast, Las Vegas Scott Tomashefsky California Energy Commission April 11, 2005

2. Opening Thought: Net Metering Policy Is Embraced Across Much of North America Our government believes it's time to reward those who want to help clean up our air and increase Ontario's supply of clean, green energy. Ontario Energy Minister Duncan, Ontario Govt Press Release, January 5, 2005 Net energy metering encourages the use of renewable energy resources and renewable energy technologies. Arkansas Renewable Energy Development Act of 2001, HB2325. Louisiana Renewable Energy Development Act of 2003, HB863. The legislature finds that it is in the public interest to promote net metering because it: 1) encourages private investment in renewable energy resources; 2) stimulates Montana's economic growth; and 3) enhances the continued diversification of the energy resources used in Montana. Montana Code, Title 69-8-601, Legislative Findings, Public Utilities and Carriers, July 1999.

3. So What is the “Real” Appeal? Photos Courtesy Of NREL The Legislature finds and declares that…net energy metering… is one way to encourage substantial private investment in renewable energy resources, stimulate in-state economic growth, reduce demand for electricity during peak consumption periods, help stabilize California's energy supply infrastructure, enhance the continued diversification of California's energy resource mix, and reduce interconnection and administrative costs for electricity suppliers. California Public Utilities Code Section 2827, Established in 1995.

4. Net Metering Defined “The ability to generate electricity to an electric distribution grid system and receive a credit for deliveries to the grid.”

5. Net Metering Across the Nation • 38 states have net metering • Variations are wide ranging • Size • Technologies • Limits on Total Capacity • Treatment of Excess Generation • Maximum stated size of 1 MW allowed in California

6. California’s Net Metering Legislation Assembly Bill 58 (2002) • Permanent expansion of net metering program. • Wind greater than 50 kw receives generation-only credit. • Public purpose program charges apply. • Utilities must interconnect within 30 business days of complete application. • Utilities must accommodate net metered MW equal to ½ of 1% of system-wide peak demand. Assembly Bill 1X29 (2001) • Temporary expanded net metering program to 1 MW from 10 kw. Assembly Bill 2228 (2002) • Biogas Net Metering. Assembly Bill 1214 (2003) • Fuel Cell Net Metering.

7. Net Metering Takes Off in California!Grid Installed PV Capacity 100,000 85,874 90,000 More than 93 MW to Date 80,000 70,000 60,000 kW 50,000 40,000 30,000 20,000 4,950 10,000 2,280 0 2000-2004 1981-1989 1990-1999

8. Payments Payments Year Year Number Number MW MW ($ Millions) ($ Millions) 1998 1998 41 41 181 181 $0.5 $0.5 1999 1999 197 197 1,060 1,060 $2.9 $2.9 2000 2000 235 235 802 802 $2.2 $2.2 2001 2001 1,292 1,292 4,294 4,294 $16.9 $16.9 2002 2002 2,331 2,331 8,501 8,501 $36.4 $36.4 2003 2003 3,022 3,021 12,919 12,917 $52.1 $52.1 2004* 2004 2,938 4,615 19,218 12,641 $47.6 $69.4 Grand Total Grand Total 11,733 10,056 40,395 40,395 $180.4 $158.7 But It Is Not Cheap… Rebates Provided by CEC

9. But It Is Not Cheap… Rebates for Net Metered Projects Via CPUC’s SGIP Program Source: Utility SGIP Websites, February 14, 2005.

10. California Estimated Net Metering Caps Note: LADWP is exempted from net metering caps. However, an estimated cap is provided for LADWP as if the cap did apply to them.

11. Net Metering Policy Considerations • Do customers really need incentives to participate? • Should net metering be expanded to other technologies? • Does wide-scale deployment impact the work of the grid protection engineers? • How should “hybrid” systems be administered?

12. Do Customers Really Need Incentives? • Rebates going down over time, but interest is not subsiding. • Energy Commission and CPUC programs are oversubscribed.

13. Some May Need Incentives More Than Others

14. And Just Who Reaps the Benefit?(System Cost in Dollars per Watt) Cost to Consumer Rebate

15. Should Net Metering be Expanded to Other Technologies? • Inverter technologies relatively straight forward. • What happens when induction generators are allowed to net meter?

16. How Does Rapid Deployment Impact System Protection? • Wide-scale deployment a concern for utility protection engineers. • Small level of net metering projects generally manageable. • Large projects require more review from utility protection engineers. • Increases time needed to review all applications.

17. Are Emerging “Hybrid” Systems Problematic? • Technically – No • Procedurally – All sorts of tariff administration problems. • Metering is an issue • Non-bypassable surcharges are an issue. • Crediting mechanisms are difficult.

18. California Net Metering Policy Is at a Crossroads • Is net metering living up to the intent of the legislation? • Incentive requests continue to exceed amount of available money. • Program expansion up for reconsideration • Fuel Cell and Biomass pilot programs expire at the end of 2005.

19. Net Metering Policy Must be Focused • Reduces peak demand. • Stimulates economic growth. • Stabilizes energy infrastructure. • Diversifies resources. • Reduces energy costs to suppliers. • Uses limited public dollars sub-optimally. • Favors certain technologies. • Incentives do not always reach customer. • Often serves as substitute for conservation. • Increases administrative costs to utilities. • Raises utility protection concerns.

20. For Additional Information… Scott Tomashefsky California Energy Commission stomashe@energy.state.ca.us (916) 654-4896