Duke Energy’s SC Net-Metering Replacement Won a Crucial Ally: Rooftop Solar Companies

Few grid policy battles have been fought as bitterly as those
surrounding replacements for net-metering, which determines how
much rooftop solar customers get paid for power they export to the
grid.

Utilities across the country have pushed to move away from
paying full retail rates, arguing it shifts costs onto other
ratepayers. Solar installers typically respond by calling utility
proposals, which often propose additional costs for rooftop solar
customers,�punitive and unreasonable.

Utility Duke Energy tossed out the conventional playbook when
proposing a net-metering successor for its South Carolina
territory. It got the rooftop solar industry on board.

The agreement, made public Wednesday afternoon, shows that
Duke’s “Solar Choice Net Metering” concept enjoys the official
support of advocacy groups Vote Solar and North Carolina
Sustainable Energy Association, leading national installer Sunrun,
and several other environmental groups. It’s up to regulators to
approve the plan, but rallying a broad coalition is a good place to
start.

The policy seeks to update the existing paradigm to compensate
rooftop solar production in a way that is sustainable for all
ratepayers. 

If approved, the plan would keep monthly netting, but put solar
customers on time-varying rates, which cost more during hours of
peak demand. Solar customers can also earn an up-front energy
efficiency incentive if they install a controllable smart
thermostat alongside solar.

“Legacy rate design hasn’t been designed for generators on
people’s roofs,” said Lon Huber, Duke’s vice president for rate
design and strategic solutions. “Without modernizing that, it can
lead to suboptimal outcomes for the adopting customer and
everyone.”

The new plan aligns pricing with the cost of service, to create
“a triple win for customer, company and climate,” Huber added.

The changes, plus a $30 bill minimum and a grid access fee for
systems larger than 15 kilowatts, ensure that solar adopters will
not zero out their payments to the utility. But Duke says those
measures, and the time-based rates, eliminate 92 to 96 percent of
the calculated cost shift — that means paying for solar
net-metering won’t appreciably raise rates for customers who don’t
have solar.

“This is just a smarter rate design,” said Thad Culley, Vote
Solar’s senior regional director for the Southeast. “It’s not
about taking away money from solar customers, it’s aligning the
cost and aligning the price signals.”

Beyond solar

Time-of-use rates are not new; solar-loving California has
already enacted them, for instance. But the linkage between
net-metering and flexible demand is novel, and has the potential to
leverage solar homes for more system-wide value than previous
policies have attempted. 

Customers can just do solar, if they want. But adding a
discounted, utility-controlled smart thermostat creates more
savings opportunities. Duke plans to add more controllable devices
later. 

Households can program the thermostat to adjust to the peak
pricing periods. But it will also respond to a limited number
of “critical peak pricing” events on days when grid supply is
stretched thin. In practice, this could look like homes pre-heating
or -cooling when their solar system is producing, to save money in
evening hours when the prices go up.

“It is more complex — that’s going to take some education,”
Culley said. “But this is where we want to see the grid go: We want
to see more flexibility and customers playing a bigger role in
that.”

Solar Choice Net Metering reframes home energy consumption as an
energy efficiency measure, a technical shift with big
ramifications.

States created energy efficiency programs to incentivize
customers and utilities to save money by reducing consumption of
electricity. Solar self-consumption similarly reduces demand for
electricity, but has not been treated as an energy efficiency
measure. Breaking down the silo between efficiency and home solar
could could clarify the benefits of rooftop solar for the utility
and the system as a whole.

A good deal all around

Net-metering battles of years past gave the impression that the
outcome would either crush the solar value proposition or subsidize
it on the bills of all other ratepayers. The South Carolina plan
offers a radical alternative to this zero-sum vision: solar policy
can make the utility whole, eliminate a cost-shift from non-solar
households, and still make solar worthwhile for people who want
it.

The current retail rate is essentially flat throughout the day,
so net-metering pays the same for exports at noon as it does in the
late afternoon. The new off-peak rate would pay a couple cents
less, but the on-peak rate would pay several cents more; some solar
production will fall in that window. That could result in a slight
decrease in solar payback, but not by much, Culley said.
Conversely, households that lean into the flexibility could come
out ahead compared to the current, simpler paradigm.

The proposal avoids fixed charges or demand charges, which the
solar industry has fought in other states. Instead, it requires
that charges for the month needs to hit at least $30, based on the
calculated cost for the utility to serve solar households. Most
ratepayers will already have a bill that high, so Culley noted only
a very small number of customers are likely to require bill
increases to meet that level. Similarly, the fee for systems larger
than 15 kilowatts would be rare, as that’s an uncommonly large
system size, roughly double the national average rooftop solar
size.

These measures are meant to right-size solar systems to the
needs of the house, rather than encourage overbuilding to cash in
on exports. That right-sizing keeps the program costs in check.

The proposal checks the boxes laid out in South Carolina’s 2019
Energy Freedom Act, passed with widespread support, Culley said.
That law created objective standards to measure things like cost of
service to solar customers, long run costs of net-metering and the
economic benefits of a homegrown solar industry.

“It gave everyone a standard language to ask the right
questions,” Culley said. “It lets you develop a solution that’s
the right size cure for whatever the ill is, if there is an
ill.”

South Carolina launched retail-rate net-metering in energy
legislation passed in 2014. Utilities starting
hitting the program cap
in 2018, prompting a scramble to lift
the cap to allow the market to grow. When a legislative effort
failed, Duke Energy Carolinas asked regulators to approve a
temporary extension of the program. That effort succeeded, creating
space for stakeholders to figure out what the long term future of
residential solar in the state should look like. 

Duke Energy
committed
last year to eliminate half of its carbon emissions
by 2030 and achieve net-zero emissions by 2050. The company
identified winter peaks, driven by electric heating load, as a

challenge for decarbonizing the grid
. Using customer devices to
reduce critical peak demand “is definitely going to help” with the
winter peak challenge, Huber said.

Source: FS – GreenTech Media
Duke Energy’s SC Net-Metering Replacement Won a Crucial
Ally: Rooftop Solar Companies