Bar News - September 16, 2015
Environmental, Telecomm, Utilities & Energy Law: Solar Net Metering in New Hampshire and Vermont
By: Elijah Emerson
Should NH Take Some Cues from Its Neighbor to the West?
The latest expansion of private and commercial solar power in New Hampshire is partially a result of the recently updated net metering law, along with falling costs of solar panels and associated equipment. But compared to its neighbors, New Hampshire still lags behind in the expansion of small-scale, distributed, renewable energy generation.
This article uses a high level comparison of the New Hampshire and Vermont net metering systems to highlight the areas where New Hampshire’s laws and rules could be revised to further accelerate the growth of this industry and these critical energy projects.
New Hampshire’s net metering law, originally passed in 1998, is found at RSA 362-A:9. The Public Utilities Commission has created rules (PUC 900 et seq.) implementing the program. Net metering allows a person or organization to build a renewable energy generation facility that produces up to one megawatt that is used to offset their own energy consumption.
The law was updated in 2013 to allow customers with net metering facilities that create excess production to partner with other customers, often ones that cannot build their own renewable energy facilities, to share that excess production. This is called “group” net metering. All customers in a group must be default service customers of their local utility – meaning they cannot purchase power from competitive suppliers.
Total Net Metering Cap
New Hampshire has set its total cap for all net metering projects at 50 megawatts, which is just over 2 percent of its total load. Utilities have seen an uptick in net metering applications in the past year, indicating that interest in the program has grown. As the interest picks up, two of New Hampshire’s utilities have reached their cap, with one not far behind. This is not because there are a lot of projects built or being planned; it is because the cap is so low.
In contrast, Vermont has set its net metering cap at 15 percent of its load. Since increasing the cap just about a year ago, Vermont has seen an explosion of solar projects. New Hampshire would likely see a similar spike in solar expansion if it were to raise the cap. At this point, the low cap effectively blocks the satisfaction of the growing demand for solar net metering projects.
One way group net metering is effectuated is by valuing the excess energy produced by the net metering facilities to offset group members’ electric charges. Generally, electric energy is measured in kilowatt-hours (kwh), and the price of such energy is expressed in dollars per kilowatt hour ($/kwh).
Vermont has chosen to assign a higher value than New Hampshire has to this excess generation, as a way of incenting customers to invest in distributed generation. Vermont’s largest utility currently values excess generation at about $0.19/kwh. New Hampshire’s largest utility values excess generation at roughly 4 cents less for smaller projects (100 kilowatts or less) and 10 cents less for larger projects. These values are set by statute with a beginning reference point being the utilities’ rate tariffs. The larger projects are where economies of scale are often achieved, delivering greater benefits to residents and businesses.
The question then is whether Vermont’s higher valuation for net metering is worth it. Some may argue that non-net metering customers are subsidizing the costs of net metering and are not receiving a return benefit. This ignores the fact that distributed solar generation provides many collective statewide benefits.
Utilities are charged costs by the regional electric grid operator (ISO-NE) based on their “footprint,” which is determined on the days of highest usage in New England (typically the hottest, sunniest days). Solar just happens to be at its greatest output when it is hot and sunny. The smaller the utility footprint, the lower the costs, and the smaller the quantities of energy products needed to meet their needs. This reduces costs for everyone – net metering and non-net metering customers both.
A recent study by a Vermont utility determined that the actual value of distributed solar generation was in the $0.18 - $0.19/kwh range. On the other hand, as New Hampshire sees its New England neighbors’ footprint shrink as they expand solar production, it will be left with a relatively larger footprint and all the consequences that accompany it. The larger its footprint becomes, the more expensive the electricity for the ratepayers of New Hampshire becomes, and the greater its proportional impacts on New England’s natural resources.
One last feature that distinguishes the net metering programs in the two states is how the excess generation is credited to group members. In the New Hampshire system, the utility hands a check over to the facility owner and then steps back to allow the group members to determine how to allocate the money (which presumably offsets the charges the members paid to the utility). Under the Vermont system, the group informs the utility how it wants the excess generation (kwh) allocated among the group, and then it is the utility’s responsibility to allocate it on the members’ bills accordingly, reducing those members’ bills. Although the New Hampshire system may work for some, it does not reflect a true net metering system, where group members are sharing the production of a common facility. Vermont’s on-bill allocation of the excess generation is arguably a simpler way to deliver the benefits of net metering.
New Hampshire is at a critical juncture in the development of its home-grown solar industry. Recent trends indicate that there is a strong interest in expanded growth, but the current state of the net metering system is a barrier to that growth. With some basic fixes – increasing the cap, valuing excess production based on its true value and allowing on-bill allocation – New Hampshire will spur growth in the solar industry, keep pace with its neighbors and moderate increasing regional costs associated with purchasing electric energy.
Eli Emerson is a partner at Primmer Piper Eggleston & Cramer, practicing out of the firm’s Littleton and Manchester offices. He concentrates in the areas of energy law, environmental and land use law. He has extensive experience in assisting clients in the development of energy infrastructure projects, including renewable and net metered generation facilities.