Competitive Market Will Take Care of Next Burning Issue
Dr. Cicchetti is a Managing Director at Berkeley Research Group. He was Chair of the Public Service Commission of Wisconsin. He taught energy and environmental economics at the University of Wisconsin, Harvard's John F. Kennedy School of Government, and the University of Southern California. His most recent book is "Going Green and Getting Regulation Right."
I do not understand why we are still distracted by Net Energy Metering (NEM). It worked well when we had not-so-smart meters and were trying to encourage rooftop solar penetration. The idea was simple. It focused on the customers who spent the money and signed the leases to install solar on their homes and small businesses.
The first approaches were based on the proposition that when self-generation exceeded real-time use, the electricity meter literally spun backwards. As meters became smarter, the customers could read both cumulative electricity use and excess solar generation.
To some, a legislative or regulatory solution was needed. The question was how to value the excess kilowatt-hours generated but not immediately used by rooftop solar customers.
NEM mostly allowed rooftop solar customers to credit these excess kilowatt-hours against the kilowatt-hours that the utility continued to supply to them. These customers had no incentives to shift the time of appliance use, or to spend money to store the excess kilowatt-hours on their premises for future use.
In effect, the utility banked or stored the excess kilowatt-hours for virtually nothing. This allowed the rooftop solar customers to recall and use the banked kilowatt-hours to offset the cost of electricity they had purchased when their rooftop solar installations were not producing enough to satisfy customers' needs.