Technical Information


Net Metering and Annual True Up By Utility Companies

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 Distributed Generation (DG) systems.  If a customer-generator sizes a system to meet their 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 considered a best practice.  The next best scenario is to allow customers to choose their own annual period so that they can optimize the use of any excess generation.  Some states require a calendar year true-up at the end of December, and other states 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.  Other states currently require monthly settlement at avoided cost (wholesale rate).  The following is a brief look at how solar and wind electric systems 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. In North Carolina, for example, 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 corresponds to some of the residents’ lowest energy consumption months, in part, because they 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.  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.  However, in some coastal areas wind seems to be fairly consistent throughout the year.  In a few places wind speeds will 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 geographic location.

Other Considerations 

Other considerations will also factor into 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.

Summary

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.  Each state sets its own annual true-up period, so make sure you understand how it works and what effect it will have on your RE installation.

Taken from the Interstate Renewable Energy Council’s website, http://www.irecusa.org/.