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Navigating Solar without Net Metering

net metering gif

For years, net metering was seen as the way for solar customers to get paid for the energy they generate by crediting them for the energy they add to the grid. If the solar system generates more electricity than the home uses, the meter would essentially run backward and become a credit to be consumed at night or at times when the home is using more electricity than is being produced by the solar system.

This method allows customers to be billed for their net energy use. The excess energy is put on the grid and the utility company can then sell the energy to others at full price. Most solar customers produce more electricity than they consume, which allows them to save a great deal of money on their utilities.

 

Unfortunately, most states are moving away from net metering and it is becoming a thing of the past. Although many states still abide by net metering, they are beginning to move away from it and solar companies are forced to come up with different solutions. Take Arizona for example, net metering for the most part is no longer the law of the land.  Out of the three major electrical utility companies in the state, two of them, American Public Service (APS) and Salt River Project (SRP), have done away with net metering.  This was part of a campaign years ago to squeeze leasing companies out of the market; and it worked. Due to the great production of solar in the southwest, and the relatively high cost of power, leasing companies became a problem for the local utility companies.

net map

Utility companies argued that their overhead and commitment to customers wasn’t just the ability to provide a typical amount of MWh per year, but really an instant amount of power at any given time, typically up to 200 amps of instantaneous power.  Regardless of how much power a solar system produces, the utility company is still on the hook for the extra power that a customer needs, even if they receive revenue from that customer. It was this argument that allowed both APS and SRP to dramatically change their solar rate plans in 2015.  Tucson Electric Power (TEP) still offers a net metering plan.  

What did these changes do to the financials of buying solar?

While APS’ solar rate structure is simpler, straight forward and provides a better return on investment (ROI); SRP, took a much more aggressive approach. The SRP solar rate options are confusing and there are a lot of them. They change the cost of power and the time of use (TOU) windows throughout the year.  Basically, they have created 4 different options that fit individual customer needs, but we will focus on the most popular right now, which is the E27 demand TOU structure.  In layman’s terms, SRP has actually dramatically reduced their kwh cost from an average of $.10-$.12/kwh down to about $.04-$.06/kwh.  Sounds great, but there is a catch.  Customers are also charged a demand fee for the highest measured amount of instant KW they have used during the month.

 

Demand charges are fees charged to your electric bill based on the highest power drawn during a random snapshot of usage during the day. The utility will then apply the demand charge based on the maximum power that customer used during that snapshot of time. To determine the demand for the month, the maximum power demand is multiplied by the demand charge rate. These demand charges can greatly affect your electric bill and negate any savings you may have from your solar system. While APS measures consistently throughout the month and takes an average over each hour, SRP takes a snapshot of customers power usage at random times.  This means that customers could accidentally cause themselves to see a very high electricity bill if they are not careful. This demand structure has caused a shift in consumer habits. Demand charges can impact how a homeowner uses standard appliances such as their washer and dryer, air conditioner and electric range, due to their high energy use.

So what does this mean for solar installers?

Dave Brady, CEO of Erus Energy, says that they first need to figure out what the homeowner’s goal is. The main reasons he finds customers wanting solar is to:

 

  1. Save money
  2. Avoid peak periods
  3. Stick it to the man (utility company)

“You want an east-west facing system now in Phoenix because of the peak window changes,” Dave says. This is due to customers wanting to have the solar cover the demand charges and not necessarily the entire day worth of electricity. The focus is now on covering the demand charges and not making the meter spin backward.

 

Erus Energy has been in the Phoenix area since 2008 and has survived through all the changes that have been placed on energy and solar usage. Dave commented that, unfortunately, when net metering went away, so did many solar installation companies. Without net metering, designing a solar system is more complicated. It is important to stay up to date on the utility rate structures and the energy efficiency products that are available. Erus Energy credits their success with staying current with the technologies and consistently learning more about the products that are available.

battery

These challenges that utility companies pose are driving some important product and design innovations in the market. One of the more exciting developments within these rate structures is the use of batteries. Battery technology is currently in a major development of software and interconnection options. For most households, batteries might not be necessary, but it is important to consider your own household situation.

Is your electric reliable? Does your power go out regularly? Do you live in a place such a California that experiences wildfires and blackouts? Do you live in a hurricane prone area where power outages are likely? These would all be locations where batteries are highly recommended. In places like Arizona where there aren’t any major power issues, batteries would be an option to help smooth out demand charges. The battery can charge during the day and later in the day when usage is higher, offset the demand and give the homeowner control over the surge of electricity.

 

The most likely time that customers will slip up on their electric usage and hence their demand charges is once the sun goes down, and everyone comes home.  The solar arrays do produce some power that does offset the demand costs when the sun is out, but if it is cloudy outside, this might not be the case.  During summer months, especially in Arizona, when the sun is still going down around 6 – 8 pm it can still be extremely hot; this is where the batteries play an important role.  Customers with battery systems can relax knowing that their battery system will kick on at the end of the day when it is still hot out and everyone is now home and the AC system is needed.

 

When considering a solar energy system for your home or business, it is necessary to do your research. It is a real investment and you should choose quality products from a company with longevity, such as Erus Energy. The company should discuss with you your goals and understand your reasons for wanting to go solar. Is your main reason to save money? Do you want to have a smart home that is fully automated with the newest technology? How does your house consume power? There are many options to help reduce your power usage such as LED lighting, duct sealing, smart home solutions and more. All of these components come together to help lower your demand charges and overall power usage.

 

With the elimination of net metering and the decrease in the tax credit, now is the time to invest in solar. The Solar Investment Tax Credit (ITC) has been one of the most important federal policies for the solar industry in the United States. According to SEIA, “Since it was enacted in 2006, the US solar industry has grown by more than 10,000%.” In 2019, the ITC has started to decrease and is set to be eliminated by the end of 2021. This credit is a dollar for dollar reduction in income taxes that a person pays to the federal government and is a major incentive to going solar. Considering solar energy only represents 2.5% of energy production in the US, there is still a lot of room for solar advancements.

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