Guest blog by Jasper Dikmans of PV Solar Report
A new report predicts that net metering is set to experience strong growth in the U.S. as federal and state governments seek to further renewable energy goals, primarily driven by third-party financing of solar PV systems. However, the electricity generated under NEM programs as a percentage of total electric retail sales is expected to remain low. Electricity sold back to utilities represented just 0.01% of total electric retail sales in 2012.
According to "Running Backwards: Net Metering Short Circuits Electric Sales," a report by Fitch Ratings, net energy metering (NEM) will experience strong growth in the U.S. as federal and state governments seek to further renewable energy goals. The majority of the electricity produced by net metering customers is self- consumed, resulting in lost sales to the utility. However, the electricity generated under NEM programs as a percentage of total electric retail sales will remain low. Electricity sold back to utilities represented just 0.01% of total electric retail sales in 2012.
The top five states with the largest NEM customers in 2012 were California, Arizona, Hawaii, New Jersey, and Colorado. The five largest utilities with NEM customers in that time period were Pacific Gas & Electric (PG&E), Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), Hawaiian Electric, and Arizona Public Service (APS)
Primarily residential customers
Commercial and industrial sectors are the largest gross producers under net metering programs in terms of the number of megawatt-hours generated. However, the residential sector represents the largest customer base net seller under NEM programs (generation minus consumption), composing approximately 146,400 MWh, or 50%, of the total amount of electricity sold back to the utilities in 2012.
PV generation accounted for about 251,700 MWh, or 85.8%, of the total amount of electricity sold back to utilities in 2012 under NEM programs. According to the report, a key driver of NEM growth is third-party financing of solar PV installations, which represents the largest proportion of net excess generation utilizing NEM programs. In 2012, residential PV installations increased 62% to 488MW, as compared to 2011, driven by the growth of third-party financing options. Third-party-owned systems now account for more than 50% of all new residential installations in most major residential markets.
NEM customer growth has been increasing at a 46.7% CAGR, and Fitch expects this trend to continue.
New types of investor financing
Another factor driving NEM growth is new types of investor financing, the report says. SolarCity completed the industry's first securitization of distributed solar generation in November this year, opening up a whole new market for capital investment. The securitization market provides a potential new source of efficient capital to fund solar installations, removing the high cost barrier of entry for residential consumers.
Not without controversy
Fitch notes that net metering programs are not without controversy. They explain this in terms of NEM being a form of Feed In Tariff (FiT), usually a tool designed to promote broad energy or economic policies. FiTs have caused unintended consequences in several situations, both in Europe and the U.S. While FiTs differ in design, they all share a common feature, which incents one desired type or source of higher priced electricity generation. The higher costs are then expensed (or socialized) over the entire customer base.