Distributed Energy Resources

Vermont utility regulators update net metering policy

The Vermont Public Utility Commission recently issued its required update of the state’s net metering program.

Based on a review of information presented in its proceeding, the Commission determined that adjustments are needed to ensure that the net-metering program remains financially sustainable, with a balance between the pace of net metering development and the program’s impact on electric rates.

The net-metering program, established in 1999, is only one of several programs available for developing solar and other types of renewable energy in Vermont but financial incentives also make net metering the most expensive of Vermont’s renewable energy programs, the Commission said 

The Commission noted that solar net-metering systems receive up to 18.9 cents per kilowatt-hour (kWh) compared to solar prices of 10-13 cents under the state’s standard-offer program and roughly similar or lower prices for power purchase agreements and utility-built systems. Based on the information presented in this proceeding, net-metering projects continue to be installed at a rapid pace since the current program went into effect on January 1, 2017.

The PUC said the program has been successful in encouraging many projects to be built on “preferred sites,” such as rooftops and previously disturbed terrain, and in customers transferring their renewable energy credits to Vermont utilities to count toward the state’s renewable energy requirements. In calendar year 2017, the Commission received more than 2,500 applications, the second-highest number ever, and approved permits for a total of 42.6 megawatts (MW) of capacity.

These applications tended to be smaller in size and located on preferred sites. However, there also continues to be substantial interest in building larger net-metering systems. The Commission notes that it has received notice of approximately 30 applications for larger systems, to be filed in the next few months, for several MW of new net-metering capacity. The amount of net-metering commissioned in 2016 and 2017, if continued, would exceed the levels necessary to meet Tier II of Vermont’s Renewable Energy Standard, which imposes a requirement for each utility to acquire a certain portion of its power supply from small, in-state renewable energy.

More cost-effective sources of solar and other types of local renewable power are available to meet the RES requirements and the goals of the State’s Clean Energy Plan, which recommends planning “carefully to meet all three tiers of the RES in a least-cost manner” and to “strive to lower both energy bills and electric rates,” the PUC noted.

The Commission also considered the effect of high net-metering prices on electric rates for all residential and business customers in Vermont. In the proceeding, a number of Vermont utilities expressed concern about the effect on rates of continued high net-metering prices. Vermont Electric Cooperative and Washington Electric Cooperative each reported that in 2017, the total number of net-metering applications and their capacity exceeded the totals during the prior three and four years combined in their respective territories.

According to Green Mountain Power Corporation, a single year of net-metered deployment at the current pace and current prices will add roughly $2.3 million per year of upward rate pressure for GMP customers. For these reasons, and based on the information presented in the proceeding, the Commission determined to adjust the incentives paid to future net-metering systems. The changes will be phased in over two years so their effect is not abrupt and the Commission can assess how such changes affect the pace of net metering deployment.

Specifically, there will be a gradual reduction in the incentive payment for customers who transfer their RECs to their utility, by 1 cent per kWh in each of the next two years. In addition, there will be a 1-cent reduction in the price paid to the very largest net-metering systems (over 150 to 500 kW), which have better economies of scale than residential-sized systems.

For most customers, these reductions will be partially offset by a simultaneous increase in the statewide blended residential electric rate, resulting in a net reduction of one-half cent for all residential systems next year and 1.5 cents for the biggest systems.