First we have to define Net Metering. Your home or business uses electricity 365 days a year, 24/7; solar PV by its nature can only develop energy during the day. Therefore, at points throughout the year your solar array will create more energy than the home/business is consuming at that moment. Where does the excess energy go? Well, it leaves your house via your electric meter and goes back onto the grid. This excess energy is then consumed by your neighbors and you get a credit in your Energy Bank (a virtual account created to log your creation and then consumption of this excess energy) in kilowatt hours (unit of measurement the utility uses to bill you for your usage of electricity). When your home needs energy not created by the solar array, either at night or time of heavy consumption (air conditioning, pool filter etc.), you make a withdrawal from your Energy Bank. At the end of the month you may have excess credits to be used in the future against heavy consumption or you will have a zero balance if you have not created excess credits for that billing period. That was the long way of saying that your Net Meter allows the grid to be used as a big battery, storing any excess energy your solar array creates.
So what is changing? As of May 2018, any NEW commercial solar arrays no longer have Net Metering and as of January 1, 2020 the same will be true for residential consumers. So what happens to the excess energy? It still leaves your home or business via the electrical meter and is consumed by your neighbors. Sounds like nothing has changed, right? Well the change is not in how it operates, it is how it is valued. Current Net Metering is basically a one for one exchange, produce a kilowatt hour and send it onto the grid you get one credit, use one kilowatt hour from your Energy Bank and the whole thing is a wash, it is volume driven, not economic. Sounds really fair doesn’t it? YES it does! Fast forward to residential systems installed post 1/1/20 and you no longer have Net Metering, but now you have a new system to value the excess energy you create. The system is called VDER, Value of Distributed Energy Resources. How does this new system calculate the value of your excess kilowatts? It uses a very complex calculation that takes into account various factors, including when and where the energy is created. It is a very complex calculation, however, the short version is this, the excess energy you create goes onto the grid and you get approximately 65% of whatever the current value of that kilowatt hour is worth. Sounds like you have just bet against the house in Vegas and lost? Yep.
Currently 2% of PSEG rate payers who have both, fixed the cost of their future electricity consumption and create green energy by building a solar array on their home are grandfathered into the Net Metering system. What if you don’t cover 100% of your consumption, which is the case for the vast majority of those with solar? The remainder of the energy you need for your home is then purchased from the utility at the current cost of energy.
So, if you have or have not yet considered going solar the time is now! If you get a solar array installed before 12/31/19 you will be grandfathered into 20 years of Net Metering, after that 20 years you will be converted to some type of VDER system. Will solar still be a good investment as well as being something good for the environment in a post Net Metering world, sure, just not as good as it is today. Obviously, this sweeping change will cause a rush to get solar, unlike anything the industry has ever seen. There will be massive backlogs going into the later part of 2019 so don’t wait and risk missing out because you waited too long.
Share on Facebook
Share on Twitter
Still Sunny? The Future of the Solar Investment Tax Credit (ITC)