Policy Corner - Net Metering

by Dan Burgess, Boston GreenScene's Policy Corner Commentator

Over the past week, the world has turned its attention to climate negotiations in Denmark. This greatly anticipated global meeting seeks to find a collective agreement among over 200 nations regarding climate change policies and emissions reduction goals.  This event is almost certainly the most important gathering to be focused on the environment in the history of the planet. If somehow you aren’t convinced the entire world is focused on Copenhagen, read last Monday’s editorial that was printed in 56 newspapers in 45 countries (or turn on your TV, listen to the radio, or open an Internet browser)

Unfortunately for me, life does not take a break to follow the events and I am unable to write about Boston GreenScene’s high hopes for success in Copenhagen. I am however, fortunate enough to be researching Massachusetts clean energy policy and in light of this research, this week’s Policy Corner will focus on an integral policy in Massachusetts clean energy strategy: net metering.

Net metering is one of the most common forms of clean energy incentives policies in the United States. Generally stated, net metering is a state policy that allows energy customers to use and get credit for unused electricity that is created by a renewable energy system. According to the National Renewable Energy Laboratory (NREL), “42 states, four territories, and the District of Columbia have net metering policies.”

The below map shows a snapshot of states with net metering policies as of July 2009.

Net metering was originally introduced by the Department of Public Utilities in 1982 for small clean energy systems in Massachusetts. As a part of the Green Communities Act, net metering was greatly expanded and is now a major component of Massachusetts’ strategy for clean energy production.  The Green Communities Act placed net metering facilities into three separate classes. These classes provide a strong framework for private renewable energy system classification. Additionally, they represent a significant expansion on previous net metering systemization from 60 kilowatts up to 2 megawatts. These parameters were also expanded to specifically include agricultural energy facilities, such as biomass facilities and anaerobic digesters.  This permits Massachusetts farmers the opportunity to create, use, and credit their unused produced energy.  In combination with other state and federal incentives, law makers expect that net metering will greatly increase private renewable energy generation in Massachusetts.

Overall, net metering policy has been successful in the United States. According to the National Renewable Energy Laboratory (NREL), “states that had implemented net-metering legislation in 2005 had significantly more renewable energy generation in 2007 (in terms of total generation, as a percent of total electricity generation, and per capital) than states without the policy.”

Unfortunately, there are also numerous drawbacks of net metering for Massachusetts. The first being that net metering is often not enough of a stimulus for private investors to seriously invest in clean energy production. As the policy is credit-based, the investment return time is likely to be significant. This gap in return on investment ensures that those who insert capital to install a renewable energy system will need a large sum up front.  This limits the amount of projects that could be developed, ensures that potential producers are not likely to invest heavily, and limits who can invest.

While net metering provides Massachusetts residents with a decent incentive to invest in renewable energy generation systems, there are other policy initiatives that Massachusetts should authorize. In the upcoming weeks, I’ll discuss other Massachusetts initiatives that are currently in place as well as other policies the Commonwealth should considering enacting.

Comments

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Thanks, Luc. It's great to know there are kindred spirits out there. Keep fighting the good fight!