Here’s a further update to my recent article on the future of rooftop solar and net metering in BC. My thanks to a reader who shared the source information from a recent BC Hydro net metering consultation session. It’s good news for net metering fans.
As recently as February 2020, BC Hydro was arguing that net metering customers’ generation should be constrained. Now, with a looming shortage of electricity, the utility is trying to encourage more customers to generate their own electricity.
The other good news is that BC Hydro still plans to submit its proposals to the BCUC by the end of June, 2024 – June 28, to be precise.
Updated progress
According to the new material, as of February 2024, BC Hydro had approximately 8,800 net metering customers, whose total connected capacity was approximately 79.6 MW. BC Hydro provided the following graph (I’m not sure the axis labelling is quite correct, but you get the general idea):
The average residential project size is now 7.0 kW, and the estimated installation cost $20,000.
New proposals
BC Hydro is looking at several “potential options” that might be part of a proposal to the BCUC in June. These could be in addition to, or instead of, today’s net metering scheme; this remains to be seen.
Adding to the complexity, BC Hydro is also anticipating filing a rate design application at the same time, which might change the way residential rates are structured in BC. More on this in a future article (again, thanks to a reader who has shared BC Hydro consultation materials on the subject).
The BCUC also recently approved a residential time-of-use rate, which may further complicate matters.
Regardless, BC Hydro has some interesting proposals that may enable it to expand further the electricity it receives from customers’ self-generation.
Bigger is better
BC Hydro’s net metering scheme currently limits a customer’s generation facility to 100 kW. Since the average residential installation is now around 7 kW, this limit doesn’t seem unreasonable. But larger scale installations are more efficient, and there are opportunities for self-generation by multi-home dwellings and commercial buildings that could exceed 100 kW.
So, BC Hydro is considering allowing much larger installations: up to 1 MW, ten times the current limit. This comes with a catch, though. Installations above 100 kW would require a BC Hydro system study to ensure that the additional energy can be safely accommodated and used within the system. System studies of this size cost $7,500 to $60,000 and take 1 to 6 months, but might still make sense for a commercial operation looking to offset its electricity usage.
There might be another option though. BC Hydro is also considering a new “net injection” limit of 100 kW. A net injection limit would allow customers to build and connect generators larger than 100 kW, so long as they limit the amount of electricity they give to BC Hydro to 100 kW. This could allow a more efficient size of generation facility while avoiding the need for a system study.
Repricing self-generation
BC Hydro’s current scheme benefits net metering customers in two ways: they can offset consumption with “banked” electricity for which they would otherwise have paid the retail rate, and they can receive a year-end payment for any annual surplus valued at the wholesale market rate BC Hydro would pay for electricity.
However, net metering customers are generally subsidized by other customers, and this is true in BC. The subsidy arises because net metering customers avoid paying for the utility’s fixed costs that are recovered in the variable, per kWh, rate, when the customer offsets their usage from electricity that they have “banked” with the utility.
BC Hydro’s idea to reduce the subsidy is to compensate net metering customers for all their generation, including any annual surplus, at a fixed rate based on the utility’s marginal cost of producing more electricity.
BC Hydro estimates this fixed rate could be between 9.17 and 11.00 cents / kWh, less than today’s highest marginal residential rate (14.08 cents / kWh) but around what BC Hydro currently pays for any annual excess generation (10.3 cents / kWh in 2023).
It’s not clear whether this pricing proposal would entirely remove the subsidy received by net metering customers. But basing the amount paid for all self-generated electricity on BC Hydro’s marginal cost to add new generation has a strong regulatory logic to it.
Further incentives
There is a possibility that BC Hydro would pay a premium, of 8.8 to 11.61 cents / kWh, for any electricity generated at times of peak demand. BC Hydro estimates this occurs each day from 4 and 9 pm between November to February. Not many solar facilities will be generating at these times, but other forms of generation could be, especially larger facilities built to serve commercial or industrial customers’ own generation.
Finally, BC Hydro is considering offering installation incentives of $5,000 to customers who enroll in the new pricing scheme, but not to customers in the existing scheme.
Virtual net metering
BC Hydro is also considering whether to offer virtual net metering, whereby self-generated electricity could be shared by more than one customer account. This is a feature that was explored in the 2020 net metering decision, and the BCUC encouraged BC Hydro to consider how it could be achieved.
The idea presently under consideration is for groups such as multiple tenants in the same building to become members in a sharing scheme. The group would manage its own membership, and BC Hydro would administer the distribution of payments for the self-generated electricity. Facilities could be up to 1 MW in size, and all group members would have to be connected to the same substation.
Conclusion
In 2020, BC Hydro attempted to constrain the amount of generation from its net metering customers. The BCUC rejected the request on the ground that customer self-generation might be needed in future (disclosure: I was on the panel that made that decision).
This rejection illustrates how a strong BCUC, willing to stand up to the state-owned utility, can prevent BC Hydro making a short-term decision that might not be in its best interests or those of its customers.
The impending shortage of electricity is clearly focusing minds at BC Hydro. While BC is unlikely to catch up with sunny California in rooftop solar generation, net metering might yet play a bigger role in our energy mix.