What does a Railbelt customer get from installing solar on their house?
And how would that change if net metering were calculated annually?
Short answer: a yearly electric bill savings of around $150-$230 per kilowatt installed, and annual net metering would push more of those systems to the high end (for larger systems, for most utilities). Long answer: the rest of this post.
Currently, around 2,200 people on the Railbelt grid have solar panels on their houses. The total capacity (power generation potential) of these systems on Railbelt homes and businesses has quadrupled in the last five years, while remaining much lower than in the US as a whole. Across the US, 2.4% of residential customers have net metered solar systems (calculated from 2023 EIA net metering data), compared to just under 1% on the Railbelt.
These home solar systems work through monthly "net metering." Some electricity produced by the panels is immediately consumed by the house. When the house is producing more than it consumes, that electricity is fed back into the grid. When the house is producing less than it consumes, it gets energy from the grid. At the end of the month, those kilowatt hours in both directions are added up, and the customer is billed for the "net" amount they consumed. Some proposed bills in the legislature (including the RPS, a potential change to the community solar bill, and possibly others) have talked about changing that to annual net metering -- basically the same thing, but adding up once a year at the end of March. So I was curious to see what that might do.
The Railbelt has high electricity prices, and similar solar install costs to other states, which should make net metering a pretty good deal. But we also have less sun than a lot of places, and a lot less electricity use when it's sunny (not a lot of air conditioning, which dominates electricity use in warmer places). So most people with solar panels overproduce in the summer, and that overproduction gets credited at the lower “buy-back” rate (technically the Small Facility Purchased Power Rate) of 5.5 to 15 cents/KWh, rather than the higher retail rate of 18 to 25 cents/KWh. Additionally, HEA customers get charged for a minimum of 150KWh each month, regardless of use, as a "system delivery charge."
So I took the average monthly use for a residential customer at each utility, the average monthly solar production for a representative city in that utility's area, current electric rates, and did a little math to figure out what a solar system would do to that average home's bills -- now, and if net metering became annual.
Solar, right now, is the best deal for GVEA customers. They have high power consumption (just behind MEA), the highest power costs, and the highest buy-back rate. It’s worst for HEA customers, who have high rates, but the lowest consumption, and a “system delivery charge” that kicks in when monthly consumption drops below 150KWh. Interestingly, HEA customers are actually the most likely to have solar panels. Maybe other factors (permitting? environmental motivations?) are hindering or driving adoption in different areas. The smallest solar systems give the greatest savings per KW for a typical customer, but the average system size is significantly larger. It’s possible that people with solar use significantly more power than average, that the investment is still attractive at larger sizes and people put in the largest system they can afford, or that sizing is driven by other factors (like reaching net zero for a household).
Making net metering annual would reduce yearly bills almost $300 in the best case, and not much at all in others. The biggest change would be in Chugach territory, where current buy-back prices are lowest (because of the gas field Chugach owns). It would have the least impact on the HEA grid, where the system delivery charge would cancel out most of the gains.
Annual net metering would improve economics the most for customers installing solar systems with annual output matching annual consumption, which is around 6-7KW for an average user.
Would it make a difference? Anecdotally, people seem to care a lot about the payback economics of their solar panels (HEA got a lot of complaints when the system delivery charge hit net metering customers in 2020), but I’m not sure how much people are gaming out the system in detail, vs. installing what they can afford to hedge their bets against rising utility prices. Electricity prices are already set to rise based on inflation and interest rates, and are likely to rise substantially more with the impacts of the Cook Inlet gas crisis.
Data geeks can check out the data and assumptions
behind this on my Google sheet.