Some individuals and companies generate their own electricity (“self generation”), for example by installing solar panels on their roofs. But most are still connected to the distribution grid, and rely on electricity from utilities when they are not able to generate enough electricity of their own.
Net metering is a voluntary arrangement for utility customers to “bank” any excess electricity generated when it’s not needed, and to use it later when it is needed. A customer might generate more energy than they need during the day from solar panels, but want to use that energy after the sun goes down. Other customers might be able to bank surplus energy in the spring or summer, then use it in the winter. The utility is providing an energy storage service, like a big battery.
Utilities sometimes limit the types of generation that qualify for net metering programs. In BC, the two electric utilities that have net metering programs only permit clean or renewable facilities.
A variant of net metering that allows larger customers to aggregate demand from multiple meters is known as virtual net metering. No utility in BC offers virtual net today.
Benefits
Customers gain from the “banking” arrangement in net metering programs, allowing them to take more advantage of their facilities. Without such a program, the surplus power they generate would be wasted, and they would have to pay the full retail rate for the energy they need when they can’t generate enough of their own.
Some net metering programs also compensate customers at year end if there is surplus energy in the bank. This surplus can be valued as high as the full retail rate for electricity, or at a lower rate based on the utility’s cost of buying energy.
Utilities also stand to benefit from an additional source of electricity generation, with almost no capital investment required by the utility. Net metering customers are usually located close to other customers who would use the surplus, so the utility avoids transmission costs to move the energy elsewhere.
Challenges
Despite the benefits to both consumers and utilities, net metering has its challenges.
Net metering can cause operational and planning challenges for utilities. Excessive amounts of solar energy, a common form of consumer self-generation, can lead to dramatic increases in demand for electricity when the sun goes down. This is clearly demonstrated by the California “duck curve”, showing how much the daily increase in demand around 6 pm has increased in the last decade.
Source: California ISO.
Net metering can also create subsidies between ratepayer groups, leading to inequities and undue discrimination. These subsidies arise primarily because energy storage is not free. For solar energy, this storage is usually just during the day, but not all self-generation is solar. Some net metering customers have small hydro-electric generators, which generate more electricity during the spring run-off when rivers are full, and less in the winter.
In an ideal rate design, utilities would allocate the full cost of energy storage to the net metering customers who benefit from it. This is hard to do, however, as it requires calculating the value of the energy to the utility when the energy is banked, and the value of the energy when it is taken out of the bank. Simpler calculations are usually used instead, which leads to some of the cost being allocated to all electricity customers.
BC Hydro’s net metering program
BC Hydro’s net metering program was first approved by the BCUC in 2004, and has been amended several times since, most recently in 2020.
In its current form, BC Hydro residential and commercial customers may install clean and renewable generating facilities of up to 100 kilowatts (kW) on their premises, banking any unused energy during the year.
Any surplus energy in the customer’s “bank” at the end of the year is purchased by BC Hydro at its average market price for electricity.
On March 1, 2019, BC Hydro had 1,851 customers in its net metering program, 1,817 of whom (98 percent) used solar power to generate electricity. An example of the generation from a typical residential solar installation for a BC Hydro customer is:
BC Hydro projects its net metering program will continue to grow the number of participants:
BC Hydro forecasts its energy savings from net metering will rise from 62 GWh in 2024 to 998 GWh in fiscal year 2041, reaching almost 1,600 GWh by 2048.
By 2041, BC Hydro anticipates the following characteristics for its net metering participants:
- Number of residential participants: 115,000;
- Average installed capacity of residential systems: ~6 kW;
- Number of commercial participants: 5,600; and
- Average installed capacity of commercial systems: ~25 kW.
FortisBC’s net metering program
FortisBC has a similar net metering program to that of BC Hydro, first approved by the BCUC in 2009.
In its current form, FortisBC customers may install clean and renewable generating facilities of up to 50 kW, but not larger than their estimated annual consumption. FortisBC compensates net metering customers for any year-end surplus electricity in their “bank” at FortisBC’s cost of purchasing electricity.
FortisBC had 86 net metering customers by April 2016, with a total installed capacity of 534.5 kW. The program has continued to grow, although new additions have declined since 2018:
As of mid-June 2021, FortisBC had approximately 660 net metering customers, mostly with rooftop solar power, representing approximately 6 MW of generating capacity.