Net metering bills will increase ratepayer costs
Net metering is a very confusing issue that is difficult to explain in a few hundred words, but let’s be clear on one thing. There is a cost-shift from non-participants to participants, and it isn’t good for all ratepayers.
In the March 29-April 11 issue of NH Business Review, a quartet of business leaders expressed their support for House Bill 365 and Senate Bill 159 — bills that would compensate politically preferred generators (essentially solar and small-scale hydro) at roughly 2 1/2 times what other generators get paid in the competitive electricity marketplace.
The supporters of the bills are correct in their claims that they will help their bottom line, but it will happen at the expense of all other New Hampshire families and businesses. While it is certainly a good thing for consumers to feel empowered to self-generate and conserve electricity to reduce their costs, they shouldn’t do so at the expense of others and further contribute to the corruption of energy markets.
This net metering mandate drives up the cost of electricity to all other consumers by raising the costs of bids received by electricity suppliers to procure default and competitive supply rates. Why? Because energy marketers have to build the risk of the commitments the utilities have in intermittent resources that are only capable of generating power 15 to 35 percent of the time.
A 2017 study by Meridien Energy Policy in Washington D.C. concluded that if net metering penetration levels reach 10 percent of load, the cost of retail electricity supply to non-participants will increase anywhere from 8 to 17 percent.
How does this translate to New Hampshire? That is $20 million to $60 million of increased costs to all ratepayers every year.
Much has been written the past few years about the intersection of state energy policies and New England’s wholesale energy markets — specifically the damage done to the region’s electricity markets by state actions.
The more mandates and out-of-market compensation implemented via legislators, the less competitive our markets which lead to premature retirements of otherwise economic plants — or further subsidies, like those recently used to keep the Mystic natural gas plant open, or the purchase mandate imposed by Connecticut to keep the Millstone nuclear plant running.
What is worse is that solar panels don’t solve the biggest threat to our grid, while pushing out more reliable generators that can. Solar panels are most effective in spring and summer, but New England’s grid is most stressed and electricity costs are highest in the early evenings in winter when natural gas prices spike.
Advocates of these bills also assert that expanding net metering rates up to 5 megawatts will assist businesses and municipalities in lowering their electricity costs. That may be true, but it will come at the expense of everyone else. Most of the excess generation will be “sold” on weekends, particularly summer weekends when demand is low and prices hover at roughly $20 per megawatt-hour — far less than the $80 to $100 per megawatt-hour paid to beneficiaries of these bills. This won’t help anyone except the generators line their pockets by selling overpriced power.
Finally, another canard expressed by the business leaders is that the bill is needed to allow larger facilities to receive compensation. This argument is disingenuous as generators of this size can already receive real-time energy market compensation and they testified to that fact.
HB 365 and SB 159 provides them with above-market compensation for their generation. There is no arbitrary restriction on larger systems selling power. They currently receive the fair wholesale energy market price paid to the other New England’s generators.
The direct recipients of these programs will get millions more at the expense of everyone else without providing any substantial benefits to the grid. We are often reminded that “renewable energy” shouldn’t be a partisan issue, and that is true, but opposition to rent-seeking shouldn’t be partisan either.
Consumers need to ask themselves one question — has intervention in electricity markets by elected officials and regulators over the past decade lowered the cost of electricity and improved reliability? If the answer is no, then we shouldn’t trust them on SB 159 and HB 365 either.
Marc Brown is executive director of the New England Ratepayers Association.