Joe wants to save money. He has been approached by a salesman to buy a solar panel or a wind turbine. The salesman assures Joe he will “save money on his electric bill” and “make money selling extra electricity to the cooperative or public power district.” Should Joe invest?
The answer depends on how dedicated Joe is to the idea of renewable energy. There are several factors including: costs, energy prices, and how long it would take to pay-back Joe’s investment. Before Joe invests, he should talk to his electricity provider about his options.
Nebraska law provides a mechanism to allow customers to generate their own electricity and sell excess generation back to the utility. It is called net metering. Unfortunately, net metering is much more complicated than just buying and selling electricity.
Imagine an electric meter that rolls forward when Joe is buying electricity from the utility and then reverses when Joe’s wind turbine produces more than he uses. So, if Joe uses 1,000-kilowatt hours (kW) of electricity and generates 1,000 kWh’s of electricity in a month, his net energy use at the end of the month would be zero. The energy charge on Joe’s bill would be zero for that month.
For Joe’s electric utility this exchange is far more complicated. In reality, Joe’s renewable generation unit will not generate at a constant rate throughout the month. It is not likely to generate electricity to match actual electric usage needs, but rather, it will be generating when the sun is shining or the wind is blowing. Without a battery for storage, electricity needs to be used simultaneously from its moment of generation. The wind tends to blow more over the evening hours, and the sun shines during the daytime hours only, yet we all require some electricity around the clock. Conversely, it may be very windy at 3:00 a.m. and the generator may be producing maximum electricity, but most people probably do not have a high energy demand at this time.
As Joe produces electricity, the meter theoretically runs in reverse. While this is occurring, the utility is compensating Joe at the retail value of that electricity when the utility could buy those kilowatts at wholesale rates. If Joe generates more than he uses in any given month, the utility will then compensate him at a wholesale rate for that excess energy.
This leads to a discussion of the subsidization of net metering customers by customers that do not net meter. At the end of the month, a net metering customer may not have an energy bill to pay, but they did use the utility infrastructure to both receive and deliver electricity. They generated electricity, and that electricity flowed over electric lines and power poles, the utility provided a continuous supply of electricity to the home when Joe was not able to generate electricity, and utility staff accounted for this transaction and kept the lights on throughout the month. This all has a cost, and if the utility is not fully capturing these costs in their fixed customer charges on the utility bill, then a net metering customer may be avoiding their “fair share” of those fixed costs. Since your public power utility is not-for-profit, those costs have to be recovered through the rates paid by every other customer.
Nebraska’s law requires electric utilities to offer net metering to their customers. Enjoying the benefits of producing your own electricity while simultaneously calling on your electric utility to be prepared to immediately fill in the gaps, however has costs. As more customers look to generate their own electricity, the impact of the subsidization of net metering customers by those who do not participate will grow. Customers will be buying less kilowatt hours but still require reliable electricity around the clock. As this occurs, utilities may need to take a close look at their rates and will have to adjust the fixed charges within their billing methods to ensure everyone pays their fair share and that customers who cannot afford, or chose not to install their own personal generation, are not footing the bill of net metered customers.
We encourage all those thinking about a renewable energy system to work with their local electric provider to make sure that the system they choose meets their expectations.