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Why is indefinite rollover for net metering important? January 26, 2010

Posted by Laura Arnold in Net Metering.
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Indefinite rollover, the great equalizer

From July’s (2009) Connecting to the Grid Newsletter, by Laurel Varnado, editor

As summer turns up the sun’s rays for PV systems across the country, let us briefly consider how a net metering policy’s provision for Net Excess Generation (NEG) rollover can affect the financial outlook for different types of DG systems. If a customer-generator sizes a system to meet average annual onsite energy consumption, ideally the customer would benefit most from an annualized period that starts before the peak production season of the generation unit so that the excess energy carries forward to the less productive months ahead. Because the seasonal output of solar-energy systems is much different than that of wind-energy or other systems, it is next to impossible to define an annual period that would benefit all customer-generators equally.

Indefinite rollover is therefore considered a best practice, from IREC’s perspective. With the addition of Delaware this month, by our count, 11 states1 and the District of Columbia allow indefinite rollover of NEG, with no monthly or annual settlement for net metering credits. The next best scenario, as in the case of New Jersey, is to allow customers to choose their own annual period so that they can optimize the use of any excess generation. Arizona requires a calendar year true-up at the end of December, and other states, such as Pennsylvania and North Carolina, set an annualized period beginning in June and ending in May of the following year. Some states do not allow retail credits to roll over at all; New Mexico currently requires monthly settlement at avoided cost (though this may be changing through a PRC rulemaking), and Alaska’s proposed rules also stipulate monthly settlement. The following is a brief look at how a few generation types differ regarding peak performance.

Solar -At first glance, it would seem that an annualized period beginning in the late spring would best suit PV systems, due to summer’s longer days. NEG credits can be a complex issue though, even if the annual period starts at the beginning of the summer. Here in North Carolina, for example, if you look at the PV Watts calculation for peak solar production, you’ll find that peak production months (using the optimal panel tilt for the latitude) occur in March, April and May. This time period also correspond to some of residents’ lowest energy consumption months, in part, because we don’t need air conditioning yet. North Carolina’s net metering policy, however, requires that all NEG be surrendered to the utility on May 31, with no compensation for the customer. This annualized period would therefore probably be the least optimal situation for PV system owners in that they may not carry forward all their accrued NEG throughout the high-energy cost summer months.

Wind – Throughout the country, wind energy systems typically realize their peak production during winter months. This is true for the South, according to the Southeast Regional Climate Center’s data on monthly wind speeds. For most customers with wind generation, an ideal annual period would start in the fall so that customers could carry excess credits over through the less productive summer months. In some coastal areas, however, wind seems to be fairly consistent throughout the year, and in a few places, wind speeds peak in summer months due to unique geographical features. In other words, wind-energy peak production, like that of PV, is fairly specific to each location.

Biomass – There is a multitude of different types of biomass that can be eligible for net metering in certain states; among those, one can find almost as many peak production times. Woody biomass, often used by operations like pulp and paper mills, is a fairly constant producer throughout the year but will experience lulls in production during a rainy season. Anaerobic digesters, like those found at hog and cattle farms, typically produce more energy during the hotter months of the summer than during colder months. Agricultural biomass is highly seasonal, with crop waste being burned at the end of growing seasons (i.e. spring and fall). For more information, Oak Ridge National Lab’s Billion-ton study is quite informative on different types of biomass production.

Small hydropower – Found mostly in mountainous or hilly areas, micro-hydro systems produce most of their energy in spring and summer due to increased rainfalls and snowmelt runoff. These systems sometimes also must be shut down entirely in the winter due to freezing, and are prone to clogs in the fall due to leaf accumulation. For micro-hydro then, an annual period starting in the late winter would usually be ideal so that the spring surge would carry forward through to the following seasons.

Other considerations will also factor in to the NEG rollover equation. Net-metered vacation homes will have extended periods in which there is minimal or no load for extended periods. Seasonal variations in foliage could also present shading challenges for some PV systems thereby reducing their summer peak performance. Wind energy systems could be presented with seasonal handicaps with a change in the prevailing wind direction (and obstructions in different directions). Preferably, these issues would be accounted for in the site development of the facility but this is not always possible.

While this may be a generalized picture of DG seasonal performance, it is at least apparent that a one-size-fits-all policy of set annual periods will not benefit all DG system owners equally. The indefinite rollover option clearly provides the best approach to account for variations among different system types and locations and allow customer-generators to realize the most financial benefit from net metering.

Regards,

Laurel Varnado

1 Indiana, Colorado, Delaware, Iowa, Kentucky, Louisiana, Massachusetts, Michigan, Nevada, New Hampshire allow for indefinite rollover, and New York allows indefinite rollover for commercial systems only.

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