Net Energy Metering and the Future of Distributed Generation Vishal C. Patel, P.E. Manager - Distribution Resource Interconnections April 28, 2015
What is Net Energy Metering (NEM)? NEM is a tariffed program that: Allows customers to generate their own power using renewable technologies Typically Solar Photovoltaic (PV) (e.g. residential rooftop solar) Energy credits for exported energy offset energy charges over 12-month Relevant Period Connects behind the meter 2
Strong Growth of NEM in SCE s Service Territory NEM limit for SCE: 2,240 MW 1 Cumulative NEM installations as of March 2015: 1,083.1 MW # of customer accounts (cumulative) 1,253 3,868 7,264 14,125 23,325 37,388 58,363 64,961 1 NEM program limit is 5% of aggregate customer peak demand (44,807 MW). 3
Impact of Solar Customers on the Grid Typical residential rooftop solar (NEM) customer profiles (illustrative) Summer 1 Power provided by SCE Winter 3 2 3 Customer usage from selfgeneration 2 2 1 1 1 1 3 SCE grid used as a battery to store exported energy The costs associated to serve these solar customers include: Fixed costs for the infrastructure required to deliver electricity when it is needed Costs related to additional backup capacity needed when solar systems are down or not generating as expected (e.g., cloudy day) Costs of upgrading the electric grid to allow solar systems to use the grid for energy exports Solar production Consumption 4
Net Energy Metering and Cost Recovery How NEM currently works in California: Every month, SCE bills NEM customer for net energy use: the difference between energy imported from SCE and energy exported to the grid. Customers receive full retail credit for exported energy. Any monthly net energy credits (in $) can offset SCE energy charges (in $) within a 12 month Relevant Period Any net surplus energy (in kwh) at the end of the 12-month Relevant Period receives additional Net Surplus Compensation at a wholesale price. NEM presents cost recovery issues: NEM customers can avoid paying for a significant portion of the fixed costs of the grid These unrecovered costs are pushed or shifted to other non-nem customers E3 s 2013 NEM evaluation report estimated shifted costs from NEM to be $1.1 billion in 2020 1 Growing issue as NEM adoption reaches significant levels (nearly 1 GW of installed capacity today) Assembly Bill 327 (AB 327) orders a solution to this problem by: Establishing a transition period under the current NEM structure for up to 20 years for all NEM customers added before July 2017 (or NEM limit) Establishing a new rate/tariff structure to balance costs/benefits of distributed generation (DG) Allowing a fixed charge for new DG customers different from that of non-dg residential customers 1 For all-generation case, in 2012 dollars. 5
Assembly Bill 327 RESIDENTIAL RATE REFORM Proposed Decision issued last week (4/21) Authority to establish rates returned to CPUC Fixed charges up to $10 for non- CARE, $5 for CARE customers Removes restrictions on low-tier rates (Tiers 1 and 2) Reduces number of tiers Considers default or optional timeof-use (TOU) rates RPS Allows the CPUC to require the procurement of renewable resources in excess of established percentages in 2016 and 2020 DISTRIBUTION RESOURCES PLAN Utilities must submit a distribution resources plan (DRP) to identify optimal locations for the deployment of distributed energy resources (DERs) NET ENERGY METERING (NEM) Transition period for current NEM Establishing an NEM successor tariff 6
Transition Period for NEM Customers Per CPUC Decision D.14-03-041: Final NEM Transition Period Decision Transition Period Establishes a transition period of 20 years, beginning with the year the system was interconnected, for customers served prior to July 1, 2017 or the date SCE reaches program limit (whichever is earlier) System Modifications and Additions Additions or modifications to grandfathered systems are generally allowed and do not end the transition period However, generation capacity cannot be increased by more than 10% of the existing system capacity or 1 kw (whichever is greater), and is sized to meet but not exceed the customer s annual onsite load Transferability Full transition period applies to generation systems even if transferred to a new owner, operator, or utility account at original location Customers that move their systems to a new location on or after July 1, 2017 (or program limit date, if earlier) do not qualify for a transition period 7
NEM Successor Tariff or Contract AB 327 required the CPUC to establish, by December 31, 2015, a standard contract or tariff, which the investor-owned utilities (IOUs) shall offer to eligible customer-generators beginning July 1, 2017 (or the date when the IOU reaches its statutorily required NEM program limit, whichever occurs first) AB 327 directs the CPUC to consider the following in developing the new contract or tariff: (1) Ensures customer-sited renewable DG continues to grow sustainably and includes alternatives for customers in disadvantaged communities (2) Is based on the costs and benefits of the renewable electrical generation facility (3) Ensures the total benefits to all customers and the electrical system are approximately equal to the total costs (4) Allows projects greater than 1 MW as long as it is sized to the onsite load (5) Allows fixed charges for residential customer-generators to differ from fixed charges of other residential customers (6) Places no cap on the program 8
Desirable NEM Successor Tariff Traits Ensures equitable cost recovery and fair compensation for benefits Recovers the appropriate fixed grid costs from grid users based on their cost of service Compensates DG for all the measurable benefits it provides to the grid Transparent incentives Any subsidies and incentives designed to promote renewable DG growth are clearly identifiable Provides flexibility (i.e., incentives can start at a high point and be phased out over time, like CSI) Easy to understand and administer Customers can easily understand cost and compensation in their DG rate structure Provides certainty through clear and accurate price signals Does not require significant changes to current billing and metering systems Incentivizes customers to efficiently manage their demand and energy use Promotes behaviors such as peak shaving and conservation, while avoiding system oversizing Compatible with future Distributed Energy Resources (DERs) Technology-agnostic tariff that prevents any arbitrage and ensures resource neutrality Other considerations Enhances consumer awareness and protection Offers options for customers in disadvantaged communities Prevents unintended safety/reliability consequences 9
Rate Design Options to Consider Feed-in Tariff (buy-all, sell-all) e.g., Value of Solar Energy charges (tiered/tou) Grid usage charges (bidirectional) Variable Charges ($/kwh) Compensation of Exports NEM Successor Tariff Monthly fixed fee Demand charges ($/kw net usage) Grid charges ($/kw nameplate capacity) Standby charges Fixed Charges Net Metering (full retail rate credit) Minimum Bill COMPENSATION CHARGES 10
Residential Rate Reform The current inclining-block tiered rate structure presents a number of issues: Fixed Tier 1/low-income rates Continued shifting of costs to high tier customers Lack of residential fixed charges and recovery of virtually all costs through volumetric charges AB 327 orders a solution to this problem by: Lifting some Tier 1 restrictions, reducing # of Tiers, flattening Tiers Creating more flexible low-income (CARE) customer rate adjustments Enabling fixed monthly charges to pick up some fixed costs ($10 cap) Allowing CPUC to establish default Time of Use (TOU) rate for residential customers by 2018 SCE s residential rate reform proposal seeks to address these issues 1 : Rate tiers Tier ratios 2014 2018 4 tiers 2 tiers 1 / 1.2 / 1.9 / 2.1 1 / 1.2 Fixed charge $0.73 / $0.94 (non-care / CARE) $10 / $5 (non-care / CARE) 1. This table illustrates information prior to issuance of the P.D. last week on 4/21. 11
Distribution Resources Plan DRP Draft Guidance Requirements 1 (R.14-08-013) 1. Specify how much capacity may be available on the distribution circuit (Integration Capacity Analysis), specify net benefits from DERs 2 in a given location (Optimal Location Benefit Analysis) and develop three ten-year scenarios that project expected growth of DERs through 2025 2. Develop proof points that demonstrate the capabilities of DERs to meet grid planning and operational requirements 3. Propose policy on data sharing, procedures for data sharing, and plans for obtaining data from smart meters 4. Outline DER tariffs; develop recommendations for how location values could be integrated into the DER tariffs; provide recommendations for new services, tariffs or incentives as part of demonstration programs and refinements to interconnection policies 5. Propose/modify existing standards to accommodate high levels of DER by identifying potential reliability and safety standards that DERs must meet; delineate how DERs can support higher levels of system reliability and safety; describe major considerations for owners/operators of DER equipment and for first responders (fire, policy and health professionals); and, utility engagement regarding local permitting 6. Identify barriers to DER deployment, interconnection, and operations and propose solutions 7. Describe specific actions or investments may be included in the next GRCs 8. Propose a plan for how DRPs can be updated on a biennial filing cycle for the next 10 years 1. Commissioner Picker s Draft Guidance Document (11/17/2014) - (R.14-08-013) 2. DERs include distributed renewable generation, energy efficiency, energy storage, electric vehicles, and demand response 12
SCE and the Electric Grid of the Future Aligned with California s strong direction toward DERs with AB 327 as a key driver SCE is preparing for the future of solar by: Creating a 21st century power network that can handle California s energy needs, including rooftop solar, solar farms, and other sources of energy Upgrading the power network to allow SCE to incorporate more rooftop solar energy, so that we can use clean energy without compromising reliability Reforming rates and policies so that all customers, solar and non-solar alike, help pay for the use of the power network that enables solar to be integrated and supplies electricity to customers 24/7 Working with key customers to understand solar and other energy options that can help them meet their energy objectives and any anticipated future requirements Contributing to California s Green Rate & Community Renewables proceeding to help expand customer renewable energy choices while protecting non-participant ratepayers Collaborating with solar companies, battery providers, technology suppliers and customers in building the 21st century power network that provides access to clean energy and technologies for everyone 13