Regulatory innovation required before DERs can succeed
An astonishing array of innovative energy technologies — distributed generation, energy storage, microgrids, rooftop solar, and smart grids — is changing America’s electricity future.
These technologies, collectively known as distributed energy resources, could deliver significant environmental and reliability benefits to the electric grid while diversifying sources of generation. Given the promise of DERs, state regulators and Members of Congress have cheered this ongoing energy revolution.
Success, however, depends on the grid’s ability to accommodate these technologies without endangering affordable electricity for all or threatening system reliability. We must decide who pays for integrating these technologies into the grid.
Remember, DERs increase — not decrease — grid costs. More investment, not less, will be needed. Billions of dollars must be spent on the remote monitoring and control systems, meters, power inverters, and sensors needed to accommodate two-way power flows on distribution lines before extensive amounts of DER can be accommodated. Existing power plants must be retained and new plants built as standby for intermittent supplies of wind and solar energy.
Unfortunately, hidden regulatory subsidies have bankrolled the development of distributed energy resources. Net metering, for example, subsidizes rooftop solar by requiring a local utility to pay more for the excess electricity generated by the customer’s solar panels than the utility would pay in the marketplace.
Forty-three states and the District of Columbia have established net metering requirements. Unfortunately, the 600,000 solar American households with net metering contribute little to the grid’s fixed costs. Nevertheless, they plug into the grid if the sun doesn’t shine or the wind stops blowing and sell their excess electricity to the local utility.
Net metering is a double whammy for the majority of ratepayers. First, it provides an ability for often wealthy homeowners to install solar panels and thereby avoid paying their fair share of the costs of maintaining the electric grid. But as more of these privileged homeowners go solar the more utility rates increase for everyone else — the middle class and the poor — many of whom rent their residences and can’t install solar on their rooftops. Second, utilities must invest more in the grid to accommodate distributed resources. These costs also have to be picked up by non-privileged customers unable or uninterested in rooftop solar. It’s Robin Hood in reverse.
