Few grid policy battles have been fought as bitterly as those pertaining to replacements for net metering, which determines how much rooftop solar customers get paid for the power they export to the grid.
Utilities across the country have pushed to move away from paying full retail rates, arguing that it shifts costs onto other ratepayers. Solar installers typically respond by characterizing utility proposals, which often propose additional costs for rooftop solar customers, as punitive and unreasonable.
Utility Duke Energy tossed out the conventional playbook when proposing a net-metering successor for its South Carolina territory. It was able to get the rooftop solar industry on board as well.
The agreement, made public Wednesday afternoon, shows that Duke's "Solar Choice Net Metering" concept enjoys the official support of advocacy groups Vote Solar and North Carolina Sustainable Energy Association, leading national installer Sunrun and several other environmental groups. It's up to regulators to approve the plan, but rallying a broad coalition of stakeholders is a good place to start.
The policy seeks to update the existing paradigm to compensate rooftop solar production in a way that is sustainable for all ratepayers.
If approved, the plan would keep the current net-metering framework but transition solar customers to time-varying rates, which are higher during hours of peak demand. Solar customers can also earn an upfront energy-efficiency incentive if they install a controllable smart thermostat alongside their solar system.
"Legacy rate design hasn’t been designed for generators on people’s roofs," said Lon Huber, Duke's vice president for rate design and strategic solutions. "Without modernizing that, it can lead to suboptimal outcomes for the adopting customer and everyone."
The new plan aligns pricing with the cost of service, creating "a triple win for customer, company and climate," Huber added.
The changes, plus a $30 bill minimum and a grid access fee for systems larger than 15 kilowatts, ensure that solar adopters will not zero out their payments to the utility. But Duke says those measures, plus the time-based rates, eliminate 92 to 96 percent of the calculated cost shift — so paying for solar net metering won't appreciably raise rates for customers who don't have solar.
"This is just a smarter rate design," said Thad Culley, Vote Solar's senior regional director for the Southeast. "It’s not about taking away money from solar customers; it’s aligning the cost and aligning the price signals."
Time-of-use rates are not new; solar-heavy California has already enacted them, for instance. But the linkage between net metering and flexible demand is novel, and it has the potential to leverage solar homes for more systemwide value than previous policies have attempted.
Customers can just do solar if they decide to. But adding a discounted, utility-controlled smart thermostat creates more savings opportunities. Duke plans to add more controllable devices later.
Households can program the thermostat to adjust to the peak pricing periods. But it will also respond to a limited number of "critical peak pricing" events on days when grid supply is stretched thin. In practice, this could look like homes preheating or -cooling when their solar system is producing in order to save money in evening hours when the prices go up.
"It is more complex — that’s going to take some education," Culley said. "But this is where we want to see the grid go: We want to see more flexibility and customers playing a bigger role in that."
The Solar Choice Net Metering concept reframes home energy consumption as an energy-efficiency measure, a technical shift with big ramifications.
States created energy-efficiency programs to incentivize customers and utilities to save money by reducing consumption of electricity. Solar self-consumption similarly reduces demand for electricity but has not been treated as an energy-efficiency measure. Breaking down the silos separating efficiency and home solar could clarify the benefits of rooftop solar for the utility and the system as a whole.
A good deal all around
Net-metering battles of years past gave the impression that the outcome would either crush the solar value proposition or subsidize it on the bills of all other ratepayers. The South Carolina plan offers a radical alternative to this zero-sum vision: Solar policy can make the utility whole, eliminate a cost-shift from non-solar households and still ensure that solar will be worthwhile for people who want it.
The current retail rate is essentially flat throughout the day, so net metering pays the same for exports at noon as it does in the late afternoon. The new off-peak rate would pay a couple of cents less, but the on-peak rate would pay several cents more; some solar production will fall in that window. That could result in a slight decrease in solar payback, but not by much, Culley said. Conversely, households that lean into the flexibility could come out ahead compared to the simpler current paradigm.
The proposal avoids fixed charges or demand charges, which the solar industry has fought in other states. Instead, it requires that charges for the month need to hit at least $30, based on the calculated cost for the utility to serve solar households. Most ratepayers will already have a bill that high, so Culley noted that only a very small number of customers are likely to require bill increases to meet that level. Similarly, the fee for systems larger than 15 kilowatts would rarely be imposed, as that's an uncommonly large system size, roughly double the national average rooftop solar size.
These measures are meant to right-size solar systems to the needs of the house, rather than encourage overbuilding to cash in on exports. That right-sizing keeps the program costs in check.
The proposal checks the boxes laid out in South Carolina's 2019 Energy Freedom Act, passed with widespread support, Culley said. That law created objective standards to measure things like the cost of service to solar customers, long-run costs of net metering and the economic benefits of a homegrown solar industry.
"It gave everyone a standard language to ask the right questions," Culley said. "It lets you develop a solution that’s the right size cure for whatever the ill is, if there is an ill."
South Carolina launched retail-rate net metering in energy legislation passed in 2014. Utilities starting hitting the program cap in 2018, prompting a scramble to lift the cap to allow the market to grow. When a legislative effort failed, Duke Energy Carolinas asked regulators to approve a temporary extension of the program. That effort succeeded, creating space for stakeholders to figure out what the long-term future of residential solar in the state should look like.
Duke Energy committed last year to eliminate half of its carbon emissions by 2030 and achieve net-zero emissions by 2050. The company identified winter peaks, driven by electric heating load, as a challenge for decarbonizing the grid. Using customer devices to reduce critical peak demand "is definitely going to help" with the winter peak challenge, Huber said.