Louisiana: Net Metering Cost/Benefit Study Authorized
Aug. 21, 2014 by Alexandra Aznar
This is the first blog in a four-part series of articles in which we discuss either the valuation of solar to the grid and various stakeholders or value-of-solar (VOS) tariffs and policies.
A VOS policy or tariff is an alternative policy option for addressing some of the potential challenges of net energy metering (NEM). It is important to acknowledge the difference between the broadly utilized terminology "valuation of solar" and a VOS tariff. A valuation of solar method strives to determine the market value of distributed generation projects. Numerous studies across the United States have sought to quantify the value of solar to the grid. A VOS tariff is the actual policy enacted wherein a rate is calculated and then utilized in crediting solar customers for their generation.
Following the creation of VOS tariffs in Austin (2006) and Minnesota (2014), policymakers across the United States began investigating how best to quantify the benefits and costs of solar. Since the 2005 enactment of a state net-metering policy in Louisiana, policymakers there have been analyzing the law's effects and discussing modifications.
Louisiana's 50% tax credit (up to $12,500) on residential solar net-metered systems and 30% federal tax credit have spurred the growth of net-metering customers throughout the state. Net-metered residential photovoltaic (PV) systems numbered close to zero in 2003, but increased to nearly 1,400 by 2013 (LPSC Staff Report, 2013).
Currently, residential customers with qualifying renewable energy resources, such as solar PV panels and geothermal units, that are producing less than 25 kilowatts (kW) and commercial customers whose systems produce less than 300 kW can receive a retail-rate bill credit from their utility for extra electricity produced but not consumed until net-metering purchases reach 0.5% of a utility's "retail peak load" (DSIRE, 2014). Projects larger than 300 kW are accepted by the utility on a case-by-case basis. Louisiana's NEM law also states that once a utility hits its 0.5% NEM cap, "...it is no longer required to accept net metering applications" (Louisiana Public Service Commission, 2013, 17). According to solar advocates, several utilities have claimed that they have met their NEM cap and have chosen to halt further NEM applications (Phelps, 2014). In jurisdictions where this is true, further customer-sited renewables will not be possible without modifications to existing laws.
Louisiana's current 0.5% NEM cap came out of a 2011 PSC ruling that also expanded commercial net metering limits from 100 kW to 300 kW in response to concerns from the solar industry that the original size limitation was too small (Verzwyveit, 2014). The ruling requires the PSC to revisit the 0.5% cap once a utility in its jurisdiction reaches the cap, and also allows utilities to suspend additional customer NEM applications in the interim (LPSC Staff Report, 2013).
Three electric coops in rural Louisiana (Panola-Harrison, Northeast, and Washington-St. Tammany) have stopped accepting net-metering applications from consumers because they have already reached their 0.5% caps (Alliance for Affordable Energy, 2014). Each utility, however, calculates this 0.5% cap differently because the LPSC does not have a standard cap calculation (Phelps, 2014). For example, utilities can currently choose the month in which they measure average peak load which is used to determine when a utility has reached its 0.5% net-metering cap (Bradley-Wright, 2014). A review of Panola-Harrison, Northeast, and Washington-St. Tammany's NEM cap calculation methods is still pending (Verzwyveit, 2014).
Between 2011 and 2013, discussion about the appropriateness of the solar net-metering tax credit and whether non-net metering customers were subsidizing net-metering customers (i.e. cross-subsidization) continued at the PSC. In April 2013, the PSC staff issued a report claiming that cross-subsidization was occurring in Louisiana and offered several options for addressing the concern (Verzwyveit, 2014; LPSC Staff Report, 2013). According to the PSC, commissioners felt they had inadequate information about NEM benefits at the time to justify a rule change (Verzwyveit, 2014). Furthermore, solar advocates, like the Alliance for Affordable Energy, The Alliance for Solar Choice, and the Gulf States Renewable Energy Industry Association, argued that the PSC should not change its NEM rules until it gathers and weighs all evidence of NEM costs and benefits (Bradley-Wright, 2014). The recent call for a cost-benefit analysis arose from this discussion.
On March 13, 2014, the Louisiana Public Service Commission (LPSC) issued a request for proposal (RFP) for a cost-benefit analysis of NEM. The LSPC chose to use remaining American Recovery and Reinvestment Act (ARRA) funds to commission the NEM analysis (Verzwyveit, 2014). The original RFP was followed by a revised version on March 18 "seeking proposals from independent technical consultants to assist the Commission in reviewing the legal and technical issues related to [net metering in Louisiana]," the results of which would "enable the Commission to make an informed decision regarding the costs and benefits of net metering and assist it in developing appropriate policies for Louisiana (LPSC RFP 14-06, 2014)."
Several consultants responded to the RFP, but Acadian Consulting Group LLC (Arcadian) out of Baton Rouge, Louisiana, ultimately won the contract. Acadian is set to launch a website for collecting stakeholder comments about what should or should not be considered in the cost-benefit analysis soon (Verzwyveit, 2014). Results of the analysis will inform the LPSC as it considers raising the 0.5% net-metering capacity limit per utility (Lacy, 2014).
Stakeholder passions run high on both sides of the net-metering issue in Louisiana. One particular challenge of navigating such a dynamic policy space is managing participation in the utility commission rulemaking process. Typically, the LPSC interacts with large entities—notably utilities—that are familiar with the rulemaking process, but in this case large numbers of ordinary citizens have been contributing input about NEM. Staff members at the LPSC have tried to inform people about formally participating in the rulemaking process to make sure their voices are heard (Verzwyveit, 2014). Additionally, identifying the effects of a uniform net-metering policy and cap can be challenging for Louisiana, because each utility's rate structure differs and will be uniquely impacted by net-metering (Verzwyveit, 2014).
The outcome of the cost-benefit analysis due by late October could lead to a LPSC rulemaking on net-metering, but any future action will depend on the study results. Advocacy organizations such as the Louisiana Alliance for Affordable Energy and Vote Solar hope that the recent request for a cost-benefit analysis spurs the PSC to increase the net-metering cap and standardize the net-metering methodology (Bradley-Wright 2014; Phelps, 2014). Forest Bradley-Wright, of the Louisiana Alliance for Affordable Energy, questions whether Louisiana's current 0.5% cap is consequential enough to impact the results of a cost-benefit analysis (Bradley-Wright, 2014).
We'll keep following these interesting developments in Louisiana's solar market. The state has long-standing solar incentives, and it appears that existing NEM caps are starting to limit additional deployment in some utilities' jurisdictions.
Alliance for Affordable Energy. 2014. "Latest on Solar Net-Metering Policy at the LA PSC." Accessed June 26, 2014. Bradley-Wright, Forest. Phone interview. Alliance for Affordable Energy. June 20, 2014.
Database of State Incentives for Renewables and Efficiency (DSIRE). 2014. "Louisiana: Incentives/Policies for Renewables and Efficiency." Updated on 6/20/2014. Accessed July 2, 2014.
Lacy, Stephen. 2014 "As Net Metering Battles Move to Small Markets, Solar Advocates Claim Early Victories; Could Minnesota be a model for brokering a truce?" Green Tech Media. Accessed July 16, 2014
Louisiana Public Service Commission. 2014. "RFP 14-06 (amended)." Accessed June 26, 2014.
Louisiana Public Service Commission. 2013. Docket No. R 31417. "Staff Report and Recommendation."
Louisiana Public Service Commission. 2013. Docket No. R 31417. "General Order: Re-examination of the Commission's Net Energy Metering Rules Found in General Order No. R-27558." Accessed July 24, 2014.
Phelps, Nathan. 2014. "Small Steps on the Long Road to Raising the Louisiana Net Metering Cap." The Vote Solar Initiative. Accessed July 2, 2014.
Testa, Dan. 2014. "La. PSC calls for cost-benefit analysis of net metering." SNL. http://www.snl.com/interactivex/article.aspx?id=27281801&KPLT=6. Accessed July 2, 2014.
Verzwyveit, Melanie. Phone interview. Louisiana Public Service Commission. June 30, 2014.