New Jersey Proposes Net Metering Changes

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In January of this year, the New Jersey Board of Public Utilities (BPU) proposed amendments to the state's net metering rules to remove the two megawatts (MW) cap on eligible generators.  All systems that generate electricity using solar, wind, geothermal, wave, tidal, landfill gas or sustainable biomass resources, including fuel cells and all "Class I" technologies as classified under the state Renewable Portfolio Standards (RPS), would be affected by these proposed amendments.  Additionally, these changes would affect all residential, commercial and industrial customers of the state's investor-owned utilities and certain competitive municipal utilities and electric cooperatives utilizing the advantages of net metering. 

To understand the changes, one must understand net metering first.  The overall principle of net metering is that customers can use the grid as an electric storage mechanism.  When a renewable energy system is producing more power than a customer can use, the excess power passes through the electrical meter and the meter will actually spin backwards as the power is sent back and recorded by the electric utility grid.  During a sunny day, customers utilizing solar energy systems will most likely send excess electricity to the grid.  Conversely, when the customer needs more power than the system is producing, at night for example, the grid feeds the customer. Net metering keeps track of this back and forth flow, so that the customer pays only for the net amount of grid energy used.

New Jersey BPU's proposed change to its rules regarding net metering for Class 1 Renewable Energy Systems is to remove a limit on the size of a renewable energy generating unit that is eligible for net metering.  Currently the net metering rules require each electric power supplier, basic generation service provider, and electric distribution company to offer net metering to customers who install up to two MW Class 1 renewable energy generating systems on the customer's side of the electric meter.

The purpose of this proposal, according to the BPU, is to allow the further development of renewable energy in a manner that achieves the goals of the New Jersey Energy Master Plan at the lowest cost for ratepayers.  Larger renewable energy generating units, above two MW, will generate renewable energy at a lowers cost per kilowatt hour (kwh), thus driving down the cost of renewable energy and also the cost of compliance with the New Jersey RPS rules.

The Board recognizes that net metering does shift the cost of maintaining the electric distribution system to those customers that do not have renewable energy generating systems and do not net meter. The Board will address this issue in a separate proceeding, or as part of rate cases filed by the individual electric distribution companies.

The proposed amendment will have a positive social impact by broadening the availability of net metering to more customer-generators and thereby increasing the generation of clean, distributed renewable energy; however, it is anticipated to have a minimal impact on jobs in New Jersey.  While proposed change will likely increase the number of jobs in industries that support net metering, such as renewable energy system installers and engineers, the Board does not expect the potential impact to be significant.

Overall, the passing this proposed amendment would be good news for anyone considering solar and for the state of New Jersey.  Net metering makes the installation of solar energy more attractive and affordable for homeowners.  Photovoltaic installations, for example, can pay for themselves in five to ten years in many places based on the returns from net metering. This is one of the reasons grid-connected solar systems, those systems that use an inverter to connect to the utility grid instead of relying on batteries, now make up the largest part of the solar market.

Currently in New Jersey, there is no firm aggregate limit on net metering, although the BPU is permitted to allow utilities to cease offering net metering if statewide enrolled capacity exceeds 2.5% of peak electric demand.  However, a limiting factor for homeowners to enter a net metering contract with their utility company isn't the potential cap, but the outlay of the initial funds to purchase the system and pay for its installation. 

There is, however there are complimentary programs to offset the costs of the purchase and installation in the long run.  One, for example, exempts renewable energy systems used to meet on-site electricity, heating, cooling or general energy needs from local property taxes.   In order to claim the exemption, property owners must apply for a certificate from their local assessor which will reduce the assessed value of their property to what it would be without the renewable energy system and exemptions will take effect for the year after a certification is granted.  But the bottom line is this -- without strong credit to finance a new system or the out-of-pocket cash required to purchase and install a renewable energy system, most homeowners will still struggle to go green and take advantage of programs of this type.  Unfortunately, it's the Catch-22 of sustainability, not just for New Jersey, but the world.

Source SolarKnowledge by Maureen McHale