ORIGINAL REPORTING: WHAT THE E3 STUDY OF NEVADA NET ENERGY METERING REALLY SAYS

What the E3 study of Nevada net energy metering really says

Herman K. Trabish: July 16, 2014 (Utility Dive)

Through 2013, solar incentives in Nevada have shifted the cost of rooftop solar to non-solar owners’ electricity bills. But starting in 2014, all ratepayers could benefit from solar, saving them money into the 2020s.

Or a new Nevada law could alter that whole value proposition, according to Nevada's biggest utility.

By the end of 2013, Nevada’s renewables incentives supported some 50 megawatts of distributed photovoltaic (PV) solar. That is expected to grow to over 234 megawatts by 2016. Through Nevada’s net energy metering (NEM) program, that solar earns a per-kilowatt-hour return for the electricity it sends to the grid. The cost is spread across all ratepayers.

Two important changes in Nevada’s supports for rooftop solar and other distributed renewables will play key roles in the costs and benefits of that generation going forward, according to Nevada Net Energy Metering Impacts Evaluation, prepared for the Nevada Public Utilities Commission by Energy + Environmental Economics (E3).

Beginning in 2014, the utility’s Renewable Generations rebate program will allow new rooftop solar owners of systems of less than 25 kilowatts to choose the current, lottery-awarded upfront incentives (UFIs) or more readily available but lower performance-based incentives (PBIs) that will be progressively stepped down with increasing installed capacity.

For systems installed after 2015, the multipliers allowed to NV Energy (NVE), the state’s dominant electricity supplier, for using solar to meet a mandate of 25% renewables by 2025 will be retired (though systems installed before that retain the multipliers).

E3 was asked to determine how NEM solar currently impacts solar owners, non-solar-owning ratepayers, NVE and the state, and to look ahead at possible effects of the two changes.

The first change will make rooftop solar and other distributed generation less of a bargain for system owners, though they will continue to earn returns through NEM. By the end of 2016, E3 finds, solar owners will pay about "$0.02 per kilowatt-hour more for energy they self-generate than if they would have purchased from the utility."

That conclusion depends on how the capital cost of rooftop solar evolves, noted E3 Sr. Associate and study co-author Jenya Kahn-Lang.

However, the reduced rebates will significantly reduce the shift of costs for solar away from NVE and non-solar owners, Kahn-Lang said.

The multiplied credits NVE earns from distributed generation built through 2015 can be banked toward its renewables mandate, explained Kahn-Lang. Along with the renewables capacity it has already bought, the utility will need relatively little new investment in renewables through at least 2023. Postponing the expense of procuring new generation, including utility-scale renewables, she said, should lower electricity bills.

And the multiplier "reduces the total installed renewable generation by 2025," the study finds. With it, "one kilowatt-hour of NEM generation prior to 2016 will displace about 2.7 kilowatt-hours of future utility-sited renewable generation." That reduces the amount of renewables the utility has to buy to meet its mandate, further reducing procurement costs and, therefore, overall cost impacts.

These kinds of cost-benefit causes and effects reflect the complexity of the analysis, Kahn-Lang said.

Among the many key inputs E3 used were energy and capacity costs, fuel use, utility emissions and forecasted renewables mandate requirement shortages.

Another indicator of the study’s density are its analyses of how conclusions might shift with changes to distribution avoided costs, retail rate design, retail rate escalation, demand charge reduction or the utility-scale PV power purchase agreement price.

"Overall, we do not estimate a substantial cost shift to non-participants due to NEM going forward given the current and proposed reforms to the program," E3 reports. "We estimate a total [net present value] benefit of 2004-2016 NEM systems to non-participating ratepayers of $36 million during the systems’ lifetimes."

Whether NEM systems are a net cost or net benefit to non-participants is sensitive to some key input assumptions, E3 adds, but "overall, the planned reforms significantly reduce costs to non-participants while reducing the financial proposition to those that would install self-generation."

What the E3 study does not consider, according to an exclusive statement from NVE to Utility Dive, are "key factors that we believe need to be included to properly assess the costs and benefits of distributed generation."

"I believe they are referring to the impacts of Senate Bill 123," Kahn-Lang said. SB 123 "potentially changes a number of assumptions," E3 notes. The law requires NVE South to:

"Retire or eliminate" at least 800 megawatts of coal-fired electric generation by December 31, 2019;

“Construct, acquire, or contract for" 350 megawatts of renewables capacity through solicitations issued between December 2014 and December 2017; and

"Construct or acquire 550 megawatts of company-owned electric generating capacity" that can be renewable or conventional capacity.

Because no official data had been submitted to the commission on the potential impacts of SB 123 when E3 did its study, the law was not considered.

According to Kahn-Lang, the bill "could impact the value of NEM in both directions."

"The renewable capacity additions would reduce the [renewables mandate] value, but the coal retirements might increase avoided energy and capacity costs," Kahn-Lang said. "We need to know NV Energy’s SB 123 replacement capacity procurement plan to understand these impacts."

Without data, an analysis of SB 123 impacts would be speculation, Kahn-Lang said: "If the net impact on the utility avoided costs of NEM is positive, then non-participating ratepayers will benefit from SB 123. If the impact is negative, there will be a cost shift to non-participants."

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