Solar Secrets of Net Metering
June 23, 2022
Solar Secrets of Net Metering
The Disadvantages of Net Metering in Arizona
Solar energy systems are growing in popularity with each passing year. Unfortunately, there are numerous issues that all consumers should be aware of before deciding to purchase solar panels. This article will discuss some of the disadvantages of net metering in Arizona, and how homeowners can avoid costly pitfalls.
It's Not All Sunshine
Phoenix, Arizona, the Valley of the Sun. It should be a solar-powered paradise of green, renewable energy. On average Arizona has more than 300 days of sunny skies, yet only 8% of Arizona’s power comes from the sun.
By comparison, many states that have far less sunshine utilize solar power to a greater degree than Arizona. Massachusetts manages to generate more than 20% of that state’s power from the sun despite having 100 fewer days per year of sun. Arizona generates more solar power than almost any other state in the Union. However, this solar power is generated commercially and sold to other states like Nevada or Utah. Why is this?
When homeowners attempt to generate solar power for their homes, the hurdles to energy independence are nearly insurmountable.
The Rise and Fall of Net Metering
It could be said that Arizona’s consumer energy dependence is a product of design. A design that benefits traditional energy companies rather than homeowners. Queue, net metering.
Those who have purchased solar panels may remember the part of their sales pitch that revolved around net metering. It was likely implied that the costs would be offset and there was potential to make money through this incentive. Unfortunately, that is an outdated scenario that is often over-emphasized during the sales process.
What Is Net Metering?
Prior to 2016 Arizona followed most other states in the country and allowed for “net metering.” Net metering just means that over the course of the month, the amount of power a home with a solar system used would be deducted from the amount of power that the home’s solar system generated and the consumer would purchase the difference from the power company, the “net” electricity left after their own production was used.
For example, if a consumer-produced $95 worth of power and used $100 worth of power, they’d purchase $5 of power from the power company. If a consumer’s solar power system produced more power than they used every month, the power company would end up paying the consumer to purchase the power, and that purchase was at the same market rate that a consumer purchased power from the power company. If the going rate for a kilowatt-hour was, say, $0.12, then the power company would purchase excess electricity from the producing consumer at $0.12 per hour.
Usually, this resulted in an offset to the next month’s bill, and few consumers actually ever saw such a significant surplus that they made money from their solar system, but the possibility was there. That possibility did not survive 2016.
New Incentives: Who Benefits?
In 2016 the Arizona Corporation Commission voted 4-1 to eliminate retail net metering, those who had solar systems prior to the vote were grandfathered into the new program still on a net metering schedule. This vote was the culmination of a process that had started several years before when a state Administrative Law Judge recommended the change away from net metering. What followed was a rather bitter electoral campaign between pro-solar candidates for the Corporation Commission and candidates who were more in favor of traditional consumer power generation being by the power company.
The Corporation Commission’s new board, following that election, was dominated by candidates who favored the traditional model of consumer power, where consumers purchased power from power companies and did not purchase their own. The landmark decision was made on the basis of testimony that net metering resulted in higher costs for non-solar consumers because the power company passed the costs of purchasing power from solar consumers on to non-solar consumers.
The new framework of solar compensation is called “avoided cost rate” metering and utilizes the “export rate” and “instantaneous netting.” The theory behind the new framework is that solar power systems are best utilized at “avoiding” consumer costs, not compensating consumers for power produced.
What this new framework means is that any excess electricity a consumer produces is purchased by the power company, not at the market rate, but at a rate the power company decides upon, the “export rate”.
The power company, for what should be obvious reasons, has every incentive to lower the price that they will purchase power from consumer systems, some power companies purchase power at rates up to 30% less than retail.
The Tactic Behind Instantaneous Netting
The power company calculates energy usage, called “instantaneous netting.” This program heavily favors the power company’s set rates of purchase. Under the instantaneous netting system, a solar consumer is credited with power generation during daily windows (set by the power company) that favor the power company. How does this work?
For example, a calculation is done from, say, noon to one PM, when most people are out of their homes. While a great deal of power is being generated on the sunny roof, almost no appliances in the home are being used; which means that the power being generated isn’t used to run any appliances and is then not being given much recognition by the power company for avoiding the costs of running those appliances. The power company will then do another calculation at say, eight to nine PM, when many appliances are running but the sun has set, now the solar system is not generating and is thus not offsetting appliance usage either and appliance costs are not being avoided either.
Export Rates May Not Save Money
A consumer’s solar system is not offsetting appliances during hours of peak usage. Instead, it is generating electricity during hours that it is not being used and the power company is not collecting it, resulting in the power being wasted. And now the “avoided costs” of having a solar system are very low. This allows power companies to set the export rate alarmingly low. While a consumer having a battery allows for them to save their electricity during hours of peak generation and use that power during hours of peak usage, solar batteries are very expensive as well and are usually not packaged with solar systems.
Power Companies Monopoly on Arizona Solar Power
What this ultimately results in is a situation where solar consumers purchase expensive systems with the expectation that their solar system will save them a large amount of money; these savings never materialize because of how the power company is allowed to control the math and set their own prices and the end consumer ends up seeing a minimal amount of savings every month.
If you have purchased or are considering purchasing a solar power system and you have questions/concerns please do not hesitate to contact Counxel Legal Firm to speak with one of our attorneys. We would be happy to review your contract and ensure you are protected.
Note: This article was written with Arizona residents in mind, however, we offer legal counsel in additional states. If you do not live in Arizona but would like to discuss your solar contract we would be happy to assist you.